According to experts at the Dubai-based Gulf Research Center (GRC), oil price, contrary to the expectations, will stabilise in 2006, and may even decline significantly if the US experiences a recession as a result of a reduction in government spending. Emilie Rutledge, economist at the GRC, said the high oil price and the increasing global demand for oil triggered a boom for the PGCC economies. The region's aggregate GDP rose by 5.3 percent, stock markets grew by 79 per cent and market capitalisation touched $1.1 trillion, an increase of 110 percent over 2004. The aggregate PGCC trade surplus stood at $253 billion in 2005, and imports of good and services rose by 20 per cent. "Regional governments are generally aiming to avoid overdependence on oil through economic diversification strategies, labour nationalisation policies and the privatisation process." Other issues of importance, according to Rutledge, were the Saudi accession to the WTO, Oman's free trade agreement with the US, continued diversification of investments, including further overseas acquisitions, moves toward establishing a PGCC Common Market and the risks of a stock market correction and inflationary pressures. The forecasts were made during the GRC's third annual conference, which included revealing the contents of the "Gulf Yearbook 2005-2006." The "Gulf Yearbook" is an annual compendium of analyses on events in the Gulf region during the previous year, with forecasts for the next. In his opening remarks, the GRC Chairman, Abdulaziz Sager, highlighted important issues in 2005, including the continuing political reform process that has firmly implanted itself in the region, the effects of the unprecedented increase in oil prices on the PGCC economies, as well as the numerous security challenges that confront the region. On defence issues, Dr. Mustafa Alani of GRC mentioned that the PGCC defence budget amounted to $34 billion during 2005, an increase of $4 billion over 2004, which could be related to higher revenues because of the oil price. He added that the region is feeling the pressure of escalating external threats: "Due to the failure of group defence strategy development set in the framework of the PGCC systems, the countries in the region are moving toward individual armament policies." Dr. Anas Alhajji, moderator of the Gulf Energy Program at the GRC, said the soaring price in 2005 was due to the market fundamentals of limited supplies and rising demands. "Opec members ran out of marketable excess capacity, and non-Opec production was lower than expected, while the global demand - especially the US, India and China continued to grow," Dr. Alhajji said. Current trends estimate that both demand and supply will increase in 2006. However, oil prices will depend on the size of the additional production capacity, he added. PIN/KHALEEJTIMES