DUBAI: GDP growth for the GCC is expected to rebound to 2.3 per cent next year as countries adjust to a ‘new normal’ of lower oil prices and benefit from a resurgent global economy, according to an analysis from UBS Wealth Management.
Arabian Gulf economies are projected to grow by 0.6 per cent this year, according to the Swiss bank.
“GCC countries are still adjusting to the new economic reality of lower oil prices, despite the recent recovery, while reform plans across the region are balancing the need for a more broad-based, diversified economy with respect for local traditions,” said Ali Janoudi, head of wealth management for Central and Eastern Europe, Middle East and Africa, France and Benelux International at UBS Wealth Management.
“We think the progress achieved so far brightens the region’s outlook.”
Oil prices have recovered since June and are hovering at around US$60 per barrel, but they are expected to trend sideways next year. Further reforms are needed to diversify GCC economies and attract foreign investment, UBS warned.
The end-of-year report from UBS Wealth Management’s Chief Investment Office (CIO) said that 2017 has been the strongest for the global economy since 2011, with GDP growth likely to rise to a “high level of” 3.8 per cent from 3.1 per cent in 2016.
Global growth is set to stabilise, providing a “benign” background for stocks and setting a new context for investment portfolios. The outlook for global equities relative to high-grade and developed world government bonds is positive, according to the report.
“Periods of high economic growth often sow the seeds of their demise, but there is little evidence today of an impending recession, which is historically caused by one or more of: capacity constraints, oil price shocks, excessively tight monetary policy, contractions in government spending, or financial crises," said Mark Haefele, global chief investment officer at UBS Wealth Management.
“None of those look likely to materialise in 2018.”