Gulf economies are seen returning to solid growth in 2010, with Qatar and Oman soaring on rising oil and gas output, but “corporate distress” remains a risk, the Institute of International Finance said in report. However, the current account surplus of the GCC states would shrink to $49 billion in 2009 from $268 billion in 2008, before rebounding to $122 billion in 2010, it said. Foreign assets of the GCC would rise to around $1.55 trillion by end-2010, excluding asset valuation changes, the IIF said, without providing a comparative figure for 2009. Oil revenues across the six countries in the Gulf Cooperation Council - Saudi Arabia, Bahrain, Oman, Qatar, Kuwait and the UAE -are expected decline to $327 billion in 2009 from $575 billion in 2008, before recovering to $421 billion in 2010, the IIF said. Real gross domestic product (GDP) in Kuwait, Saudi Arabia, and the United Arab Emirates was expected to grow 4 percent, 3.5 percent and 3.4 percent respectively in 2010, driven mainly by a rebound in oil production, the IIF said in its report. This follows estimated contractions in Kuwait of 1.9 percent, 1.2 percent in Saudi Arabia and 1.5 percent in the UAE in 2009, according to the IIF. Banks across the Gulf region have had to take provisions for their exposure to Saad and Ahmad Hamad Algosaibi and Bros Co (AHAB), two Saudi conglomerates that defaulted on debts, with some bankers warning the total cost of writedowns may hit $22 billion and affect around 120 banks. “Investors have been unsettled by the revelations of corporate debt problems,” Saudi-based bank Samba Financial Group said in a separate report. “A paucity of data means that it is impossible to diagnose the extent or severity of debt problems within the Saudi corporate sector.” Qatar's economy was set to surge 35.5 percent next year, according to the IIF, having posted growth estimated at 9.3 percent in 2009 as the world's largest liquefied natural gas exporter completes a number of LNG expansion projects. The Omani economy was seen growing 9.7 percent in 2010, compared to an expected 5.2 percent expansion this year, the report said. Gulf governments' current account and fiscal surpluses were likely to remain “sizeable”, the IIF said, but would track a decline and then recovery in the region's oil revenues, the IIF said in its report. Crude oil prices rallied to peaks of above $147 a barrel in July 2008, before slumping to levels close to $30 a barrel earlier this year as the global downturn battered markets and hit demand. Prices have since recovered to around $70 a barrel. Meanwhile, companies in the Middle East and North Africa (MENA) raised more than $2 billion in the first nine months through initial public offerings, an 84 percent drop compared with a year earlier, Zawya.com data shows. Saudi Arabia, the region's largest economy, accounted for 48 percent of the proceeds and eight out of the 13 issues year-to-date, according to Zawya's third quarter IPO bulletin. Issuers sold shares worth $841 million in four IPOs during the third quarter, compared with $1.13 billion in seven IPOs during the second quarter. Saudi National Petrochemical Co.'s IPO worth $640 million was the biggest in the third quarter, and ranked second year-to-date after Vodafone Qatar's $952 million offering. A meltdown in the global economic conditions late last year hit IPO markets as investors stayed away from riskier asset classes like equities. “In general the fall in IPO activity is natural given the credit crunch,” said Haissam Arabi, chief executive and fund manager at Gulfmena Alternative Investments. “The IPO market is encouraged by the secondary market trending upward.” The Mena region, once flush with petrodollars, was also hit by a sharp fall in crude oil prices. The region's stock markets lost about 45 percent of their market capitalization in 2008 as liquidity dried up. IPO activity in the region is expected to pick up as global markets stabilize on hopes of a sooner-than-expected economic recovery. Oil prices bouncing back to above the $65 a barrel also supports sentiment. “We should start seeing some early signs of activity that will lead to public offerings next year. The price of risk is still somewhat high and the debt markets will recover before the equity markets,” Gulfmena's Arabi said. The GCC markets, which account for a bulk of the trading activity in the region, have clawed back some of last year's losses. The Saudi Tadawul is up about 32 percent year-to-date. But investors have become more selective as seen by the performance of this year's IPO shares since listing. Al Rajhi Co. for Cooperative Insurance's stock is trading at a seven-fold premium over its issue price, while Jordan Masaken for Land and Industrial Development Projects' shares have lost 37 percent of their value since listing, Zawya.com noted.
