World Economy

(P)GCC to See Meager Growth

(P)GCC to See Meager Growth (P)GCC to See Meager Growth

The (Persian) Gulf Cooperation Council region in 2016 will generate a modest economic rebound for most countries at 3.7% after facing tough year in 2015–GDP growth of 3%, said Paris-headquartered Euler Hermes.

The optimism is supported by its claim that there might be a slight rebound in oil prices–forecast to reach $60/barrel and supported by strong financial assets–as four of the top 10 sovereign wealth funds globally are based in (P)GCC, Albawaba reported.

“The current economic situation is an opportunity for (P)GCC countries to press ahead with diversification–not just away from energy, but also within the energy sector itself. Given climatic and meteorological conditions, and the current appetite for policies promoting the green economy, solar energy is high on the list such as Solar (P)GCC Alliance.

The UAE plans to invest $35 billion in ‘clean energy’ by 2021 and Saudi Arabia plans to spend $100 billion on solar projects by 2030,” Ludovic Subran, chief economist of Euler Hermes told Khaleej Times during 2015 International Trade Observatory summit on Thursday.

 Wealth Leverage

The worldwide leader in trade credit insurance, Euler Hermes, explained (P)GCC could leverage on wealth based in its own domestic markets. In particular, UAE and the Dubai International Airport are already retail centers.

“This is the right time for the (P)GCC countries to make some significant improvements,” said Subran, who was on a visit to Dubai for the summit.

“Its structural business environment needs transparency and less bureaucracy, the private sector needs to be promoted, further trade liberalization is required and aspects of competitiveness need to be addressed. The (P)GCC influence worldwide is based on real estate, financial services and energy, but key for future growth is promoting regional cooperation rather than national competition.”

The UAE continues to be a very attractive and competitive market place for financial services and for Euler Hermes in particular. Credit insurance is still not widely used which is a pity since credit risk, especially non-payments continue to increase.

 Higher GDP Growth

Subran Mahan Bolourchi, Euler Hermes (P)GCC CEO gave the keynote address at the summit and said: “In 2016 (P)GCC countries will absorb adverse external headwinds, and most of them will record higher GDP growth than in 2015 and continue to present solid risk profiles.”

As major producers and exporters of oil and gas, recent downward pressures on prices are clearly detrimental to these countries’ economic performance. Proactive steps are already underway by local governments and economic institutions to reduce the dependency on oil, for example by further increasing industrial diversification and sector promotion.”

When asked about UAE’s diversification plans and growth, Subran said: “Diversification is working but efforts need to be strengthened in spite of lower commodity export revenues. This is the key to counter cyclical policymaking: never to lose focus on the big ticket items and Dubai certainly made it its national pride to connect continents with state-of-the-art port and airport logistics.

Commodities continue to be the bulk of the wealth especially trade-wise but diversification is happening. In addition it is also visible in the efforts from sovereign wealth funds to invest in equity across sectors abroad and bring dividends home.

“The local market is strong and I see services and wholesale-retail economy increase their output every year in line with GDP,” he said.