DOHA
THE outlook for the global economy remains gloomy with some key risks: a looming fiscal crisis in the US, potential for further disruption from eurozone sovereign debt crises and a potential slowdown in the Chinese economy from previously high growth. However, according to analysis from QNB Group, the GCC is well positioned to sustain a severe and sustained shock to global GDP.
Slower growth in the US, Eurozone and China would have knock-on effects in the GCC, mainly through weaker demand for oil and the impact on oil prices.
The IMF estimates that 1 percent lower real GDP in either the US or Euro Area would lead to 0.4 percent lower GDP in the GCC a year later, while a 1 percent fall in China’s growth would lead to a 0.1 percent fall in the GCC.
Over a fifth of GCC exports are to China, the EU and the US, so a simultaneous demand shock in these countries could have a significant impact on demand for GCC exports.
More importantly, slower growth in these major economies—responsible for 44 percent of oil and 35 percent of gas consumption—would be likely to drive down hydrocarbon prices. This in turn would have a stronger impact on GCC export revenue, reducing fiscal and current- account surpluses and potentially leading to weaker economic activity.
During the global recession in 2009, oil prices fell by 37 percent and liquefied natural gas (LNG) spot prices by 27 percent. As well as reducing export revenue, this contributed to a 0.2 percent contraction in GDP in the GCC as oil production was lowered in response to lower demand and prices. Consequently, some investment plans were scaled back with the deteriorating economic climate.
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