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Economic growth in the Gulf Cooperation Council (GCC) is likely to continue to outperform the global economy in 2023, with GDP growth for the GCC member states set to hit around 4.2% a year after closing in on 6.5% in late 2022, a report said.
The GCC forecast contrasts sharply with the International Monetary Fund’s (IMF) assessment of the global economy, which recently predicted that 2023 would be the weakest year for global growth since 2009 at 2.7%, compared with the first-half forecast. 0.9% lower 2022 – excluding the low point of the Covid-19 pandemic, First Abu Dhabi Bank (FAB), one of the largest banks in the UAE and one of the largest and safest financial institutions in the ‘Entering a new cycle’ said the 2019 Global Investment Prospects report.
The difference is even more pronounced compared with Western economies, with the IMF forecasting real GDP growth of just 1.0% in the US this year and 0.5% in the Eurozone.
Egypt up 4.7%
Meanwhile, the Egyptian economy is expected to grow by 4.7% in the 2022/2023 fiscal year, down from FAB’s previous estimate of 5.7%.
In financial markets, investment trends in 2022 may continue into the first quarter of 2023, but the report predicts that the market should begin to recover in the summer.
Analysts at FAB believe that U.S. interest rates, currently at 4.33%, have been the main driver of investor risk aversion, and the rate will stabilize later this year with a possible recession in the first half of the year.
Rapidly rising interest rates make traditional investments like bonds and stocks look less attractive to investors than cash deposit rates, but once the predicted U.S. recession actually happens, this should be a clue to investing in riskier assets, especially once stock prices reach Bottom may soon be reached.
profit recovery
Alain Marckus, managing director and head of asset management at FAB Private Banking Group, said: “As investors, we can never be sure what is coming, but the negative story of 2022 may now be closer to a close, and we are very close to a difficult bear market in stocks and bonds. The end.By mid-year at the latest, prescient investors will be doing their calculations for a potentially stellar earnings recovery in 2024.
“The stock market tends to look 9-16 months or so into the future. Smart investors also know that the unpredictable ‘X’ factor can sometimes spoil things. So it’s too late to sell now as investors may have to wait until the ‘V’ “It won’t be able to re-enter the market until the market recovery begins. Those with cash should consider deploying it in the next few months.”
The FAB outlook notes that the GCC region continues to be supported by strong oil revenues from its hydrocarbon exporters, which help create a buffer for non-oil and gas sector activity in the region and help return government balance sheets to surplus.
economic diversification
However, diversification of non-hydrocarbon economies is important to the economic development of the GCC and will be key to cushioning member economies from the headwinds of a possible global recession this year.
Encouraging sectors include growth in inbound tourism, with several GCC countries reporting higher visitor numbers in 2022 than before the pandemic. Industrial production also continued to expand across most of the region, including Saudi Arabia and Egypt.
While the report reflected a strong economy, the region has not been immune to global pressures. Inflation in most of the GCC will average 5-6% in 2022, levels not seen in more than a decade but about half the rate in many Western countries. The FAB forecasts that GCC inflation will slow to around 3% in 2023.
The situation is more complicated in Egypt, where inflation will continue to weigh on the country’s economic outlook into 2023, driven by high food and energy prices and the recent further depreciation of the Egyptian pound. GCC rates, as a function of their dollar-pegged currency could peak in May or June as the Fed tightens monetary policy further.
Market trends shaping future growth
In addition to key economic indicators, the FAB Global Investment Outlook also considers a range of trends that affect future growth prospects, including a focus on specific industries.
Sectors included in the report include:
• Crude oil and carbon trading
• Developments in the Middle East and Egypt
• Emerging Market Outlook
• Developed Market Outlook
• real estate
• ESG (Environmental, Social and Governance)
emerging opportunities
Emerging opportunities include an expected surge in sustainability-related investments. It noted that the “green” bond market recently reached a milestone valued at $2 trillion, while “sustainable” bonds – including social, sustainability, sustainability-linked and transition bonds – rose in 2018 The total value at the end of the year reached $3.5 trillion. According to the Climate Bonds Initiative report sponsored by FAB and published at COP27, Q3 last year.
The GIO report also noted that carbon trading is increasingly influencing the financial landscape in the Middle East and North Africa, building on the launch of landmark trading platforms in the Gulf Cooperation Council and the Middle East and North Africa region in 2022. These include in the UAE, a partnership between Abu Dhabi Global Markets (ADGM) and the AirCarbon Exchange (ACX) to create the world’s first fully regulated carbon trading exchange.
ADGM also became the first jurisdiction to regulate carbon credits and offsets as environmental instruments (a class of financial instruments) and to issue licenses to exchanges and clearing houses operating both spot and derivatives markets.
Other regional initiatives include the launch of a regional voluntary carbon market in Saudi Arabia, and the Egyptian government’s launch of the first African voluntary carbon market during November’s COP27 climate summit. trade arab news agency
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