In 2016, Saudi Arabia, the region’s biggest economy and its second-most populous nation after Egypt, introduced a long-term economic plan that it aims to achieve by 2030. The plan came in the aftermath of a major decline in oil prices, of which the kingdom is the world’s top exporter.
In recent years, Abu Dhabi and Egypt have also announced economic ‘vision’ plans for 2030. The three visions share the goals of improving the living conditions of each country’s citizens and boosting economic growth.
Speaking at the Arab Strategy Forum in Dubai earlier this month, World Bank Group senior vice-president Mahmoud Mohieldin said most of the Arab countries need to focus on building human resources through investments in education and healthcare, along with investing in infrastructure and risk management if they are to achieve their long term economic visions.
“The documents are superb,” Mohieldin said, talking in Arabic about the Arab countries’ long term plans, without specifying one. “But when it comes to implementation and activation, especially on the local front, the matter needs a lot of work and thinking,” he added.
“The question is to what extent will the growth bring an increase in the employment rates,” Mohieldin said, speaking during the forum’s panel discussion, which was titled the State of the Arab World Economy in 2019.
“And we are not talking about any kind of job opportunities, we want those that would be productive, add value and which bring good income that would help enhance a person’s living standard,” he added.
Nasser Saidi, Lebanon’s former Minister of Economy and Trade, said during the same panel discussion that the Arab region’s three biggest economies of Saudi Arabia, the UAE and Egypt need to work on quick fixes for their economic issues, which in the case of Saudi Arabia and Egypt include a relatively high unemployment rate, while the UAE has been impacted by an economic slowdown that has affected its retail and real estate markets.
Unemployment and economic slowdown
The unemployment rate among Saudi citizens maintained a record rate of 12.9 percent in the second quarter of 2018, while Egypt’s unemployment rate dropped to 10 percent in the third quarter, down from 11.9 percent in the same period last year.
“In the long run, we are all dead. We will not be here in 2030 and no one will be questioned or held accountable,” Saidi said at the Arab Strategy Forum’s panel, also speaking in Arabic.
Abu Basha said that Saudi Arabia remains in a phase of adjusting for “lower oil prices for longer”.
Oil prices steadied on Friday after a volatile week of trading, with Brent Crude futures rising by 4 cents to close at $52.20 per barrel, while U.S. West Texas Intermediate crude rose by 72 cents to finish at $45.33 per barrel, according to Reuters.
Brent crude futures prices are down by around 22 percent since the start of the year and are around 40 percent lower than the peak reached in early October, according to Eikon data.
“They (the Saudi government) had to do an adjustment, which led to a slowdown in growth… but it was much needed and it is really good that they delivered on it,” Abu Basha said, adding that the kingdom’s short-term priority would be to put in place policies that would further stimulate growth.
“The government no longer has the capacity to spend as it used to,” he added.
Abu Basha said the kingdom’s sovereign wealth fund, the Public Investment Fund, is an effective public investment tool that would help the country in diversifying its investments.
The PIF has made several investment announcements in the past few years, including investing in Noon, an e-commerce portal part-owned by Dubai businessman Mohamed Alabbar and a $500 billion megaproject named NEOM, a major industrial and tourism project spanning across 26,500 square meters along with other investments inside and outside the kingdom.
“Investing in entertainment cities or tourism projects shows that the thinking is going in the right direction as there are many Saudis who spend a lot of money outside Saudi on that,” Abu Basha said.
As for the UAE, Abu Basha praised recent decisions by the government to introduce new visa regulations aimed at attracting more investors and retirees to the country, but said the government needs to set softer conditions and work on implementing other, similar moves to boost growth to higher rates.
In September, the UAE government approved a law that will allow expats to stay in the country after they retire provided that they own a property worth two million dirhams ($545,492), or have at least one million dirhams in savings, or an active income of at least 20,000 dirhams per month. The law is due to be implemented in 2019, but it is not yet clear when.
Abu Basha said that some of the conditions set by the government could pose a challenge when it comes to attracting wealthier retirees, which is the law’s main goal. Discussing the 2 million dirham ($544,580) property rule, he said: “It is a big number even by Dubai’s high living standards”.
The UAE also announced plans to introduce 100 percent foreign ownership for onshore companies and 10-year visas for certain individuals such as doctors, engineers, entrepreneurs and innovators. A temporary, six-month visa for jobseekers has also been announced to help more UAE residents find work while remaining in the country, without having to leave one month after a job-linked visa expires.
“Speaking about Dubai specifically, it hit a ceiling in terms of development and needs to make a bit of a leap forward. The model of opening up to expats to come and make business has been tremendously successful but it hit a ceiling. If you want to go to another stage where you make the economy grow at a 5 percent rate and above… you need more structural solutions. It has become very expensive to open or sustain a business in Dubai, so they need to structurally change that,” Abu Basha said.
A grim outlook
Saidi said during the panel discussion at the Arab Strategy forum event that there is a global consensus that the world would witness an economic slowdown that could escalate into an economic recession within the next few years.
“I am with the camp who believes that the economic recession will most likely start in 2019,” he said.
Saidi said there are three factors to watch that will most likely lead to a recession and which could impact the Arab region: Oil prices, a global financial crisis similar to the one experienced in 2008 and the trade war between the United States and China, which he thinks could hinder China’s growth and technological development.
Mohieldin said the Arab region continues to be impacted by the volatility in oil prices. “We can now mourn the age of risks as today we are in the age of uncertainty,” he said.
Saidi said that an International Monetary Fund (IMF) forecast of GDP growth in the range of 3 percent for the Gulf Arab states is “optimistic”, adding that in his view, GCC states will grow at a rate of around 2 percent in the coming year. He said the era of $100 oil prices “is over.”
According to the IMF’s most recent forecast announced last month Saudi Arabian GDP is expected to grow at 2.2 percent this year and 2.4 percent next year, up from -0.9 in 2017 and UAE GDP is projected to grow at 2.9 percent in 2018 and 3.7 percent in 2019, up from 0.8 percent in 2017.
A report issued by the fund in October on Egypt said that the Egyptian economy grew by 5.3 percent in its 2017/2018 fiscal year, which ended on June 30 this year, up from 4.2 percent in the prior fiscal year. The IMF’s World Economic Outlook report issued in October predicted that Egypt’s economy would grow by 5.5 percent in the 2019 calendar year.
Abu Basha said that he was expecting “a small pick-up” in non-oil activity in Saudi Arabia and the economies of the UAE and Egypt.
“We are expecting around two and-a-half percent growth in the non-oil, this year it is expected to be 2.2 (percent). I think growth will be challenged a little bit and we will not see much spending or government investments,” he said.
“The UAE, we are expecting growth to slightly up-pick … But growth will be challenged by cyclicality… and the need to do more structural reforms.”
“In Egypt, we expect the economy to grow at plus 5 percent. Tourism is doing well and the gas production is also expected to continue to rise.”
(Reporting by Yasmine Saleh; Editing by Michael Fahy)
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