05 May 2011
Oil-importing countries such as Egypt, Syria, Yemen and Tunisia are in danger of falling into a recession, according to IIF.
Oil-Importing Middle East States In Danger Of Falling Into Recession: IIF
Middle East's oil-importing countries such as Egypt, Yemen, Tunisia and Syria could fall into recession this year, according to the International Institute of Finance (IIF), a group of 430 major international banks and financial institutions.
Tunisia and Egypt, which have seen their regimes collapse earlier this year, are going through a major political and economic overhaul. Meanwhile, Yemen and Syria are currently in the middle of great unrest as their unelected rulers look to clamp down on restless citizens who are seeking greater participation in the political and public policy issues and greater job opportunities.
Yemen will fare the worst, with its economy shrinking by 4%, Syria will see its economy contract 3%, Egypt 2.5% and Tunisia 1.5% this year, according to IIF.
Not surprisingly, oil-exporting MENA states will feel none of the pain. "Growth in the GCC will accelerate from an estimated 5.1% in 2010 to 6.5% in 2011, driven by expansion in crude oil production and larger increases in public spending."
Qatar will lead the way with a blistering 18% growth in 2011, but a shade under the 18.5% achieved in 2010. Saudi Arabia will see its economy rise 5.3% his year after a less-than-stellar 3.5% in 2010.
Like forecasts from other analysts, the IIF expects the UAE economy to get a major boost.
"The turmoil in the Arab world could indirectly boost the Emirates' economy through the following channels: higher production of crude oil in Abu Dhabi; (ii) higher revenues due to a spike in oil prices; and (iii) a diversion to the UAE of some of the regional trade, transportation, tourism, and finance. Dubai's economy is expected to recover significantly, growing by 3.5% in 2011 as compared to 1.7% in 2010."
Kuwait is expected to see growth more than double in 2011 after a weak 2% growth in 2010. The 4.4% growth in 2011 will be on the back of government spending as part of the $107 billion development plan
Read Kuwait Development Plan
The Gulf laggard will be Bahrain with a weak 2.9% growth in 2011 after a 4.5% growth in 2011.
Higher oil prices averaging $115 in 2011 will ensure that the GCC's budgeted revenues from energy exports exceed half a trillion dollars, or $533 billion, in 2011 from $362-billion in 2010.
"This surge in revenues far exceeds the increases in government spending and underlies the widening of the consolidated fiscal surplus from 8.0% of GDP in 2010 to 13.2% in 2011," says the IIF.
Meanwhile, MENA oil-importers will not be as blessed and suffer from low, contracting growths. "Furthermore, inflationary pressures are expected to rise, and current accounts to weaken, while some countries will see the erosion of reserves and pressures on their currencies," says IIF.
"Nonetheless, these countries are buffered by adequate reserves and therefore not expected to suffer serious external vulnerabilities, although the risks will remain on the downside."
The authorities of oil-importing countries will also be distracted this year as they focus on their political process rather than economic reforms. Elections in Tunisia and Egypt, and deep unrest in Yemen and Syria will mean fiscal deficits of the oil importers will widen and postpone much-needed fiscal reforms, says IIF.
"To help mitigate the adverse impact of the spike in global food and oil prices, most oil importers increased food and fuel subsidies, raised wages and pensions, and expanded employment in the public sector."
This, combined with weaker economic activity will widen the fiscal deficits for oil importers as a group from 6.0% of GDP in 2010 to 7.4% in 2011. The fiscal deficits are projected to widen to 9.4% of GDP in Egypt, 9.5% in Lebanon, 6.5% in Morocco, and 4.5% in Tunisia, says IIF.
"In these countries deficit financing usually comes from domestic sources and should not pose an undue problem this year, although risks could rise over the medium term. Government debt for oil importers is projected to increase from 65% of GDP in 2010 to 67% in 2011," says the IIF.
It is clear it will be a story of two regions: Oil-exporters at the one end and oil-importers at the other. Luckily, Arab oil exporters have a long history of investing in their oil-importing neighbouring. That may help ease the pain, pacify some anger, create much-needed jobs and benefit the region overall.
alifarabia.com 2011
Oil-importing countries such as Egypt, Syria, Yemen and Tunisia are in danger of falling into a recession, according to IIF.
Oil-Importing Middle East States In Danger Of Falling Into Recession: IIF
Middle East's oil-importing countries such as Egypt, Yemen, Tunisia and Syria could fall into recession this year, according to the International Institute of Finance (IIF), a group of 430 major international banks and financial institutions.
Tunisia and Egypt, which have seen their regimes collapse earlier this year, are going through a major political and economic overhaul. Meanwhile, Yemen and Syria are currently in the middle of great unrest as their unelected rulers look to clamp down on restless citizens who are seeking greater participation in the political and public policy issues and greater job opportunities.
Yemen will fare the worst, with its economy shrinking by 4%, Syria will see its economy contract 3%, Egypt 2.5% and Tunisia 1.5% this year, according to IIF.
Not surprisingly, oil-exporting MENA states will feel none of the pain. "Growth in the GCC will accelerate from an estimated 5.1% in 2010 to 6.5% in 2011, driven by expansion in crude oil production and larger increases in public spending."
Qatar will lead the way with a blistering 18% growth in 2011, but a shade under the 18.5% achieved in 2010. Saudi Arabia will see its economy rise 5.3% his year after a less-than-stellar 3.5% in 2010.
Like forecasts from other analysts, the IIF expects the UAE economy to get a major boost.
"The turmoil in the Arab world could indirectly boost the Emirates' economy through the following channels: higher production of crude oil in Abu Dhabi; (ii) higher revenues due to a spike in oil prices; and (iii) a diversion to the UAE of some of the regional trade, transportation, tourism, and finance. Dubai's economy is expected to recover significantly, growing by 3.5% in 2011 as compared to 1.7% in 2010."
Kuwait is expected to see growth more than double in 2011 after a weak 2% growth in 2010. The 4.4% growth in 2011 will be on the back of government spending as part of the $107 billion development plan
Read Kuwait Development Plan
The Gulf laggard will be Bahrain with a weak 2.9% growth in 2011 after a 4.5% growth in 2011.
Higher oil prices averaging $115 in 2011 will ensure that the GCC's budgeted revenues from energy exports exceed half a trillion dollars, or $533 billion, in 2011 from $362-billion in 2010.
"This surge in revenues far exceeds the increases in government spending and underlies the widening of the consolidated fiscal surplus from 8.0% of GDP in 2010 to 13.2% in 2011," says the IIF.
Meanwhile, MENA oil-importers will not be as blessed and suffer from low, contracting growths. "Furthermore, inflationary pressures are expected to rise, and current accounts to weaken, while some countries will see the erosion of reserves and pressures on their currencies," says IIF.
"Nonetheless, these countries are buffered by adequate reserves and therefore not expected to suffer serious external vulnerabilities, although the risks will remain on the downside."
The authorities of oil-importing countries will also be distracted this year as they focus on their political process rather than economic reforms. Elections in Tunisia and Egypt, and deep unrest in Yemen and Syria will mean fiscal deficits of the oil importers will widen and postpone much-needed fiscal reforms, says IIF.
"To help mitigate the adverse impact of the spike in global food and oil prices, most oil importers increased food and fuel subsidies, raised wages and pensions, and expanded employment in the public sector."
This, combined with weaker economic activity will widen the fiscal deficits for oil importers as a group from 6.0% of GDP in 2010 to 7.4% in 2011. The fiscal deficits are projected to widen to 9.4% of GDP in Egypt, 9.5% in Lebanon, 6.5% in Morocco, and 4.5% in Tunisia, says IIF.
"In these countries deficit financing usually comes from domestic sources and should not pose an undue problem this year, although risks could rise over the medium term. Government debt for oil importers is projected to increase from 65% of GDP in 2010 to 67% in 2011," says the IIF.
It is clear it will be a story of two regions: Oil-exporters at the one end and oil-importers at the other. Luckily, Arab oil exporters have a long history of investing in their oil-importing neighbouring. That may help ease the pain, pacify some anger, create much-needed jobs and benefit the region overall.
alifarabia.com 2011
