GCC Boom has ended?

The global financial turmoil has ended the boom cycle in most GCC states, research by Gulf Finance House (GFH) said. The steep fall in oil prices from their peak last summer, output contraction across other key economic sectors, tight liquidity conditions and the fall in asset prices will make 2009 a challenging year for the GCC. The fallout from the global financial crisis, coupled with the plunge in oil prices, has effectively ended the six-year economic boom which began in 2003 on the back of high oil prices that allowed strong government and private spending. The hydrocarbons export revenues are likely to fall by about 60 per cent to $200 billion (Dh734bn).
The outlook for various sectors are
Banking: Most GCC banks will see profit contractions as a result of slower growth in business volumes. Some banks will need to recapitalize or merge, and, in the process, cut back on credit expansion to improve capital adequacy metrics.
Petrochemicals: Downside risks remain high in the petrochemicals sector due to the build-up of excess global production capacity, declining global demand, lower prices and higher financing costs.
Real estate: Anecdotal evidence suggests that speculators are unable to exit long positions except after a long period and at significant discounts. In this environment, property flippers will be obliged to hold on to property and meet payment obligations, raising the likelihood of an increase in default rates in 2009.
Construction: The weakness in the GCC construction sector is a natural outcome of the weakness in the real estate sector, which will suffer from delays or cancellations and tighter access to credit.
Telecom: Although profitability growth of telecom companies will likely decelerate in 2009 due to already-high penetration rates, slower growth in subscription and intensifying competition relatively strong profitability and cash flow metrics present a buffer.

Contributed by Rajesh