Global economic rebound to boost Middle East growth

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Dubai: The return of world's leading economies such as US, UK, Germany and Japan will drive the global recovery in 2014 and it will have a very positive impact on the Middle East, especially the Gulf countries, said Nariman Behravesh, Chief Economist at IHS, on the sidelines of IHS Forum in Dubai.

"We are seeing positive economic growth signs in the Middle East, primarily driven by the Gulf countries. The UAE and Saudi Arabia are growing in excess of 4.5 per cent," he said. "Regional consumer spending is on the rise, the regional unemployment rate will be below that of France, Germany and Italy for the next three years and compound annual growth rates are forecast to be above-average through 2035."

As the key emerging markets such as Russia, Brazil and to some extent China is braced for a slowdown in economic growth, may global companies looking for global capacity expansions are looking at building new capacities in the Middle East. "The changing global economic growth dynamics could result in a number of global firms building new capacities in new growth regions. The Middle East is expected to benefit from this relocation of capacities," said Scott Key, CEO of IHS.

Industries ranging from defence, chemicals, automobile and energy sector is expected to invest heavily in the region, according to IHS forecast.

Between 2014 and 2020, IHS estimates total defence spending in the Middle East and North Africa will be $920 billion. "By 2020, $27 billion will be injected into the Gulf economy from defence deals via offset programmes," he said. "Defence offsets are a form of direct or indirect economic compensation to balance defence equipment purchases, and they are increasingly becoming the deciding factor in larger military acquisition programmes," said Guy Anderson, senior principal analyst at IHS Jane's Aerospace, Defence and Security.

Saudi Arabia is assessed by IHS Jane's to gain the most globally from its offset programme. By 2020, $12.6 billion will be added to the Saudi economy from defence offset deals, the highest globally. In second place will be the UAE, with $12.2 billion added during the same time period. India will take the number three spot, with $10.4 billion added to its economy.

Chemical exports

IHS Chemical says investments will drive chemical exports from the Middle East and will help the chemical industry grow faster than other key industries in the region. China will be the biggest market for these Middle East exports, which will grow by more than 8 per cent year-on-year in 2016, representing an increase of more than 6 per cent growth above 2013 chemical export figures.

To meet the region's high growth in power demand, IHS forecasts a need for $350 billion in new investment for generation between now and 2030, said Andy Barrett, senior global gas and power advisor at IHS.

IHS predicts that around $50 billion of the new investment will be required to develop around 17 GW of (mainly solar) renewable generation.

Between 2014 and 2020, IHS expects crude distillation and condensate-splitting capacity additions will increase regional output by around 1.5 million barrels per day.

Automotive market

Middle East automotive market is projected to grow twice as fast as those of Western Europe, North America between 2012 and 2022 "The Middle East automotive market is forecast to grow twice as fast as those of Western European and North American markets from 2012 to 2022," said Pierluigi Bellini, analyst at IHS Automotive. "In 2022, IHS Automotive forecasts that light vehicle sales in the GCC will jump 25 per cent to 1.74 million, and sales in the Middle East will jump 30 per cent to 3.45 million."

Estimates suggest that Dubai will build an $8 billion cargo infrastructure investment along with $10 billion in private sector contributions to help position the GCC as a global cargo leader, said Richard Clayton, chief maritime analyst at IHS.

"All eyes will be on Dubai in 2020 as it hosts the WorldExpo event," Clayton said,

"And it is promising to be the biggest yet. New roads, a peninsula-wide rail project, another airport, hotels, energy plants and event venues will generate project cargo on a grand scale."

4.5%

Growth in UAE and Saudi Arabian economies.

$920b

Defence spending in Mena between 2014 and 2020.

$12.6b

Amount added to Saudi economy by 2020.

Source: gulfnews.com

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