JEDDAH – Renewed fiscal stimulus makes Saudi economy one of the best performers in the Middle East and North Africa (MENA) region this year, the London-based Capital Economics Ltd study showed. Meanwhile, the Gulf economies are likely to grow on average at 3 percent this year, which is close to the historical trend, the study noted. “The Gulf economies are on course to outperform the rest of the region over the next year or so. Admittedly, weak oil production will act as a drag on growth. But increased government spending should help to offset this,” Capital Economics said. “In the UAE, the fragile banking sector and Dubai's overhanging debt problems will keep growth subdued by recent standards. Elsewhere in the Gulf, lackluster global energy demand means that hydrocarbon output will slow in Kuwait, Qatar, Bahrain and Oman this year. Qatar should be a relative outperformer, although the days of double-digit growth rates are now over.” “By contrast, ongoing political tensions mean that Bahrain and Kuwait are likely to be the weakest Gulf economies this year,” it added. However, the report noted that the MENA region's resource-poor economies are set for another tough year. “Heightened political tensions and substantial external financing risks mean that growth will remain extremely sluggish. We have pencilled in growth of 2.0 percent this year, well below their potential growth of 5 percent or more. Most vulnerable is Egypt where ongoing delays to securing an IMF deal have pushed the economy to the brink of a full-blown crisis. For now, we think further bilateral funds should stave off a worst-case scenario,” said Capital Economics. Meanwhile, according to a new study by The Boston Consulting Group, the Middle East banking sector grew revenues by nearly seven percent in 2012. On the back of the 6.9 percent increase, profits rose 8.1 percent, stemming largely from extraordinary income sources, the report said. While banks in Qatar grew revenues by 12 percent and banks in Saudi Arabia and Oman achieved high single digit growth rates, banks in the UAE, Kuwait and Bahrain achieved a revenue growth rate of 5 percent or below. The report showed banks in all countries achieved above 7 percent profit growth rates, except in Kuwait (3 percent). In 2012, loan loss provisions varied significantly by country, the report added. The BCG index includes 32 banks from across the GCC capturing nearly 80 percent of the total regional banking sector. Dr Reinhold Leichtfuss, senior partner and managing director in BCG's Dubai office, said: "While the performance of Middle East banks settled at high single digit growth figures in 2012, it still compared very well with the international banks which experienced a further revenue decline. "This provides the Middle East banks the opportunity to undertake the necessary investments in capabilities and regional expansion." – SG/Agencies
