Reforms key to boosting business climate in GCC
dubai — With oil prices crossing $80 per barrel, GCC countries are becoming complacent and not embracing economic reforms, analysts warned on Tuesday.
Ziad Daoud, chief Middle East economist, Bloomberg Economics, said changes and reforms are more in some countries than others in GCC.
“Some GCC countries UAE, Kuwait and Qatar have stronger balance sheet. The urgency for reforms is not that urgent. But other countries like Saudi Arabia, Bahrain and Oman have weaker balance sheet, therefore, urgency for reforms is urgent,” Daoud said during the conference held in Dubai on Tuesday.
Garbis Iradian, chief economist, Mena, Institute of International Finance (IIF), said with higher oil prices and narrowing fiscal deficit, the urgency for reforms has diminished in the six GCC countries.
“Deeper structural reforms are needed to strengthen the business climate and improve competitiveness to support diversification and job creation. It is crucial to avoid complacency in the context of the recovery in oil prices. The case for widespread fundamental structural reforms remains as bureaucracy, lack of transparency, inefficiency, and unpredictability remain major impediments to achieving sustained, rapid, private sector-driven growth,” he said.
Anita Yadav, head of Fixed Income Research at Emirates NBD, said current oil price will average $70 to $75 per barrel this year and will likely to soften next year at around $70 per barrel.
Speaking at Bloomberg Economics conference, she said oil supply constrain are here for the past few months but in the longer run Opec can add more production and capacity can be added. Hence, the crude prices will soften.
“”Eventually, supply can pick up and that can balance demand and supply and bring prices down. It’s hard to pick any month when the prices will decline but a lot depends on the news that come trickling in. We see $80 per barrel looks unsustainable and we are more in the camp of an average $70 to $75 for this year and next year would be closer to $70, expecting a slight softness next year,” she said.
Current oil price will average $70 to $75 per barrel this year and will likely soften next year to around $70 per barrel Anita Yadav, Head of Fixed Income Research, Emirates NBD
UAE growth to pick up
Garbis Iradian of IIF expects UAE growth to pick up from 0.8 per cent in 2017 to 2.3 per cent this year, supported by modest increase in oil production and fiscal stimulus of Dh50 billion announced by Abu Dhabi.
“We expect residential rent declines to continue in 2019, albeit at a slower pace, as job growth remains low and new housing becomes available. While the UAE currency is overvalued, the flexibility of the labour market combined with implementation of structural reforms, would improve competitiveness without the need for currency adjustment,” Iradian said.
He expects real GDP in the six GCC countries to shift from a small contraction in 2017 to a growth of 2.4 per cent in 2018 driven by higher oil production and fiscal stimulus in Saudi Arabia. However, lackluster credit growth indicates sluggish recovery of the private sector.