(MENAFN - Khaleej Times) The Gulf Cooperation Council (GCC) looks well positioned to benefit from rising oil prices and strong demand from emerging markets, Standard & Poor's said in it's latest report.
Economic prospects for oil-exporting economies in the GCC look healthier over the next few years than in the initial phase of the global financial crisis in 2008-09, according to a report by S&P titled: "Rising oil prices will continue to underpin the outlook for GCC economies."
The report said: "This is mainly because the geographic distribution of growth between developed and emerging markets - with the latter outperforming the former - that we forecast for the next three to five years should keep oil prices on an upward trajectory."
However, over the longer term, S&P anticipates that sustainable growth in GCC countries will depend on increasing employment in the non-hydrocarbon private sector.
Most GCC governments have recognised the necessity to encourage the shift of the national workforce from the public sector to the private non-oil sector and to foster the expansion of the latter.
"The distribution of GDP growth that we project for the next three to five years supports our view that oil prices will remain on a mildly upward trend," said Jean-Michel Six, S&P chief economist for Europe.
"We see growth in emerging markets recovering gradually throughout 2012 on the back of easier monetary policies. GDP growth in the Organization for Economic Cooperation and Development (OECD) economies, on the other hand, will in our view remain weak this year and next because of tight fiscal policies. This contrasting outlook implies to us that oil demand growth will be mainly dominated by China, India, Brazil, and Saudi Arabia this year and in 2013, while oil demand from OECD countries will contract modestly."
Strong demand from emerging markets will particularly benefit the GCC economies as more than 70 per cent of GCC exports (essentially crude oil) are destined for Japan and the developing Asian countries.
"The GCC economies appear well positioned to benefit from the upward trajectory of oil prices that we foresee over the next five years," Six said.
"Their market share in emerging markets, where most of the incremental demand for oil will come from, is bound to consolidate their strong current account position, a key strength at a time when demand for funding on international debt markets becomes more competitive." "Such strengths should not lead to complacency, however. The GCC economies face important demographic challenges that in our view can only be met through continuous efforts to diversify their structure away from hydrocarbons."
"Looking ahead, we forecast that GDP growth will moderate somewhat this year and in 2013 - to five per cent and four per cent, respectively - as oil production will expand less rapidly in percentage terms than in 2011 when shortages in Libya lifted production in the Gulf," S&P said.
It predicts GCC oil production in 2012 at 17.3 million barrels per day crude oil while it forecasts 30.4 million bpd for Opec members production of crude oil.