Real GDP growth in the GCC is likely to have slowed from 7.8% in 2011 to an estimated 5.7% in 2012, according to QNB Group. This remains a relatively high rate of growth compared with many other countries in the current challenging global economic and financial environment. The non-oil sector has driven growth while oil output has also risen, according to a QNB press release.
In 2012, oil prices remained at historically high levels, boosting government revenue and spending, which, in turn, boosts growth across non-oil industrial and services sectors. Around 22% of government spending is capital expenditure, mainly on infrastructure in transport, real estate, education and healthcare sectors. Government spending, therefore, supports non-oil sectors such as construction and utilities.
The remaining 78% of government spending is current expenditure, mainly on government wages and other public services. This provides an injection of income into the GCC non-oil economy, driving growth in services and retail trade.
Additionally, non-oil industry has grown strongly as investment in major manufacturing projects, particularly petrochemicals, has boosted output.
Rising oil production was also an important factor driving growth in 2012. Total GCC oil production reached 17.2m barrels per day, on average, in the first three quarters of 2012, 6.2% higher than in 2011. Higher oil production came as OPEC removed its production quotas for individual countries. The quotas had initially been put in place in 2009 when oil prices crashed, but were replaced in 2012 with a more relaxed aggregate production target for all OPEC members. OPEC also ramped up production in 2011-12 to calm oil markets as concerns grew about lower output in countries such as Libya (due to the Arab Spring) and Iran (due to sanctions).
Overall, despite historically high oil prices and rising oil production, strong growth in the non-oil GCC economy has sustained its share in total GDP at around 50% in 2012.