Weekly Economic Update Sunday, 06 March 2011

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2 Recent Macroeconomic Developments GLOBAL China sets yet another 5-year economic growth target China has set a 7% economic growth target for the next 5 years, broadly in line with the targets set in the past two development plans. Although China has for long been setting such single-digit growth targets, its actual economic growth performance has consistently surpassed the targets by a wide margin. For instance, the Chinese economy grew by at least 10% in 6 out of the past ten years, with 2007 recording the highest growth rate of more than 14%. Analysts believe that although a growth target of 7% has now been set for the period , the real growth rate of the GDP is forecast to average 9.5%. China s remarkable economic growth performance has enabled it to overtake Japan as the world s second largest economy in terms of absolute level of gross domestic product (GDP), surpassed only by the USA. On current trends, China is likely to overtake the US as the world s largest economy within the next 15 years China: Economic Growth Performance (%) Real GDP Growth 5-Year Plan target China: Selected Indicators (as proportion of US) Electricity per capita Car sales per capita Internet penetration Mobile phone penetration Steel production per capita Source: FT, IMF 2

3 Recent Macroeconomic Developments GCC Saudi economy in excellent shape; Tadawul boosted Gulf stock markets have recently been suffering from the tensions that have engulfed the region, which have also driven up costs of debt insurance. For instance, the Saudi stock benchmark Tadawul All Share Index fell on Wednesday to a 22-month low due to the regional jitters before bouncing back on Saturday following a remark by the Saudi Finance Minister that Saudi Arabia's economy is in an "excellent" shape and a rise in oil prices will boost the strong economic and financial position of the Kingdom. Economic and financial situations in Saudi Arabia are expected to remain sustainable for the forthcoming period thanks to the continued increase of oil price and government support. The Saudi Arabian Monetary Agency left the repo and reverse repo rates in March unchanged at 2% and 0.25% respectively, and inflation fell 5.3% in January 2011, the lowest since April Bahrain's central bank to keep peg to dollar Bahrain s central bank governor said on Tuesday that the ongoing unrest has not affected the fundamentals of the economy and that the country has no intention of changing its dollar peg exchange rate regime for the foreseeable future but that it is wary of adopting greater exposure to foreign exchange. This followed Monday s downgrading of Bahrain by Standard & Poor s Ratings Services by one notch, with Moody s placing its rating on negative watch, citing the anti-government protests. It is noteworthy that the Rating agencies have voiced concerns about the country s finances, particularly the gradual rise in the break-even oil price of its budget. But rising oil prices should help offset the negative shock to economic output from political instability. 3

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5 17/02/ /02/ /02/ /02/ /02/ /02/ /02/ /02/ /02/ /02/ /02/ /02/ /03/ /03/ /03/ /03/ /02/ /02/ /02/ /02/ /02/ /02/ /02/ /02/ /02/ /02/ /02/ /02/ /03/ /03/ /03/ /03/2011 Currencies Current ( 04 March 2011) Week Ago Weekly Change International $1 $1 (%) Euro GBP Yen CNY INR CHF GCC AED BHD KWD OMR Euro, Yen & Pound vs Dollar Euro (LHS) Pound (LHS) Yen (RHS) The Dollar Index QAR SAR Source: Thomson Reuters 5

6 Weekly Economic Update Sunday, 06 March 2011 Stock markets DowJones 0.33% 12,170 CAC % 4, NASDAQ 0.13% 2,785 FTSE % S&P % 1,321 Nikkei % 10, , Source: Thomson Reuters 6

7 23-Feb Feb-11 Weekly Economic Update Sunday, 06 March Feb Feb Feb Feb Feb Feb Feb Feb-11 Stock markets Abu Dhabi 3.20% , Kuwait 5.14% , Doha 8.79% Muscat 4.43% 6,352 7, Dubai 8.61% Saudi 15.02% 1,352 5, Source: Zawya 7

8 Stock markets Stock Exchange Current A Week Ago Weekly Change (04 March) (%) Dow Jones (US) 12,170 12, Nasdaq (US) 2,785 2, S&P500 (US) 1,321 1, CAC40 (FR) 4,020 4, FTSE100 (UK) 5,990 6, Nikkei225 (JP) 10,694 10, Abu Dhabi 2,530 2, Bahrain 1,377 1, Doha 7,489 8, Dubai 1,352 1, Kuwait 6,148 6, Muscat 6,352 6, Saudi Arabia 5,323 6, Source: Thomson Reuters and Zawya 8

9 Weekly Economic Update Sunday, 06 March 2011 Miscellaneous GULF projects Projects planned or under way Projects planned or under way Change on week (%) Projects planned or under way Change on year (%) 23-Feb Mar-10 ($m) ($m) ($m) Bahrain 80,567 80, , Kuwait 157, , , Oman 101, , , Qatar 234, , , Saudi Arabia 678, , , UAE 640, , , GCC 1,892,398 1,894, ,275, Iran 311, , , Iraq 361, , , Gulf Total 2,565,350 2,567, ,818, Source: MEED 9

10 miscellaneous Dr. Nahed makes the top 20 most powerful Arab women Over the past six months, CEO Middle East has been scouring the globe to examine in the detail the influence of female Arabs. Though primarily from the business world, no sector has been left untouched including science, media, entertainment, arts and sports. The result, according the CEO Middle East, is the most definitive list ever published on the power of Arab women. Source: Thomson Reuters 10

11 Gulf One Investment Bank B.S.C. (c) is a Bahrain registered bank whose vision is to be the leading knowledge-based infrastructure investment bank in the MENA (Middle East and North Africa) region. Its mission is to mobilise local and global capital to accelerate the execution of infrastructure projects via innovative custom made financial solutions. This Weekly Economic Update has been prepared by staff in the Research Department of Gulf One Investment Bank B.S.C. (c) under the general direction of Dr. Nahed Taher, Founder & CEO of Gulf One Investment Bank. The Research team comprises: Dr. Mohammed Salisu Chief Economist Gulf One Investment Bank m.salisu@gulf1bank.com Ms. Lobna Bousrih Research Analyst Gulf One Investment Bank l.bousrih@gulf1bank.com Ms. Sana Harrabi Research Analyst Gulf One Investment Bank s.harrabi@gulf1bank.com All comments and enquiries about this Economic Update should be sent to Dr. Mohammed Salisu at the above mentioned address. Disclaimer This Weekly Economic Update was prepared by Gulf One Investment Bank B.S.C (c), ( Gulf One ) and is of a general nature and is not intended to provide specific advice on any matter, nor is it intended to be comprehensive or to address the circumstances of any particular individual or entity. This material is based on current public information that we consider reliable at the time of publication, but it does not provide tailored investment advice or recommendations. It has been prepared without regard to the financial circumstances and objectives of persons and/or organisations who receive it. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation. In addition, the views expressed in this Economic Update do not necessarily represent the views of the Management or Board of Directors of Gulf One Investment Bank. This Weekly Economic Update or any portion hereof may not be reprinted, sold or redistributed without the prior written consent of Gulf One. 11