Strong growth in Saudi Arabia's non-oil sector offset a fall of 6.4 per cent in oil GDP this year, leading to an overall increase of 0.15 per cent in inflation-adjusted GDP, say government figures released yesterday. More than half of the country's economic activity is connected with oil, and the decline in oil GDP can be traced to crude output and prices, which have tapered off from the historic highs they reached last year.
A US Energy Information Agency report this month showed oil averaged US$78 a barrel last month. The average oil price last year was more than $90 a barrel. Producers moved last year to restrict oil supply to keep prices high. The limits went into effect early this year, with prices rising from the $30 range to about $78 today. Saudi Arabia's output declined by 18 per cent between July last year and February, OPEC said.
While analysts project a weak performance for Saudi GDP this year - the IMF has predicted a 0.9 per cent decline - the outlook for next year is more positive. EFG-Hermes, the Egyptian investment bank, on Saturday predicted GDP growth would reach 4.1 per cent next year, due to expectations of stronger domestic consumption, steady government spending and stable oil prices. Monica Malik, an analyst at EFG-Hermes in Dubai, predicted an even stronger rise - 4.4 per cent for non-oil GDP next year.
The outlook is similar for the UAE and other Gulf oil exporters, which have stuck to spending plans despite the financial crisis and the dip in oil prices. The Emirates' GDP this year is expected to decline by 0.8 per cent, according to an average of forecasts from 10 analysts and international finance bodies. EFG-Hermes expects economic output in to fall by 4 per cent this year but foresees 4.3 per cent growth next year.
Inflation-adjusted GDP growth in the UAE was 7.4 per cent last year. @Email:afitch@thenational.ae
