The GCC region in 2016 will generate a modest economic rebound for most countries at 3.7 per cent after facing tough year in 2015 - GDP growth of three per cent, said Paris-based Euler Hermes, a leading provider of trade-related credit insurance solutions and experience in client support and responsiveness to changing business environments.
The optimism is supported by its claim that there might be a slight rebound in oil prices - forecast to reach $60/barrel and supported by strong financial assets — as four of the top 10 sovereign wealth funds globally are based in the GCC.
As major producers and exporters of oil and gas, recent downward pressures on prices are clearly detrimental to these countries' economic performance. Proactive steps are already underway by local governments and economic institutions to reduce the dependency on oil, for example by further increasing industrial diversification and sector promotion. In 2016 GCC countries will absorb adverse external headwinds, and most of them will record higher GDP growth than in 2015 and continue to present solid risk profiles, said Subran Mahan Bolourchi, CEO of Euler Hermes GCC.
The current economic situation is an opportunity for GCC countries to press ahead with diversification - not just away from energy, but also within the energy sector itself. Given climatic and meteorological conditions, and the current appetite for policies promoting the green economy, solar energy is high on the list such as Solar GCC Alliance. It is believed that the UAE plans to invest $35 billion in 'clean energy' by 2021 and Saudi Arabia plans to spend $100 billion on solar projects by 2030.
The assessment found that structural business environment in the region needs transparency and less bureaucracy, the private sector needs to be promoted, further trade liberalization is required and aspects of competitiveness need to be addressed. The GCC influence worldwide is based on real estate, financial services and energy, but key for future growth is promoting regional cooperation rather than national competition.
On its expectations for the global economy, the firm remained conservative for 2016 (GDP 2.9 percent), although with some signs of improvement. Global GDP growth will remain below three percent for the third consecutive year at 2.5 percent in 2015 and mature markets have remained reasonably stable. "We have seen clear signs of deterioration in emerging economies. Global trade is set to lose at least $400 billion in 2015, reflecting strong deflationary pressures in the short-term, said the CEO.