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Consumer Confidence Rises in the Gulf as IMF Predicts Accelerated Regional Growth and IIF Expects 6.4 Percent Expansion in Oman

Middle East : 22 April 2012

Consumer Confidence On the Rise in the Gulf

Although economic challenges continue, consumer confidence in the Middle East region persists in moving up, based on the recent findings of MasterCard Worldwide Index of Consumer Confidence.

According to the survey, consumer confidence in the Gulf region gained three points over the previous period of six months, reaching 85.7. This level is much higher than those seen in Africa (with 73.8 points) and Asia Pacific (with 52.1 points).

Oman and Qatar led the Middle East index with scores of 93.6. Egypt and Kuwait were close behind the leaders, each reporting a score of 88.3, while Saudi Arabia came in at 83.9 and the UAE at 82.1. Lebanon recorded the greatest increase in consumer confidence, moving up 46.4 points to reach 70.5 for the latest period. India ranked highest in Asia, reaching 81.2 points, while Nigeria led the pack in Africa with 96.4 points, followed closely by Morocco at 87.2 points.

A majority of the Middle East markets, six in seven, reported increases across four key indicators, including employment (moving from 82.9 on the index to 85.5), regular income (moving from 86.3 on the index to 91.3), quality of life (moving from 81.5 on the index to 87.6) and economy (moving from 82.5 on the index to 86.5). The stock market was the only indicator that recorded declines (moving from 81.0 on the index to 77.8).

Improved reforms and socio-economic opportunities, particularly those offered to young people, across the Gulf region resulted in these positive indicators and significantly enhanced the expectations for overall growth.

Some areas of the Middle East have experienced deterioration. Concerns surrounding oil demands in the future, as well as increasing food prices and rising housing components resulted in marked decline throughout the region, particularly in the UAE (recording a 10.8 point decline) and Saudi Arabia (recording a 14.5 point decline).

Qatar reported minor declines, with a drop of 6.1 index points, as did Oman with a 5.2 point drop. Kuwait reported stable results, remaining at 88.3 points, and Egypt jumped by 12.9 index points mainly as a result of changes in the nation’s regime.

If economic growth follows consumer confidence in the next six-month period, the Middle East will continue on an exciting and prosperous path.

IMF Expects Growth to Speed Up in the Middle East This Year

According to IMF forecasts, growth in the MENA region (Middle East and Northern Africa) will move from 3.5 percent last year to 4.2 percent in 2012.

Oil import nations should experience 2.2 percent growth, with crude export nations recording 4.8 percent growth, based on the latest World Economic Outlook by the IMF. Growth in Egypt is expected to slow down to 1.5 percent, with Iraq experiencing growth of 11 percent, Kuwait reporting 6.6 percent growth and both Qatar and Saudi Arabia experiencing 6 percent growth this year.

According to the Washington-based organization, constraints for oil importers include tourism dampened by local social unrest, higher oil prices and slower flow of trade and remittance due to issues in Europe. Oil prices remain the top risk for oil exporting nations.

Hosni Mubarak is one of three regional leaders ousted from Egypt since the beginning of 2011, partially due to conditions in that nation, which has the highest youth unemployment rate in the world. As the largest Middle East economy, Saudi Arabia raised government spending in an effort to create jobs and increase housing. The 23 percent surge in spending was put in place to prevent the popular uprisings that spread across the Arab world last year.

The IMF noted that securing social and economic stability remains the primary challenge for the region, although stabilizing public finances with a sustainable foundation is a short term requirement. Governments of oil exporting nations should be optimising higher oil prices by moving toward economic stability and diversification.

IIF Says Economy in Oman to Experience 6.4 Percent Growth This Year

The Institute of International Finance (or IIF) expects the Omani economy to experience 6.4 percent growth this year, despite weakened global growth and the volatile Arab Spring, and partially resulting from robust economic performances in 2011 across the GCC.

IIF director and senior counsellor for Middle East and Africa, George Abed, spoke at a recent press conference during the IIF annual MENA bank executive meeting, hailing Oman’s concerted effort to diversify the nation’s economy.

The organization witnessed robust economic growth across the Gulf in 2011, especially in Oman and in spite of a weaker global economy and tumultuous Arab Spring, according to Abed. The IIF expects the Omani economy to grow by 6.4 percent throughout 2012.

Abed noted that much of Oman’s growth will come from sectors outside the oil and gas industry. Although oil and gas have boosted government finances and driven development in the nation, a “major chunk” of the growth (nearly 70 percent) will come from the non-hydrocarbon economic sector.

He praised the economic diversity arising from development in Duqm and other Omani free-zone areas. Admittedly, Omani diversification and development are supported by stable oil prices.

The GCC will report record-high current account surpluses in 2012 totalling US $350 billion, according to Abed. Higher surpluses will continue to boost the GCC member states’ foreign assets, which will reach US $2.1 trillion in 2012 and are bound to be crucial as oil prices decline.

IIF managing director Charles Dallara recognised the robust economic growth in Oman, as well as the positive performance in the nation’s banking sector.

Dallara noted that the Omani banking sector remains insulated from negative impacts resulting from the worldwide financial crisis and the debt crisis in Europe.

Paul Holdsworth, Staff Writer, Gulf Jobs Market News
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