Dr. Raja M. Almarzoqi Albqami

Institute of Diplomatic Studies

Rmarzoqi@gmail.com

3nd Meeting of OECD-MENA Senior Budget Officials Network

Dubai, United Arab Emirates, 31 October-1 November 2010

Oil Exporters

Oil Importers

MENA

Source: IMF

Afghanistan

Pakistan

Iran Iraq

Saudi Arabia

Yemen

Oman

Qatar Bahrain

Kuwait

Sudan

Libya Algeria

Morocco

Mauritania

Lebanon Syria

Jordan

Tunisia

Djibouti

Egypt United Arab

Emirates

West Bank & Gaza

Oil Exporters

Oil importers

Afghanistan

Pakistan

Iran Iraq

Saudi Arabia

Yemen

Oman

Qatar Bahrain

Kuwait

Sudan

Libya Algeria

Morocco

Mauritania

Lebanon Syria

Jordan

Tunisia

Djibouti

Egypt United Arab

Emirates

West Bank & Gaza

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

GDP growth decline

Investors attitude

Credit sluggish

Oil price reduction

(36%)

4

8

12

16

20

24

28

32

36

Dec-07 Jun-08 Dec-08 Jun-09 Dec-09

Credit to private sector

Deposits

Source: Regional Economic Outlook presentation, IMF

Credit and Deposit Growth

(PPP GDP weighted year-on-year growth rates, percent)

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 correlated with oil revenue

0

2

4

6

8

10

12

14

16

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

Inflation

0

1

2

3

4

5

6

7

8

1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015

Growth of Real GDP in MENA

-100

-50

0

50

100

150

200

250

300

350

400

1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015

Current Account Balance of MENA (Billion of U.S dollar)

Surplus of CA during oil price increase

Source: Regional Economic Outlook presentation IMF

0

1

2

3

4

5

6

7

8

0

2

4

6

8

10

12

14

16

1990 1993 1996 1999 2002 2005 2008

Unemployment rate

Real GDP growth (right scale)

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

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

Cont…

Reduce of Market in Industrial countries

Increase market capitalization for Asia-Pacific

Source:www.world-exchanges.org

Americas

53%

Asia -Pacific16%

EAME

31%

Market capitalization - 2000 Breakdown

Americas41%

Asia -Pacific31%

EAME

28%

Market capitalization - 2009 Breakdown

Share trading value

Value of share trading in the Electronic order book in 2009 and 2008

Exchange

USD bn USD bn % change

2009 2008

1 NYSE

Euronext US 17 521 27 651 -36.6%

2 NASDAQ OMX

US 13 608 23 845 -42.9%

3

Shanghai

Stock

Exchange

5 056 2 584 95.7%

4

Tokyo Stock

Exchange

Group

3 704 5 243 -29.4%

5

Shenzhen

Stock

Exchange

2 772 1 242 123.2%

6

NYSE

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)

Investment flows in 2009 and 2008

Exchange

USD bn USD bn % change

2009 2008

1 NYSE

Euronext US 234,2 280,2 -16.4%

2 London Stock

Exchange 122,3 124,6 -1.8%

3

Australian

Securities

Exchange

86,2 48.9 76.3%

4 Hong Kong

Exchanges 81,4 55,0 48.0%

5

Shanghai

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

Shenzhen

Stock

Exchange

25,4 17,4 46.0%

10 BME Spanish

Exchanges 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