Political transition in Qatar, Kuwait and continued political tensions in Bahrain are seen as possible reasons for growth to be moderating the region.
Growth in Saudi Arabia is expected to moderate to 4.4% in 2013 from 6.8% experienced in 2012, due to expected decline in oil production. This is further expected to moderate to about 4.1% in 2014. Kuwait‟s GDP growth is expected to slow down sharply to 1.1% in 2013 from 5.1% in 2012 due partly to slow investments, though this is expected to recover to 3.2% levels in 2014 as political consensus is reached and reforms unleashed.
Qatar, which experienced high double digit growth rates over the last few years, has expectedly dropped to 6.6% in 2012 as hydrocarbon production stagnated. Going forward it is expected to moderate at more sustainable levels, 2013 GDP growth is expected to be at 5.2%4.
Inflation in GCC is expected to be moderate in 2013, as most of the goods demand could be met through imports, the cost of which is expected to be flat due to weak global economy. Steady rise in rentals in Qatar is expected to lead inflation to 3% in 2013 from 1.9% in 2012. While inflation in UAE is expected to be muted due to supply overhang and depressed housing rentals.
According to the IMF, inflation in Saudi Arabia as measured by average consumer prices stood at 2.9%. It is expected to increase to 3.7% in 2013 and slightly moderate to 3.6% in 2014, as several housing projects initiated in 2012 is expected to come on stream and cool off rentals. Implementation of Nitaqat program, which calls for employing nationals in private sector, could lead to rise in business costs.