Saudi Arabia’s economic growth will surge to four per cent in 2011 from three per cent this year mainly driven by massive capital investments in key strategic sectors and infrastructure, according to Standard Chartered.

Hydrocarbons are the biggest drivers of economy, at 27 per cent of GDP, followed by government services (18 per cent), manufacturing (12 per cent), financial services (11 per cent) and construction (7 per cent), the bank said in its latest forecast.

'We expect Opec quotas to continue to cap hydrocarbon production in 2011. As a result, the two key growth drivers will be diversificationrelated spending (mainly infrastructure) and development spending in the hydrocarbon sector, both downstream and upstream.'

'In 2010, the cabinet approved a $385 billion spending programme for the 2010-14 period, largely allocated to infrastructure and social services. We expect infrastructure spending to set another record, exceeding the estimated $70 billion spent in 2010.'

'We believe the move towards infrastructure-driven spending is healthier for the Saudi economy than hydrocarbon-driven growth, given the better filter-through effect of such spending to the real economy. Even where spending is allocated to the energy sector, it will be concentrated in the downstream sector,' the bank said in the 'Global Focus - 2011 - The Year Ahead' report.

This is positive, as it will create jobs for Saudi nationals due to the labour intensity of the sector, the report added.

On Bahrain scenario, Standard Chartered said unlike its Gulf neighbours, the kingdom is not heavily endowed with natural resources. As a result, the kingdom has positioned itself as a regional financial and business hub.

The financial sector, which contributes 25 per cent of GDP, has shown recent signs of improvement, the bank said in its annual forecast.

Private-sector credit grew 10.5 per cent y/y in September 2010, and we expect banks to slowly regain confidence in lending in 2011 as the regional recovery gains momentum.

The loan-todeposit ratio stood at 57 per cent as of third quarter of 2010. The sector suffered a downturn during the crisis and is still some way from a full recovery.

'However, confidence should pick up, and we expect the private sector to drive much of the recovery. Private-sector credit accounted for 83 per cent of total credit as of September 2010, said Standard Chartered bank in its forecast.

On Kuwait, the bank said government spending will gain traction in 2011 as the country's four-year development plan gets underway.

The $104 billion plan approved in February 2010 is the first of a series that Kuwait plans to roll out under its ‘Kuwait Vision 2035’ programme. The key goal is to develop Kuwait into a trade and financial hub in the next 25 years.

'Although the development plans are encouraging, we see a possibility that projects will face delays or be scrapped as decision-makers dispute the correct path to reform. Our growth forecasts reflect this caution.'

'We are also cautious about the long-term execution of this vision, as Kuwait will have to work hard to catch up with regional players that have moved faster to diversify their economies,' Standard Chartered said.

'Oil revenues, which make up 94 per cent of Kuwait’s total revenues, have provided a comfortable cushion for the economy, in turn delaying major reforms. Pushing forward is possible but will require genuine backing from the government and parliament,' it added.

'Unlike the other GCC countries, Kuwait does not peg its currency strictly to the US dollar, instead targeting a basket of currencies, the report pointed out.

Kuwait’s success in achieving sustainable growth will be determined by its ability to revamp laws to better suit its needs.

On Oman, the Standard Chartered said an increased oil production, strong fiscal policy and improving credit conditions was set to drive GDP growth to around 4.5 per cent in 2011, making the Sultanate the region’s second-fastest growing economy after Qatar.

Besides the government debt is low at 5.7 per cent of GDP, the bank said in its report.

Oil and gas had accounted for 48 per cent of Oman's GDP in the first quarter, up from 35 per cent during the same period in 2009, the report stated.

The need for Oman to diversify away from oil is becoming increasingly clear. As Oman is a non-Opec member, recent production increases have given rise to healthy trade balances, with oil and gas making up 65 per cent of exports.

Of all the Gulf states, Qatar will be the fastest-growing economy in 2011 with a eight per cent expansion. 'The growth trajectory should begin to flatten out in FY12 as gas production stabilises, with growth expected to moderate to 5 per cent.'

According to the report, the government plans to spend close to $20 billion on new roads and transport infrastructure over the next five years, and a $36 billion metro system is in the pipeline over the longer term.

Qatar is also building a $11 billion airport and a $5.5 billion deepwater seaport, it added.

The authorities, the bank said, are likely holding off on breaking ground on key projects until 2011, after the World Cup decision in December 2010 provides clarity on the scope of projects needed.

'We are positive on the longer-term outlook for infrastructure investment,' Standard Chartered said in the report.-TradeArabia News Service