Weekly Economic Update Sunday, 04 March 2012 1
Weekly Economic Update Sunday, 04 March 2012 Recent Macroeconomic Developments Global EU Leaders sign fiscal discipline treaty to rein in debt All European Union (EU) countries, except the UK and Czech Republic, signed a new treaty on tighter budget discipline for the euro zone on Friday, under which countries are bound to write a 'golden rule' on balanced budgets into their national statutes, with automatic correction mechanisms if the rule is breached. The new treaty will now have to be ratified by the 25 EU signatory countries and it requires approval by at least 12 Eurozone countries to take effect. The deal was received with optimism but critics have doubted its credibility due to lack of an effective enforcement mechanism, arguing that the erstwhile fiscal deficit ceiling of 3% of GDP enshrined in the fiscal growth pact was flouted with impunity by both rich and poor countries alike. The deal may also be too little too late to address the immediate growth and competitiveness challenges facing the euro area as economic activities continue to falter and manufacturing indices remain below the 50 mark which separates growth from contraction. In addition, the new deal may not be enough to save Greece from the abyss despite securing a second bail-out fund. It is therefore not surprising that Moody's Investors Service, the rating agency, cut Greece's local and foreigncurrency bond ratings to C from Ca, bringing the country to its lowest possible level. There were, however, cheerful news coming from the eurozone as the European Central Bank (ECB) injected around 530 billion liquidity into the banking system, aimed at stabilising sovereign bond markets in debt-stressed countries. The ECB support, along with the new fiscal stability agreement, will boost confidence in the beleaguered euro. Business Surveys, PMI index, Manufacturing Sector Euro Zone Germany France Greece Spain Italy Japan USA UK China Jan-12 48.8 49.7 47.9 34.6 41.6 43.1 45.4 55.7 46.8 47.8 Feb-12 49.0 51.3 50.0 35.5 44.8 49.6 48.8 55.3 52.6 45.8 Source: Thomson Reuters 2
MW Weekly Economic Update Sunday, 04 March 2012 Recent Macroeconomic Developments GCC Electricity demand in the GCC countries to accelerate Electricity demand is expected to more than double in the GCC countries within a decade, to exceed 162 thousand megawatts by 2020 compared with 80 thousand megawatts in 2010. Demographic dynamics, economic diversification efforts and infrastructure developments across the region are key drivers of growth in demand for electricity. Saudi Arabia, the most populous country in the region, will account for the lion s share of power consumption, expected to reach 78 thousand megawatts by 2020, followed by the UAE with 41 thousand megawatts. The rest of the GCC countries (Bahrain, Kuwait, Qatar and Oman) will together have a combined demand of around 43 thousand mega watts in 10 years time. As fossil fuel, an exhaustible resource, is the principal feedstock for power generation in the region, this trend provides food for thought on the need for innovative policies towards energy efficiency as well as addressing renewable energy challenges. 90,000 80,000 70,000 2010 2020 Electricity demand forecasts in the GCC countries 60,000 50,000 40,000 30,000 20,000 10,000 0 Bahrain Kuwait Oman Qatar Saudi Arabia Abu Dhabi Dubai Source: MEED 3
Weekly Economic Update 03-Feb-12 05-Feb-12 07-Feb-12 09-Feb-12 11-Feb-12 13-Feb-12 15-Feb-12 17-Feb-12 19-Feb-12 21-Feb-12 03-Feb-12 05-Feb-12 07-Feb-12 09-Feb-12 11-Feb-12 13-Feb-12 15-Feb-12 17-Feb-12 19-Feb-12 21-Feb-12 Sunday, 04 March 2012 COMMODITIES 129 Brent Oil Price (US$/barrel) 1790 Gold Price (US$/ounce) 127 125 1770 123 121 119 117 115 1750 1730 1710 113 1690 As March 02 (US$) Current Week Ago Weekly Change Brent Oil (barrel) 127.53 125.47 1.64 Gold (ounce) 1711.89 1776.40-3.63 Silver (ounce) 34.50 35.34-2.38 Copper (pound) 3.88 3.81 1.71 Aluminium (kilo) 2.29 2.23 2.60 Source: Thomson Reuters 4
Weekly Economic Update Sunday, 04 March 2012 02-Feb-12 03-Feb-12 04-Feb-12 05-Feb-12 06-Feb-12 07-Feb-12 08-Feb-12 09-Feb-12 10-Feb-12 11-Feb-12 12-Feb-12 13-Feb-12 14-Feb-12 15-Feb-12 16-Feb-12 17-Feb-12 18-Feb-12 19-Feb-12 20-Feb-12 21-Feb-12 02-Feb-12 03-Feb-12 04-Feb-12 05-Feb-12 06-Feb-12 07-Feb-12 08-Feb-12 09-Feb-12 10-Feb-12 11-Feb-12 12-Feb-12 13-Feb-12 14-Feb-12 15-Feb-12 16-Feb-12 17-Feb-12 18-Feb-12 19-Feb-12 20-Feb-12 21-Feb-12 Currencies Current ( 02 March 2012) Week Ago Weekly Change International $1 $1 (%) Euro 0.757 0.743 1.884 GBP 0.632 0.629 0.477 Yen 81.830 80.885 1.168 CNY 6.295 6.296-0.016 INR 49.505 48.960 1.113 CHF 0.914 0.898 1.726 GCC AED 3.670 3.670 0.000 0.83 0.80 0.77 0.74 0.71 0.68 0.65 0.62 0.59 Euro, Yen & Pound vs Dollar Euro (LHS) Pound (LHS) Yen (RHS) 84.5 83.0 81.5 80.0 78.5 77.0 75.5 74.0 BHD 0.380 0.380 0.000 KWD 0.278 0.277 0.361 80 The Dollar Index OMR 0.390 0.390 0.000 QAR 3.640 3.640 0.000 SAR 3.750 3.750 0.000 79 78 Source: Thomson Reuters 5
Weekly Economic Update Sunday, 04 March 2012 Stock markets DowJones 0.04% 13010 12,978 13000 12990 12980 12970 12960 12950 12940 CAC40 3540 0.98% 3520 3,501 3500 2995 2990 2985 2980 2975 2970 2965 2960 2955 2950 6000 5970 NASDAQ FTSE100 0.42% 2,976 0.40% 5,911 1378 1375 1372 1369 1366 1363 1360 9830 9780 S&P500 0.28% 1,370 Nikkei225 1.34% 9,777 3480 5940 9730 3460 3440 3420 5910 5880 9680 9630 3400 5850 9580 Source: Thomson Reuters 6
21-Feb-12 21-Feb-12 Weekly Economic Update Sunday, 04 March 2012 Stock markets 2640 2620 2600 2580 2560 2540 2520 6140 6130 6120 6110 6100 6090 6080 6070 Abu Dhabi 3.33% 2,624 Kuwait 0.74% 6,134 8800 8770 8740 8710 8680 5900 5850 5800 5750 5700 5650 Doha 0.10% 8,742 Muscat 2.55% 5,842 1740 1720 1700 1680 1660 1640 1620 7290 7240 7190 7140 7090 7040 6990 6940 Dubai 4.27% 1,702 Saudi 2.78% 7,226 Source: Zawya 7
Weekly Economic Update Sunday, 04 March 2012 Stock markets Stock Exchange Current A Week Ago Weekly Change (02 March) (%) Dow Jones (US) 12,978 12,983-0.04 Nasdaq (US) 2,976 2,964 0.42 S&P500 (US) 1,370 1,366 0.28 CAC40 (FR) 3,501 3,467 0.98 FTSE100 (UK) 5,911 5,935-0.40 Nikkei225 (JP) 9,777 9,647 1.34 Abu Dhabi 2,624 2,539 3.33 Bahrain 1,148 1,154-0.53 Doha 8,742 8,733 0.10 Dubai 1,702 1,632 4.27 Kuwait 6,134 6,089 0.74 Muscat 5,842 5,696 2.55 Saudi Arabia 7,226 7,031 2.78 Source: Thomson Reuters and Zawya 8
Weekly Economic Update Sunday, 04 March 2012 Miscellaneous GULF projects Projects planned or under way Projects planned or under way Change on week (%) Projects planned or under way Change on year (%) 21-Feb-12 1-Mar-11 ($m) ($m) ($m) Bahrain 62,346 62,411-0.10 79,567-21.64 Kuwait 188,623 178,229 5.83 151,096 24.84 Oman 115,830 115,630 0.17 99,954 15.88 Qatar 222,168 223,398-0.55 228,232-2.66 Saudi Arabia 741,884 733,222 1.18 685,625 8.21 UAE 549,369 547,314 0.38 618,669-11.20 GCC 1,880,220 1,860,204 1.08 1,863,143 0.92 Iran 300,849 300,093 0.25 303,210-0.78 Iraq 301,000 300,097 0.30 264,342 13.87 Gulf Total 2,482,069 2,460,394 0.88 2,430,695 2.11 Source: MEED 9
Weekly Economic Update Sunday, 04 March 2012 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 E-mail: 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 e-mail 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. 10