GCC set to register 4.5 pc growth
Manama, December 1, 2010
The GCC has come out of its slowdown and will now post real growth of around 4.5 per cent, according to a top economist.
The region's growth will outstrip that of the West and equal Asian growth, but it could do a lot better, HSBC Middle East economist Simon Williams told more than 150 delegates at the bank's annual roadshow at Ritz-Carlton Bahrain Hotel and Spa on Tuesday.
The region now needs to tackle structural impediments to growth and Bahrain could lead the way in achieving this, he said.
'It was easy to lose sight of structural impediments in the boom years from 2003 to 2008 but we are unlikely to return to that level of growth in the near future,' he said.
'There are a number of structural impediments to growth including the political risk premium in the region, though there is not a lot we can do about that.
'But it is possible to address other impediments to growth,' he added.
He said that across the region, fiscal policy was determined by oil and expenditure tended to rise or fall with the oil price.
'With oil now likely to be fairly stable at between $70 to $80, the regional economies should look to increase its tax base to allow further government expenditure,' he added.
GCC tax currently contributed only 2.5pc to gross domestic product across the region compared with 10pc in Singapore, 20pc in Lebanon and 40pc in the UK, he said.
He added that the current peg to the US dollar meant that monetary policy was set in the US and that while at the present time that was not a problem, it would likely become a problem again in the future.
Other problems included the fact that with only six states, the GCC had eight stock exchanges that had extremely low turnovers and there was no real long-term debt market in the region.
Another issue was that growth was driven by government expenditure because consumer expenditure was relatively low.
This was partly because the large expat population tended to remit money home or save for a time when they would return home to spend their money.
This could be addressed by offering expats residency so that they were not continually concentrating on returning home and could encourage them to consume more within the region.
'Because Bahrain is not as cosseted as the oil-exporting GCC states its policy-makers' understanding of competitiveness exceeds its neighbours,' he added.
'It is more forward looking and could lead the way in the removal of the impediments that prevent ever greater growth by introducing taxation and offering residency though, on its own it could not effectively do much about monetary policy,' he added.-TradeArabia News Service