(MENAFN - Qatar News Agency) After a very challenging and depressed 2009, the outlook for GCC next year is quite positive, says a new report. According to Barclays Capital''s The Emerging Markets Quarterly report "The wall of worry meets the wall of money", this positive outlook is based on higher oil prices and increasing international financial and credit flows to the region, the UAE-based (Emirates Business 24/7) daily newsletter reported on Tuesday.
"We see a solid growth recovery in 2010 and credit fundamentals in good shape for a broad range of sovereigns and quasi-sovereigns, particularly in Qatar and Abu Dhabi," says the report. Although the region has had a strong rally lately, BarCap continues to see pockets of value in GCC quasi-sovereign credits. "We think recent issuance 19.8 billion or Dh72.72bn in 2009 has been attractive, and we interpret the large demand as a positive sign that within EEMEA credit. GCC paper offers some of the best potential risk-return profiles. "Moreover, the recent oil price rally puts a floor under the sharp deterioration in hydrocarbon revenues and, in our view, further strengthens Qatar''s gas-dominant outlook." Despite many problems, the region has faced in the past few months, the Gulf States are much better positioned than other EEMEA countries, say the authors of the report. The accumulated significant reserves and net foreign assets of their SWFs played an important role. As per the data given in the report, cumulative current account and fiscal balances amounted to an annual average of 350bn over the past five years, bringing estimates of GCC SWFs to 1-2 trillion, providing them with enough of a cushion to orchestrate the fiscal stimulus needed to stimulate growth through public investment and inject liquidity and capital (where needed) into their financial sectors in order to avoid systemic failures. These twin surpluses also gave them ample room to ease monetary policy aggressively while maintaining the currency pegs throughout recent months, said the report.
Today, the outlook for the GCC economies is at a turning point, as the dynamics of oil and gas markets are slowly shifting, and there are signs that liquidity strains in the banking system are starting to ease, the paper noted. In the oil markets, there is an emerging consensus about a recovery in demand. Recently, the International Energy Agency (IEA) revised its outlook for world demand in 2009 and now expects a fall of 1.87mbpd from 2008, compared with 2.35mbpd in August. Opec, on the other hand, expects a more moderate fall of 1.56mbpd in 2009, with demand rising in each successive quarter, close to BarCap''s forecasts (-1.66mbpd), it said. This view is supported by supply-side analysis, where recent data from Opec reveal that levels of production are still down over 3mbpd compared with targets.
Moreover, non-Opec supply, which has suffered its worst fall since 1992, is unlikely to bring the incremental supply needed to meet the expected demand growth, given the steep decline in mature oilfields and the reduction in non-conventional energy sources following the credit crisis.
These factors pave the way for an upward trajectory in prices and Opec output in 2010-11. "In our projections, we adopt a WTI price of 63/barrel in 2009 and 75/barrel in 2010, while recognising that risks remain on the upside should inventory draw-downs accelerate faster than expected (BarCap''s commodities research forecasts an average WTI price of 85/barrel in 2010).
On the downside, further volatility in prices could arise should the global recovery be delayed further," said the report. In parallel, international capital and credit markets have re-opened and international financing flows, notably debt flows, have made a vigorous return to the region since March 2009. The GCC sovereigns, quasi-sovereigns and corporates issued 19.8bn in foreign currency bonds, concentrated largely in Abu Dhabi and Qatar. International banks have also extended up to 10bn in loans to large quasi-sovereign corporates (Dolphin energy, Ipic, Qatari Diyaar, etc.). As far as 2009 is concerned, changing dynamics in the oil and credit markets will, in the view of the authors of the report, put a floor to further deterioration in 2009 growth and set the stage for a firm GCC rebound
