Dr. Raja M. Almarzoqi Albqami Institute of Diplomatic Studies Rmarzoqi@gmail.com 3 nd Meeting of OECD-MENA Senior Budget Officials Network Dubai, United Arab Emirates, 31 October-1 November 2010
Oil Exporters MENA Oil Importers
Oil Exporters Morocco Algeria Tunisia Libya Syria Lebanon West Bank & Gaza Jordan Egypt Iraq Saudi Arabia Bahrain Qatar Iran Kuwait United Arab Emirates Afghanistan Pakistan Mauritania Oman Sudan Yemen Djibouti Source: IMF
Oil importers Morocco Algeria Tunisia Libya Syria Lebanon West Bank & Gaza Jordan Egypt Iraq Saudi Arabia Bahrain Qatar Iran Kuwait United Arab Emirates Afghanistan Pakistan Mauritania Oman Sudan Yemen Djibouti Source: IMF
introduction The growth of the region depends on oil Growth in the non-oil economies of the Middle East dependence on GCC growth Financial flow Remittance Tourism
Credit sluggish Oil price reduction (36%) Investors attitude GDP growth decline
Credit and Deposit Growth (PPP GDP weighted year-on-year growth rates, percent) 36 32 28 Credit to private sector Deposits 24 20 16 12 8 4 Dec-07 Jun-08 Dec-08 Jun-09 Dec-09 Source: Regional Economic Outlook presentation, IMF
MENAP oil exporters The MENAP oil exporters were hit hard in 2009. Crude oil prices drop to US$40 per barrel, real estate and asset prices plunged, and external financing dried up. The oil exporters combined current account surplus fell to US$53 billion in 2009, from its peak US$362 billion in 2008. Oil GDP contracted by 4.7 % in 2009, Grew by 1.5 percent in 2009.
MENAP oil importers MENAP oil importers have positive spillovers from fiscal expansions in the GCC countries Overall growth fell to 3.8 percent in 2009, from 5 percent in 2008. Since mid-2009 Trade rebounding and investment and bank credit beginning to pick up, Growth is estimated to increase to 4.1% in 2010 and 4.8 % in 2011.
Middle East, North Africa, Afghanistan, and Pakistan (MENAP) Average Proj. Proj. 2000 05 2006 2007 2008 2009 2010 2011 Real GDP Growth (Annual change; percent) MENAP 5 5.7 5.7 4.6 2.3 4.2 4.6 Oil Exporters 5.3 5.4 5.6 4.4 1.5 4.3 4.5 of Which: GCC 5.4 5.4 4.2 6.3 0.8 4.9 5.2 Oil Importers 4.4 6.3 5.9 5 3.8 4.1 4.8 Central Government Fiscal Balance (Percent of GDP) MENAP 1.8 6.7 4.6 6.9-2.5-0.3 1 Oil Exporters 5.3 12.8 9.7 13.8-0.8 2.8 4.6 of Which: GCC 7.6 22.4 17 26.4 2.1 7 10.3 Oil Importers -4.7-4.7-4.9-5.8-5.5-6 -5.4 Current Account Balance (Percent of GDP) MENAP 8.3 17.1 14.1 13.8 1.2 4.5 6.2 Oil Exporters 12.1 23.4 19.6 19.6 3.4 7.8 10 of Which: GCC 14.9 28.7 22.8 24.1 6.6 13 15.7 Oil Importers -5.4-1.6-2.4-4.8-4.5-4.2-4 Source: IMF, 2010
Inflation 16 14 12 10 8 6 4 2 0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Inflation correlated with oil revenue
Growth of Real GDP in MENA Current Account Balance of MENA (Billion of U.S dollar) 8 400 7 350 6 5 300 250 200 4 150 3 100 2 50 1 0 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 0-50 -100 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 Surplus of CA during oil price increase
16 8 14 7 12 6 10 5 8 4 6 4 2 Unemployment rate Real GDP growth (right scale) 3 2 1 0 1990 1993 1996 1999 2002 2005 2008 0 Source: Regional Economic Outlook presentation IMF
Fiscal MENAP oil exporters were able to undertake large spending programs concentrated on infrastructure investment. Saudi Arabia implemented the largest stimulus package relative to GDP among G20 countries in 2009. Algeria continued public investment program to support nonhydrocarbon activity;
Monetary Policies Central banks in many countries: reduced reserve requirements Cut interest rates and maintained them at low levels. Injecting liquidity or capital into banking systems Exchange rate regime
2010 Increase crude oil prices to more than US$80 per barrel by the end of last year, have aided the recovery. International reserve positions are improving again by an estimated US$46 billion in 2010. Higher oil prices and output are projected to boost oil exports by 31 percent to US$682 billion, more than double the current account surplus, to US$140 billion, This will boost oil-gdp growth to 4.3% in 2010. Many governments most notably in Saudi Arabia are planning to expand spending. This stimulus will continue to buoy domestic non-oil-sector activity, projected to grow by 4.1 percent Sustain positive spillovers to neighboring countries through trade. Stocks are up still well below earlier highs and volatile
Change in the global economy
Population growth Flow of capital Trade Increasing economic contribution of developing countries G-20 Financial crisis and the issue currencies
Cont Investment (Gross Fixed capital Formation ) / GDP in 2009 Above 30% in most of developing countries (ex. China 45%, India 32%,Indonesia 31%, S. Korea 29.3%) Below 20% in most of industrial countries (ex. US 12.3%, UK 14%, Germany 17.9%); (Source: www.cia.gov) Redaction of USA economy size and increase of China economy size and other developing countries. Diversification of currencies portfolio
Market capitalization - 2000 Breakdown Reduce of Market in Industrial countries Asia - Pacific 16% EAME 31% Americas 53% Increase market capitalization for Asia- Pacific Asia - Pacific 31% Market capitalization - 2009 Breakdown EAME 28% Americas 41% Source:www.world-exchanges.org
Share trading value USD bn USD bn % change Exchange 2009 2008 Value of share trading in the Electronic order book in 2009 and 2008 1 2 3 4 NYSE Euronext US NASDAQ OMX US Shanghai Stock Exchange Tokyo Stock Exchange Group 17 521 27 651-36.6% 13 608 23 845-42.9% 5 056 2 584 95.7% 3 704 5 243-29.4% Shenzhen 5 Stock Exchange 2 772 1 242 123.2% NYSE 6 Euronext Europe 1 935 3 837-49.6% 7 London Stock Exchange 1 772 3 844-53.9% 8 Korea Exchange 1 570 1 435 9.4% 9 Deutsche Börse 1 516 3 148-51.8% 10 Hong Kong Exchanges 1 416 1 562-9.3%
Investment flows capital raised by shares (IPOs and secondary market issues) USD bn USD bn % change Exchange 2009 2008 1 NYSE Euronext US 234,2 280,2-16.4% Investment flows in 2009 and 2008 2 3 4 London Stock Exchange Australian Securities Exchange Hong Kong Exchanges 122,3 124,6-1.8% 86,2 48.9 76.3% 81,4 55,0 48.0% Shanghai 5 Stock Exchange 47,7 27,6 72.8% 6 Tokyo Stock Exchange 44,2 13,8 220.3% 7 BM&FBOVESP A 41,7 28,8 44.8% 8 Borsa Italiana 25,9 11,1 133.3% 9 10 Shenzhen Stock Exchange BME Spanish Exchanges 25,4 17,4 46.0% 21,6 32,2-32.9%
Restriction and limitation on Growth Most of the empirical literature in the MENA region suggests that the region trades significantly less than would be expected transport constraints inefficiencies in customs clearance processes, The lack of adequate infrastructure logistics, and communications costs The key direct constraints to growth in the MENA region are difficulties in access to finance, labor skill mismatches and shortages, electricity constraints. The quilt of public services lack of adequate infrastructure