The $105 billion economy of Abu Dhabi, the world’s fifth-largest oil producer, could triple in value during the next 17 years, a report said.

Gross domestic product could surge to $300 billion by 2025, the emirate’s Department of Planning & Economy said in a report, according to Wam news agency. Oil accounts for 59 per cent of GDP, and GDP per capita is $74,000, the second-highest in the world, it said.
“A combination of factors, such as giant projects, economic reform plans and government-restructuring programmes, will enable the emirate to achieve its target of economic diversification,” the ministry said.
Oil as a share of GDP could fall to 50 per cent in 2015 and 40 per cent in 2025, the news agency said.

Oman inflation rises
Annual inflation in Oman accelerated to 11.56 per cent in March from 11.11 per cent in February, government data showed. The Gulf Arab state’s consumer price index hit 120.6 points at the end of March compared with 108.10 a year earlier, the ministry of national economy said on its website. The index was 120 points at the end of February. The sultanate’s annual money supply jumped 37.8 per cent as inflation soared. Money supply touched RO6.71 billion ($17.4 billion) on March 31 compared with RO4.871 billion a year earlier, the ministry of national economy said on its website. Foreign assets, including gold, held by the central bank almost doubled in the year to March to RO4.002 billion from RO2.218 billion a year earlier, the data showed.

Pressure on dollar peg
Saudi Arabia could face internal pressure to revalue its dollar-pegged currency as inflation in the world’s largest oil-exporter soars to a 30-year peak this year, a Saudi investment bank said. Inflation in the largest Arab economy, home to 25 million people, almost doubled in the six months to March to a three-decade peak of 9.6 per cent. A Reuters poll this week showed Saudi inflation averaging 9 per cent this year, more than double its 2007 level.
“With all sectors of the population suffering from inflation and the weak exchange rate, there will be pressure on the government to respond,” Jadwa Investment said. The riyal has been fixed at 3.75 to the dollar since 1986.
“While we have stated forcefully in past reports that no change will be forthcoming, we are less certain now, given the severity of inflation and the weakening of the dollar,” Jadwa said.
Saudi Arabia has been the Gulf Arab region’s biggest proponent of the dollar peg, saying repeatedly that it would not sever its link, even as the US currency tumbled to record troughs against the euro this year. Revaluing by at least 15 per cent “would have a clear and immediate impact on inflation and would provide some breathing space while supply bottlenecks gradually unwind,” Jadwa said.
But a revaluation would be unlikely because it would “have adverse impact elsewhere in the economy,” Jadwa added.
The government has been trying to offset the impact of inflation this year by boosting subsidies, slashing import levies, introducing cost-of-living allowances for state employees and tightening bank lending curbs. Investors, meanwhile, are maintaining bets that the riyal could rise 2.5 per cent in two years, according to forward rates. Saudi Arabia and four of its neighbours plan to launch a single currency as early as 2010.

Banking boom to continue
The boom in Qatar’s banking sector will continue for some time with the country’s economy growing strongly, says a report.
The burgeoning gas market and rapidly growing knowledge industry are set to ensure the country, and its banking sector enjoy boom town economics, according to a new research report released by regional investment bank EFG-Hermes.
The report examines Qatar’s rapid move towards a diversified economy and its impact on the local banking industry.
“With the economy booming from government-directed investment and the initiation of over $120 billion of gas, infrastructure and other major development projects, Qatar, and indeed the local banking sector, have a very solid outlook,” says Raj Madha, director of equity research at EFG-Hermes.
“We predict real GDP growth to reach double digits, while inflation is expected to push nominal growth into the high teens. On top of that, asset (particularly property) inflation is likely to offer opportunities of its own, while associated immigration is set to build the internal market,” he said.
All this translates into an equally bright future for the banking sector, he said.

SWFs value to surge
Funds under management by sovereign wealth funds, or SWFs, are expected to increase to $10 trillion in five years, the IMF has forecast, with the GCC countries holding about half.
Saying that sovereign funds are ‘widely perceived’ to have played a stabilising role in markets, possibly because their long investment horizons are reflected in longer holding periods, the IMF said it would continue to make efforts to formulate international best practice for such funds, according to a press report. Capital injections into US and European financial institutions by sovereign funds have topped $40 billion since November 2007 in the wake of the US sub-prime crisis, it said.
“The recent substantial increase in SWF assets has raised concerns about their lack of transparency, the expanded role of governments in international markets and industries, and the potential of SWFs for carrying out transactions based on non-commercial motives,” the IMF said.
In contrast, countries with sovereign funds are concerned about protectionist restrictions on their investments, which could hamper the international flow of capital.

Expatriates feel the pinch
Eighty-two per cent of expatriates in Bahrain are feeling the pinch of the rising cost of living, a major study of lifestyles revealed. Despite nearly two thirds of those surveyed saying they moved to the Gulf to improve their finances, an overwhelming majority claimed their ability to save for the future has been restricted.
This is compared to 85 per cent of expatriates in Qatar and 65 per cent in the UAE, according the second Zurich International Life (ZIL) Wealth Monitor.
The student researchers of the attitudes and future financial plans surveyed 700 expatriates living in the UAE, Bahrain and Qatar on their approaches to financial planning and lifestyle.