Gulf recovery expected to pick up this year as spending stays high

Abu Dhabi: Economic recovery in the Gulf may be lagging behind other developing economies, but should gain momentum this year with the continuation of high levels of government spending, oil prices above $50 (Dh183), and improvement in banks’ balance sheets, economists said yesterday at the opening of the Abu Dhabi Econ-omic Forum.

“Banks are not lending yet but they are better capitalised and are more liquid,” said HSBC chief economist Simon Williams. “It’s an issue of going through credit cycles. We’ve had severe deceleration in the past 12 months and I expect to see a gradual pick-up [in lending] over the course of the year.”

Lending growth has been slow across the Gulf even in economies where the sector remained intact, such as Saudi Arabia. In the UAE, loans grew just 2.4 per cent in 2009 compared with about 35 per cent average in the previous four years.

Williams, projecting 2 per cent UAE economic growth this year, said even the continued stagnation in loan growth could be made up for with the expected continuation of stimulus spending by the government.

Brad Bourland, chief economist at Saudi-based Jadwa Investments, said Gulf economies should also benefit from the high likelihood that oil prices will remain above $50 per barrel.

By Ahmed Namatalla, Gulf news