Saudi Arabia’s Tadawul All-Share Index (TASI) has posted impressive returns YTD (up over 16%), but last week’s correction, coupled with a recent report issued by Riyadh-based Samba Bank–which warned that the recovery of oil prices to above $60/barrel and a forecasted 24% increase in government spending will not be adequate to offset a sharp slowdown in private sector activity–raises concern.

The Bank asserted that while public spending in both oil and non-oil sectors has been robust, private investment, in contrast, remained tepid, constrained by lingering tougher lending standards due at least in part to poor export prospects, especially in petrochemicals (polyethylene prices are still down roughly 50% from their mid-2008 highs) and refined products, the country’s main exports after oil and natural gas. It added that the country’s GDP would contract by 1.2% in 2009 (following 4.5% growth last year), but predicted that growth would climb to 4.4%

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A new poll of 11 economists shows that economists expect real economic growth in Saudi Arabia, the United Arab Emirates and Kuwait to slow - but remain positive!br /br /The good news is that the sconomies are still expected to expand. What is clear, however, is that the Gulf is sensitive to the oil price. Obviously, a fall in oil prices from $147 a barrel to $34 a barrel has an impact. br /br /The forecasts are for real growth of 2.4 percent in Saudi Arabia, 2.7 percent in the UAE and 3.5% in Bahrain. Qatar, the world's top exporter of liquefied natural gas, is expected to see the fastest GDP growth next year at 9.5 percent!br /br /We will monitor the extent of the slowdown in the non-oil sectors. across the Gulf will be a key element to monitor," said Giyas Gokkent, chief economist at ...