The combined GDP of the GCC region, which controls over 40 per cent of the global crude wealth, is expected to grow more than 4 per cent in 2012 with Qatar topping the list at 7 per cent, according to a new report.
Saudi Arabia with 4.6 per cent growth will be in the second spot on the GCC list followed by Kuwait (3 per cent), Oman (2.7 per cent), UAE (2.4 per cent) and Bahrain (1.2 per cent), said Alkhabeer Capital, a leading Saudi investment company, in its latest global economic outlook.
The regional inflation is also expected to ease as commodities and global growth flattens during 2012, it added.
Alkhabeer pointed out that Saudi will emerge as the leading frontier economy with a lower debt profile (total debt 58 per cent of GDP), higher investment (23 per cent of GDP) and rising infrastructure spending.
Saudi’s growth is mainly derived from an expected jump in budgetary development spending (up16 per cent) as an outcome of $133 billion economic stimulus package announced by the government.
Al-Khabeer’s forecast for Arabian crude for 2012 has taken into account a 5 per cent decline in prices along with a 2 per cent appreciation for US Dollar.
While an investor in a Frontier economy is concerned primarily with currency movement and inflation, Saudi is unique because its peg with the Dollar means stable currency while monetary measures – money supply – is used to ease imported inflation, said the Saudi investment firm.
Based upon Alkhabeer Capital’s oil price outlook and past Saudi Central Bank measures, experts see 2012 inflation unlikely to exceed 4 per cent.
According to the report, the Saudi equities are also expected to project good returns with modest risk.
Trading at a PE of 11.5 and yielding 3 per cent dividend, Saudi equities are the best pick amongst Frontier world with a price appreciation potential of 17 per cent, the report added.
On the global outlook, the Saudi firm said Europe was expected to shrink by 0.6 per cent, the US unlikely to post higher than 1.5 per cent growth and the emerging world likely to post 5.1 per cent growth.
The global economic growth is expected to close around 2.5 per cent for 2012, wherein China may contribute more than 40 per cent of total global economic growth, the report added.
After reviewing all the asset classes and taking into account economic growth estimates, Alkhabeer Capital stated that bargain hunting in equities was likely to generate the most optimum return depending on the investors’ appetite for risk.
Based upon additional supplies, a modest appreciation in the US dollar and a slowdown in global consumption growth, we expect oil prices to shrink by 5 per cent in 2012, remarked Ammar Shata, the executive director & CEO of Alkhabeer Capital.
Shata, lauding the in-house research team for the Outlook, said the report ‘outlines our investment thoughts for 2012 and look forward to providing further investment insights in the year ahead.’