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Gulf economies have embarked on a new growth chapter and the UAE remains one of the region’s powerhouses, Nomura, one of the leading global investment banks, said in a latest study. “Its plentiful hydrocarbon resources and successful diversification drive have combined to create an economy with strong medium-term prospects,” Ann Wyman, Managing Director and Head of Emerging Market Research, Europe, said for the UAE. “But the economic crisis has hit the country particularly hard, exposing some weaknesses in its rapid non-oil expansion of recent years.”
Wyman continued, “Yet even as the economy has experienced a difficult year - buffeted by a large drop in oil prices along with rapid deleveraging and default in its corporate sector and banking sector strains - it is emerging from the crisis in a stronger position to put in place the elements needed for a healthier and more sustainable growth path.
The adoption of stronger regulation and supervision, increased transparency, improved coordination among states and clarification of explicit public sector obligations are all part of the agenda. Implementation will be a key determinant of future success.”
The report is looking at the prospects for the Gulf economies of Saudi Arabia, the UAE, Qatar and Kuwait. Regional economies seem to have put their recent trials behind them and are embarking on a new growth chapter, still fuelled by hydrocarbons, but armed with strengthened regulatory regimes and in some cases, a better handle on contingent government liabilities, Wyman said.
The report expects economic growth of 3.7 per cent in Saudi Arabia, led by increased oil output, loose fiscal and monetary policy and an increase in bank lending to the private sector.
Wyman said: “The Gulf region’s largest economy, is setting a course for continued strong economic performance. Its swift and pre-emptive actions to maintain confidence in the banking sector during the credit crisis, followed by a decisive and substantial fiscal response to the global economic slowdown, have helped it to weather the storm.
“While the country’s medium-term growth prospects remain inextricably tied to hydrocarbon production, it is making strides toward economic diversification.
“Business and consumer confidence is returning, and bank lending looks to have resumed, albeit at a slower, and healthier, pace.”