Saudi Arabia and the UAE are set to show strong growth in the next two years as a result of infrastructure development and successful diversification of the economy, according to credit insurance agency Euler Hermes.
The UAE economy is set to grow by 3.5 per cent and four per cent in 2013 and 2014 respectively. Despite the country’s progress in infrastructure development and its efforts in improving business climate, the education sector needs to be developed further, said Euler Hermes.
Saudi Arabia’s economy is expected to grow by four and 4.5 per cent in 2013 and 2014 respectively, the report said. According to the economists at Euler Hermes, pro-active economic policies in the Kingdom will aid further growth.
The Kingdom’s current five-year plan (2010-2014) aims at developing and improving infrastructure while investing in human capital through education and training.
In addition, the government announced two major programmes to support housing and job creation in the aftermath of the Arab Spring.
Euler Hermes said that both the UAE and Saudi have been successful in diversifying their economies from traditional oil revenues.
Saudi Arabia’s oil economy accounted for 21 per cent of total GDP in 2012 compared to 34 per cent in 2000, while the UAE’s hyrdrocarbons sector contributed to 33 per cent of the GDP in 2012, down from 47 per cent in 2000.
Despite the growth recorded by the UAE and Saudi economies, the pace of growth in the GCC markets is set to slow.
“GCC countries, having experienced two years of sustained economic growth, are expected to slow to four per cent in 2013 mainly due to the global demand slowdown (2.2 per cent in 2013),” said Ludovic Subran, Euler Hermes chief economist.
“A global and delayed recovery is expected in 2014 (3.1 per cent). However, the overall growth deceleration will increase the momentum of global insolvencies (eight per cent in 2013; two per cent in 2014).”
But he said that financial fundamentals like the current account surplus, fiscal balance and large foreign exchange reserves in the GCC remain satisfactory.