Despite last year’s regional political unrest and continued headwinds from the global recession, 2012 saw a revival of GCC economic confidence.
“2012 does feel like the year where things picked up,” said Simon Williams, chief economist at HSBC Middle East.
“Recovery policies gained traction and they are continuing to build momentum. While Saudi Arabia was the first country to begin recovery, the UAE has really been the economy that came back to life this year. Oxygenated blood has begun to pump through, particularly in Dubai’s export service-orientated sectors.”
Sustained high oil prices in 2011/12 buoyed the region’s mass scale government and infrastructure spending sprees.
In many ways, this bumper spend was a direct response to the demands of the Arab Spring with rulers doling out higher salaries and improving conditions for the working class, with education, job creation and affordable housing initiatives.
But governments will need to do much more, warned M.R. Raghu, senior vice president-research at Kuwait Financial Centre.
“With heightened tensions in Syria, the insolent attitude of Iran towards the global call not to pursue its nuclear objectives, and citizens’ clashes against the ruling dynasty, the regional political forces will need to do much more than they have been doing to stabilise the political landscape in 2013,” he said.
However, US president Barack Obama’s second term in the White House is seen as a political boost for the region, according to experts.
Arno Maierbrugger, editor-in-chief at research firm Inside Investor, said: “Obama now has a freer hand to shape US policy in the Gulf and will work towards stability. This will positively impact trade relations and take pressure off oil prices.
“However, much depends on how he can succeed with Iran and Syria and what his support and solidarity for Israel looks like in his second period.”
On the economic front, Obama’s monetary policies are expected to remain stimulatory, given the region’s currency pegs to the US dollar, which will support the Gulf’s recovery.
According to the IMF’s latest World Economic Outlook (WEO) report, global growth is projected at 3.3 and 3.6 per cent in 2012 and 2013, respectively, with MENA growth pitted at a higher 5.1 and 3.6 per cent.
HSBC’s Williams said: “We need to be mindful of the regional tensions, the poor global economic environment, the US political cliff, the softening in the emerging markets and the Eurozone crisis.
“However, I’m going into 2013 more confident than I was in 2011 and 2012. There has been a turnaround in Gulf economies. The near-term outlook for the region feels strong and the oil price is high.”