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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 2011-2015, 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. 15 14 13 12 11 10 9 8 7 6 5 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 0 50 100 150 200 Source: FT, IMF 2
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 2010. 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
31/01/2011 02/02/2011 04/02/2011 06/02/2011 08/02/2011 10/02/2011 12/02/2011 14/02/2011 16/02/2011 18/02/2011 20/02/2011 22/02/2011 24/02/2011 26/02/2011 28/02/2011 02/03/2011 04/03/2011 02/02/2011 04/02/2011 06/02/2011 08/02/2011 10/02/2011 12/02/2011 14/02/2011 16/02/2011 18/02/2011 20/02/2011 22/02/2011 24/02/2011 26/02/2011 28/02/2011 02/03/2011 04/03/2011 Weekly Economic Update Sunday, 06 March 2011 COMMODITIES 105 103 101 99 97 95 93 91 89 87 85 83 Oil Price (US$/barrel) 1440 1430 1420 1410 1400 1390 1380 1370 1360 1350 1340 1330 Gold Price (US$/ounce) As March 06 (US$) Current Week Ago Weekly Change Oil (barrel) 104.42 96.63 8.06 Gold (ounce) 1428.8 1409 1.43 Silver (ounce) 35.3 32.9 7.29 Copper (pound) 4.49 4.31 4.18 Aluminium (kilo) 2.58 2.49 3.52 Source: Thomson Reuters 4
17/02/2011 18/02/2011 19/02/2011 20/02/2011 21/02/2011 22/02/2011 23/02/2011 24/02/2011 25/02/2011 26/02/2011 27/02/2011 28/02/2011 01/03/2011 02/03/2011 03/03/2011 04/03/2011 17/02/2011 18/02/2011 19/02/2011 20/02/2011 21/02/2011 22/02/2011 23/02/2011 24/02/2011 25/02/2011 26/02/2011 27/02/2011 28/02/2011 01/03/2011 02/03/2011 03/03/2011 04/03/2011 Currencies Current ( 04 March 2011) Week Ago Weekly Change International $1 $1 (%) Euro 0.715 0.727-1.651 GBP 0.619 0.621-0.322 Yen 82.300 81.630 0.821 CNY 6.572 6.573-0.015 INR 44.985 45.325-0.750 CHF 0.926 0.930-0.419 GCC AED 3.670 3.670 0.000 BHD 0.380 0.380 0.000 KWD 0.277 0.278-0.360 OMR 0.390 0.390 0.000 0.85 0.80 0.75 0.70 0.65 0.60 79 78 77 Euro, Yen & Pound vs Dollar Euro (LHS) Pound (LHS) Yen (RHS) The Dollar Index 85.0 84.0 83.0 82.0 81.0 80.0 QAR 3.640 3.640 0.000 SAR 3.750 3.750 0.000 76 75 Source: Thomson Reuters 5
Weekly Economic Update Sunday, 06 March 2011 Stock markets 12320 12270 12220 12170 12120 12070 12020 4120 4100 4080 DowJones 0.33% 12,170 CAC40 1.23% 4,020 2810 2800 2790 2780 2770 2760 2750 2740 2730 2720 2710 6020 6000 5980 NASDAQ 0.13% 2,785 FTSE100 0.18% 1335 1330 1325 1320 1315 1310 1305 1300 10820 10750 10680 S&P500 0.10% 1,321 Nikkei225 1.59% 10,694 4060 5960 5,990 10610 4040 5940 10540 4020 5920 10470 4000 5900 10400 Source: Thomson Reuters 6
23-Feb-11 23-Feb-11 Weekly Economic Update Sunday, 06 March 2011 21-Feb-11 22-Feb-11 23-Feb-11 23-Feb-11 21-Feb-11 22-Feb-11 23-Feb-11 23-Feb-11 Stock markets Abu Dhabi 3.20% 2640 2620 2,530 2600 2580 2560 2540 2520 Kuwait 5.14% 6530 6480 6430 6,148 6380 8360 8260 8160 8060 7960 7860 7760 7660 7560 7460 6700 6600 6500 Doha 8.79% Muscat 4.43% 6,352 7,489 1520 1500 1480 1460 1440 1420 1400 1380 1360 1340 6500 6300 6100 Dubai 8.61% Saudi 15.02% 1,352 5,323 6330 6280 6230 6180 6400 6300 6200 5900 5700 5500 6130 6100 5300 Source: Zawya 7
Stock markets Stock Exchange Current A Week Ago Weekly Change (04 March) (%) Dow Jones (US) 12,170 12,130 0.33 Nasdaq (US) 2,785 2,781 0.13 S&P500 (US) 1,321 1,320 0.10 CAC40 (FR) 4,020 4,070-1.23 FTSE100 (UK) 5,990 6,001-0.18 Nikkei225 (JP) 10,694 10,527 1.59 Abu Dhabi 2,530 2,614-3.20 Bahrain 1,377 1,433-3.86 Doha 7,489 8,211-8.79 Dubai 1,352 1,480-8.61 Kuwait 6,148 6,481-5.14 Muscat 6,352 6,646-4.43 Saudi Arabia 5,323 6,264-15.02 Source: Thomson Reuters and Zawya 8
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-11 01-Mar-10 ($m) ($m) ($m) Bahrain 80,567 80,523 0.05 68,502 17.61 Kuwait 157,796 158,074-0.18 268,825-41.30 Oman 101,624 101,424 0.20 106,194-4.30 Qatar 234,032 234,624-0.25 220,676 6.05 Saudi Arabia 678,190 678,245-0.01 645,455 5.07 UAE 640,189 641,561-0.21 965,502-33.69 GCC 1,892,398 1,894,451-0.11 2,275,154-16.82 Iran 311,028 311,028 0.00 316,857-1.84 Iraq 361,924 361,924 0.00 226,576 59.74 Gulf Total 2,565,350 2,567,403-0.08 2,818,587-8.98 Source: MEED 9
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
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. 11