(MENAFN- Khaleej Times)The GCC economies are projected to grow by 3.4 per cent in 2015 and 3.7 per cent in 2016 despite shrinking oil revenues as private consumption and governments' efforts to support sustainable economic growth help maintain a positive outlook for the region the Coface Group a global leader in credit insurance said.
Amid a sharp decline in oil prices while countries with fewer financial buffers such as Bahrain and Oman are witnessing problems related to low growth performance Saudi Arabia and the UAE are less impacted with strategies under way to promote non-oil trade Coface said in its report. "The UAE is one of the most diversified among the GCC countries making it resilient to falling oil prices. Hydrocarbon revenues account for 25 per cent of gross domestic product [GDP] and 20 per cent of total export revenues" Coface said. The non-oil private sector shows strong growth fuelled by domestic demand and tourism especially in Dubai. In the first quarter of 2015 passenger traffic at Dubai International Airport jumped by seven per cent to 19.6 million with the influx of tourists expecting to grow further in line with Dubai Expo 2020. The report noted that domestic demand in the UAE is powered by strong retail sales. Dubai's retail sales which rose by seven per cent in 2014 are estimated to increase further driven by rising tourist numbers. Dubai's real estate market is also doing well with foreign investment pouring in. "As oil continues to be a major contributor to economic performance in the GCC economic diversification is vital for Gulf countries to ensure continued healthy growth. This has been showcased in Saudi Arabia and the UAE which are driving sustained GDP growth through significant government investment in non-oil sectors. "In the UAE the food and beverage sector is forecast to grow by 36 per cent between 2014 and 2019 while Saudi Arabia's automotive industry is slated to rise by 5.2 per cent in 2015" said Seltem Iyigun Mena region economist at Coface. "In view of these growth figures Saudi Arabia and the UAE are setting a positive example of the importance of diversified economies as a means to offset the impact of lower oil prices promote growth and avoid a fiscal deficit" said Iyigun. According to Coface assessment the food and beverage sector in the UAE will benefit from the high-income domestic market solid private consumption a large population of expatriates with increasing demands strong economic growth and the country's position as a safe haven. "The UAE has been investing in the food processing industry; a total of $1.4 billion since 1994 especially in the dairy industry. The halal food segment is also continuing its expansion and is projected to grow to $1.6 trillion by 2018 boosted by strong consumer demand for varied natural food choices" it said. In Saudi Arabia the most promising industry is the automotive sector the report pointed out. Several original equipment manufacturers have established local entities in the country. The Saudi Arabian Public Investment Fund is investing in an automobile manufacturing plant worth $1 billion with a production capacity of 150000 cars a year by 2018. The vehicle sector is expected to grow by 3.6 per cent in 2015 due to rising disposable incomes favourable demographics and higher urbanisation rates. -
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