Middle East reveals positive growth potential in 2010

In a report titled, "Economic Outlook for the Middle East," released by the International Monetary Fund (IMF), economies are stabilising and expected to experience higher growth next year with a return to healthier growth of 5.1 percent, about 1 percent above previous expectations. The report found that although the oil exporting countries within the region, such as Saudi Arabia, Kuwait and the UAE, were hit hard by the collapse in crude prices from their peaks, substantial reserves and countercyclical government spending softened the impact. Output contracted 3.5 percent among the oil exporters, with some countries, such as Saudi Arabia, contracting by 15 percent. But action to boost revenues from non-oil sectors has resulted in a projected GDP growth in those areas of 3.2 percent for 2009. The construction market in Saudi Arabia, Qatar and the UAE is expected to exhibit the most favourable growth prospects in the near term. A key driver of growth will be the considerable funding allocated to infrastructure projects. Saudi Arabia plans to spend $400 billion (Dh1.46 trillion) over the next five years. In the UAE, the majority of infrastructure spending will be borne by Abu Dhabi with $275bn of projects in the pipeline in the next five years. Qatar has $10bn of strategic infrastructure projects planned. In addition, fuelled by strong demand and available funding, the real estate sector is set to grow significantly in Saudi Arabia, Abu Dhabi and Qatar. Clear-cut At some point, the industry and the markets seemed to be in shock and everything seemed to grind to a halt. But now that everyone has had a chance to sit back and assess what has happened, there is some optimism creeping back into the industry with big projects coming on board in Abu Dhabi, Saudi Arabia and Qatar stimulating this buoyancy for the GCC. It is estimated that the oil exporting countries have amassed $1.3 trillion in oil earnings between 2004 and 2008. The government spending on infrastructure and industrial projects will also almost certainly create the demand for contractors and commercial firms to grow, with these nations using their reserves to stimulate their economies. Lavish real estate developments will be scaled down to meet the demand and encourage investment in property, which will generate more realistic returns. The bond issue by the Dubai Government was a very positive step and has created the impetus for other GCC countries to do the same to stabilise their economy through this type of funding. This coupled with wealthy sovereign funds, which are investing in equity, will give the economies in the GCC the support and stability they require to sustain the downturn and focus on growth manage the risk. "The construction market in Saudi Arabia, Qatar and the UAE is expected to exhibit the most favourable growth prospects in the near term. A key driver of growth will be the considerable funding allocated to infrastructure projects." For the first six months or so since the downturn affected the GCC, there was hardly any buying of construction materials; this started to pick up again towards April 2009. But the region is still expecting to see a 20 percent decline in the demand for steel and cement this year, followed by a growth of just two per cent in 2010 and 10 percent in 2011. The industry was hard hit as project financing dropped substantially due to the lack of liquidity in the financial system. The regional banks also stopped all project finance, and this together with the impact of the correcting real estate market aggravated the available lending and the contractors' healthy order books suddenly dwindled as projects were either postponed or cancelled altogether, said the report. However, these cancellations might be countered to a large degree by a high level of public sector spending on infrastructure, education and hospitals throughout theAir Force 1 High