RIYADH, Aug 14: The GCC is set to continue its growth momentum. After registering a robust GDP growth over the last two years, the regional economies were projected to grow at a rate of five per cent this year, a report compiled by the Al-Rajhi Bank said.

The economies in the oil rich Gulf grew by 6.8 per cent in 2005 and about six per cent last year, amid strong oil prices.

Over a period of five years, from 2001 to 2006, the GCC economies were reported to have more than doubled in nominal terms to some $723 billion.

According to the report, Saudi Arabia's economy has experienced a strong growth since 2003 and surged ahead with its nominal GDP estimated to have grown by 12.4 per cent in 2006 to SR1.30 trillion ($347.9 billion), while the real GDP growth rate for 2006 was recorded at 4.6 per cent.

The bank said the UAE is expected to have recorded the highest real GDP growth in 2006 at 9.7 per cent, followed by Qatar 8.8 per cent, Bahrain 7.7pc, Oman 5.9pc and Kuwait 5pc.

The UAE is set to continue to lead in terms of growth this year rising by 8.2pc, followed by Qatar 8pc, Bahrain 6.9pc, Oman 6 pc, Saudi Arabia 4.8pc, and Kuwait 3.5pc.

“While the economies of the region will remain sensitive to adverse regional geopolitical developments and uncertainties, they are, nevertheless, expected to maintain the current uptrend for several years to come, supported by the positive outlook for the world oil market, and a more confident and efficient private sector,” the Al-Rajhi report said.

Annual inflation in Qatar last year reached the highest level of 11.8pc, followed by UAE 10.1pc, Oman 3.2pc, Kuwait and Bahrain 3pc each, and Saudi Arabia 2.2pc, the report added.

The report said that Saudi bank deposits stood at SR628.3 billion in May compared to SR626.7 billion in April, recording a monthly increase of 0.3pc and an yearly increase of 19.4 pc. The total value of Saudi commercial bank credit stood at SR520.5 billion in May compared to SR511.2 billion in April, recording a monthly rise of 1.8pc and a yearly rise of 11.1pc.

The annual inflation rates in 2007 were projected to be at 10pc for Qatar, 6.2pc for UAE, 3.8pc for Oman, 3pc for Bahrain, and 2.8pc each for Kuwait and Saudi Arabia.

The newsletter said Qatar and the UAE have experienced the highest inflation rates in the Gulf, particularly in the housing sector. The average accommodation rentals increased by a total of 83pc in Doha over the last two years and by 60pc in Dubai, compared to just 21pc in

Riyadh.

Moreover, rent as a proportion of total household income has reached 33pc in Qatar and 30pc in the UAE, compared to 19pc in Saudi Arabia. Inflation in the region now ranges between 2pc and 12pc, where UAE and Qatar have the more pronounced inflationary pressures; elsewhere inflation has been more moderate.

According to the report, inflation in the GCC countries is largely driven by higher spending by the government as well as private sector, and demand/supply imbalances.

The newsletter added that the world's three major currencies were up against the Saudi riyal, where the GBP (pound sterling) appreciated by 3.24pc, the EUR (euros) 2.97pc and the JPY (Japanese yen) 1.21pc during one month from June 15 to July 15, reflecting the movement of the dollar to which the riyal is pegged.