By Matthew Brown
Nov. 9 (Bloomberg) -- Gulf economies will grow at around half the pace in 2009 as previously forecast because of plunging oil prices, EFG-Hermes Holding SAE, the largest Arab investment bank by market value, said.
Saudi Arabia's real gross domestic product, the value of all goods and services produced at historical prices, will grow 2.4 percent in 2009, down from 6.2 percent in 2008, EFG said in a report received by e-mail today. EFG had forecast 4.5 percent growth for 2009.
``Across the region, we have reduced our real GDP growth estimates as a result of the oil production cuts,'' EFG's Chief Economist Monica Malik said in the report. ``We forecast that nominal GDP growth will contract for the more oil dependant countries, Saudi Arabia, Oman and Kuwait.''
Crude oil prices have plunged more than 50 percent since July on concern that demand will decline sharply following recessions in the U.S. and much of Europe. Five of the six Gulf Cooperation Council economies will continue to enjoy fiscal surpluses as long as the price of oil remains above $50 per barrel, the International Monetary Fund said last month.
The six Gulf Arab states, including Saudi Arabia, the United Arab Emirates and Kuwait, pump almost 20 percent of the world's daily oil supply. Crude has dropped 59 percent from the record $147.27 in July on signs the contracting U.S. economy is cutting fuel use in the biggest energy-consuming country.
Crude for December delivery fell 10 percent to $61.04 a barrel last week in New York, sliding as low as $59.97 Nov. 7.
Saudi Arabia
Saudi Arabia's nominal GDP, the value of all goods and services at current prices, will shrink by 4.5 percent to $458.7 billion in 2009, EFG said. It had previously forecast 2.1 percent growth to $490.7 billion.
In the United Arab Emirates, the second-largest Arab economy after Saudi Arabia, real GDP growth will slow to 4.8 percent in 2009 from 8.5 percent in 2008, while nominal GDP will rise 0.6 percent to $235.5 billion, EFG said. Its previous forecast was for 7 percent real GDP growth and nominal GDP of $274.6 billion.
``The economic reality on the ground will not be as stark as figures indicate,'' Malik said. ``If the oil price averages $85 per barrel, we expect government spending plans will not change markedly and will remain expansionary. If the oil price stabilizes at current levels and averages around $60 to $65, we believe that government spending growth will decline, thereby providing a much smaller fiscal stimulus to the economy.''
To contact the reporter on this story: Matthew Brown in London at mbrown42@bloomberg.net
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