As the euro-zone sovereign debt crisis intensifies, drawing Spain further into its grip, the global economic outlook is deteriorating.
Halfway through the year and downward revisions to forecasts and core views among analysts have become commonplace.
Even the IMF has cut its global growth forecast to 3.5 per cent, from the 3.6 per cent forecast it raised only as recently as April.
China has recently recorded a 7.6 per cent growth rate for the second quarter, which is low by its standards, while UK growth has slumped a staggering minus 0.7 per cent quarter-on-quarter in the same period. In contrast, GCC growth forecasts are being revised up. At Emirates NBD we recently raised our forecast for GCC growth to 5 per cent for this year, up from 3.9 per cent previously. In turn, our UAE forecast has been raised to 3 per cent, up from 2.5 per cent before, while Saudi Arabian growth is now predicted to be 5.8 per cent this year, 2 percentage points higher than we predicted.
So what accounts for this change? Unsurprisingly, most of the reason revolves around oil production, which accounts for about 30 per cent of GCC output and which has been much stronger than anyone expected. In January it was anticipated that GCC oil production would decline this year in response to weaker global growth and increased supply from Libya and Iraq. Even as oil prices rose sharply in the first quarter, it was believed these would reverse.
Prices did fall back but it was not anticipated that GCC oil producers would maintain their record output levels despite the fall in prices.
Even allowing for the likelihood that oil production will ease in the second half of the fiscal year, average oil production this year is still likely to contribute positively to GDP growth.
Nonetheless, with the strength of the regional economy owing so much to this factor alone the focus inevitably turns to what lies ahead, especially in the context of a challenging global environment. Non-oil growth and diversification have long been cited as the direction in which regional economies need to head. Recent research by Bank of America Merrill Lynch emphasises the outlook for the region remains positive as the GCC moves from a capital and labour intensive phase of development to one where it moves up the "value chain" and into sectors where it does not necessarily enjoy a comparative advantage.
This, it is argued, could add 1 to 1.5 percentage points to the GCC's potential growth rate, taking it to 5.5 per cent.
As the current period of infrastructure building comes to an end, this process would entail attracting more white-collar workers (including more nationals), institution building, enhancing education and removing structural barriers.
Dubai provides a partial template of how this could be done, having broken some of the links between the oil and the non-oil economy, and achieving a degree of competitiveness in other key sectors. Crucially, it has completed much of the infrastructure build that is still under way elsewhere.
However, it is still too early to say the region's oil dependence will change anytime soon. The hydrocarbon sector's 30 per cent of the GCC economy still understates its significance representing as it does a critical source of funding.
Until a critical mass of infrastructure has been reached, solid institutions built and policies developed, the non-oil sector will remain heavily oil dependent. Nonetheless, this year's oil price and production windfall stands the region in good stead heading into what are likely to be challenging global economic times. However, as seen during the 2008 financial crisis they cannot be guaranteed to protect the region entirely - especially if oil prices fall.
Channelled productively, these resources should yield a positive long-term outlook, helping to raise productivity and allow for diversification. The urgency is to make sure such opportunities are not wasted or missed. The high levels of oil production this year suggest that is understood. The next part is to harness the proceeds of such growth and put them to work effectively.
Tim Fox is head of research and chief economist at Emirates NBD but is writing here in a personal capacity