Page 47 - Aamir Rehman Gulf Capital and Islamic Finance The Rise of the New Global Players

32 PART I Background and Context

Kuwait, and Saudi Arabia—enjoyed stronger growth in 2008 than
they had had the year before. While 2008 was a volatile year for oil
prices and for the global economy overall, the average oil price was a
strong $97. 24 This enabled the GCC economies to outperform world
averages significantly that year.
For 2009, however, far cooler economic growth is expected. Saudi
Arabia (the region’s largest economy, with over half the Gulf’s total
GDP) is forecasted to grow at only a 0.4 percent rate. For the UAE, the
growth forecast is 1.3 percent—less than one-sixth of the 2008 figure of
7.7 percent. All six GCC economies are expected to see a slowdown in
economic growth in 2009, followed by a return to higher growth in
2010. This 2010 rebound coincides with projections for a return to
growth in the overall world economy, which is expected to grow
2.4 percent percent in 2010 compared with a mere 0.2 percent in 2009.
When compared to projections for the world’s most developed
economies, however, the outlook for the GCC region appears rela-
tively strong. The OECD and EU economies are both expected to
experience negative growth ( 1.9 percent and 2.0 percent, respec-
tively) in the year 2009. In contrast, none of the GCC economies are
expected to shrink for the year. When world growth returns in 2010,
the countries of the Gulf are expected to again outpace other
regions—the OECD is forecasted to expand by 0.5 percent, whereas
all Gulf economies are forecasted to grow at about 3 percent or
higher.
A closer look at these growth forecasts also highlights the
starkly differing scale of projected growth across GCC counties.
Expansion in Qatar is expected to continue at an extraordinary rate:
11.6 percent in 2009 (while the global economy shrinks) and above
21 percent in 2010 (literally off the chart displayed in Figure 1.3).
This breathtaking 2010 projection assumes ongoing expansion of
Qatar’s natural gas exports, which continue to increase as additional
fields are brought online and export capabilities develop further.
Meanwhile, growth in Saudi Arabia is expected to return at a more
modest rate of 3.3 percent. The Gulf states with small populations
and significant energy wealth—Qatar, the UAE, and Kuwait—can
look forward to a different growth trajectory from that of their peers
in the GCC. The ongoing prosperity of these small states enables the
substantial, high-profile international investments discussed in this
book. The Gulf may be a single economic cluster, but the economies
of its member states have important differences that lead to different
investment approaches. 25