Road to Recovery, Part I
Come on – it wasn’t all bad. The crash of 2009 put the Gulf economies on a more solid footing, reports Trends magazine. Part I.
November 18, 2009 3:42 by Scott MacMillan
In August, Bank of America Merrill Lynch raised its 2010 growth forecast for the GCC from 3.2 percent to 3.7 percent, reflecting growing confidence that the region would emerge from the economic downturn faster and stronger than it had previously expected. Although the bank’s forecast for 2009 growth remained below market consensus at -1 percent, it laid out a case for renewed bullishness next year.
For one thing, oil prices are likely to remain high, leading to sustained budget surpluses. Even at the worst of times around the New Year, oil only dipped to $35 a barrel, relatively high compared to prior downturns, and going into the fourth quarter of 2009 it was trading at roughly double that, close to the $75 per barrel deemed a “fair price” by the leaders of the region’s biggest producer, Saudi Arabia.
“There is a kind of consensus – we’re not there yet, but we will be in a few months time – that oil prices are going to be much higher than in any previous recession,” says Turker Hamzaoglu, an analyst for Bank of America Merrill Lynch in London. “When oil exceeds $65 per barrel, which is our average budget breakeven forecast for the GCC, these countries start saving.
Since we see oil prices at $64 at the end of this year and $82 the next, this is definitely going to be supportive of fiscal balances.”