The MENA Weekly Monitor, Week 49

EFG-Hermes issued a note in which it indicated that it revised downward its 2012 and 2013 forecasts for oil prices and consequently, it lowered its GCC nominal GDP forecast by 0.5% for 2012 and by 1.4% for 2013. EFG-Hermes now forecasts a nominal growth of 7.5% for 2012 and 1.9% for 2013.

Oil prices would remain in the comfortable zone for GCC countries. Indeed, the region would still see healthy fiscal and current account surpluses in 2013 which compare favorably with those seen across emerging market. Nevertheless, they are set to slightly narrow within the context of weaker oil revenue and expectations of continued expansionary fiscal policies in 2013. Governments would remain focused on creating jobs and enhancing infrastructure. However, EFG-Hermes indicated that Bahrain's government spending would be flat in 2013 (v/s 2012).

GCC countries would witness a rise in their budget breakeven (BBE) oil prices in 2013, largely as a result of oil production remaining steady in member nations. During 2012, most GCC countries had significantly expanded their oil output which has therefore limited the rise in their breakeven prices, despite the expansionary fiscal stance. GCC weighted average BBE oil price would be at US$ 84.5 per barrel in 2013, up from US$ 78.7 per barrel in 2012. The lower BBE oil price in Kuwait and Qatar drags down the weighted average for the region, as per EFG-Hermes.

Real GDP growth in the GCC would stem from non-oil activity, with oil production widely expected to remain at the 2012 average levels. EFG-Hermes foresees solid real weighted non-oil GDP growth of 5.0% for 2013, only marginally lower than the 5.4% forecast for 2012. The deceleration is mostly a result of high comparables, after two years of strong non-hydrocarbon activity.

Published in The MENA Weekly Monitor Week 49 released by Bank Audi.