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Growth in Saudi Fiscal Surplus, Qatari Economy and Confidence in the UAE Fuels GCC Jobs Creation

Middle East : 09 October 2011

Fiscal Surplus Rising in Saudi Arabia

Surging revenue will result in a higher fiscal surplus for the Kingdom, despite increased spending of over 40 percent, based on data in a recent study.

Jadwa Investments made revisions to previous estimates of the Saudi surplus, increasing it to SR 158bn from SR 127bn, as a result of higher revenues. This projection results in a 45 percent increase over the surplus of 2010 and is a marked improvement over the 2009 deficit of SR 87bn.

The expectations for Saudi’s public expenditures remain positive, forecasting a jump of over 41 percent to hit SR 821bn. The government has committed to a massive handout of over SR 500bn, as outlined by King Abdullah’s announcement earlier in 2011.

Jadwa expects to see Saudi’s revenue increase by SR 31bn. The rise in spending should be more than covered by higher crude prices and increased production in the Kingdom. Saudi budgets were based on oil prices averaging $60 per barrel, but the average price is expected to be around $90 per barrel. Actual public revenues could reach levels 70 percent higher than budgeted figures, approaching the record levels seen in 2008 when oil was $95 per barrel, production hit 9.2 million barrels per day and the peak income level was SR 1,101bn.

The Jadwa report stated that the government sector should grow by five percent, while private sector expansion should rise by 3.8 percent.

The Kingdom’s foreign assets have risen to a record peak thanks to strong oil prices, with SAMA controlled assets hitting SR 1,926bn at the close of August. The surge caused foreign assets to grow by almost 13 percent from January to August of 2011, the largest increase over that length of time. Oil prices were averaging close to $110 per barrel during that time. Production in the Kingdom was over 9 million bpd, up from 8.3mn bpd throughout 2010.

Q2 Saw Almost 42 Percent Growth in Qatari Economy Due to Gas Boom

The economy of Qatar rose by 41.8 percent in the second quarter of 2011. This increase over levels seen in 2010’s Q2 was a result of rising energy prices and higher gas and gas-related production, according to official state statistics.

According to the Qatar Statistics Authority, nominal GDP estimates surged from QR 108.4bn reported in the second quarter of last year to QR 153.7bn (or $42.2bn). GDP increased by 8.8 percent over the QR 141.3bn reported in the first quarter.

The Authority stated that higher quantities of gas-related products, along with rising energy prices, have driven the nominal GDP increase, resulting in an impressive year-on-year quarterly figure.

An annual increase of 67.6 percent was reported in the gross value-added to the quarrying and mining sectors, including gas and oil. Data showed the second quarter figures were up 10.3 percent over the first quarter numbers.

These increases were mainly due to rising production of liquefied natural gas (or LNG) and other products related to gas. Condensates, propane and butane were among those products that recorded a major surge after operations swung to full capacity in two LNG mega trains, according to the Authority.

Qatar leads the globe for LNG exports and is still at the top for economic growth in the Gulf region. Adjusted for inflation, Qatar’s real GDP is forecasted to grow by 18.9 percent in 2011 according to a recent poll of analysts released by Reuters. The nation’s annual inflation was recorded at 1.8 percent this past June, based on official data.

Confidence in the UAE Economy Growing

The UAE’s private sector saw increased activity last month and small business outperformed larger firms.

In September the Purchasing Managers’ Index for the UAE, released by HSBC, jumped to 52.1. This was a significant increase from the 50.9 points reported in August. September’s index report indicated moderate improvements across the private sector, particularly in non-oil industries.

New orders rose sharply and new job creation rose slightly, breaking the stagnant economic conditions.

Small firms reported better performance that larger companies, in new orders as well as output. Data indicated that external and domestic demand were factors in the order increases, leading to a marginal rise of job creation.

HSBC’s chief economist for the MENA region, Simon Williams, stated that this recent report is good news for the UAE after having experienced declines over the last four months. He noted it was especially good that the increases were caused by a rise in new work throughout the Emirates.

Williams also points out the evidence that momentum may be waning.

Employment and wage numbers are still weak and the pace of improvements continues to lag behind the pace set in the opening six months of the year.

Williams stated that since just five percent of businesses reported decreased orders from external sources, the UAE could experience the effects of a catch up moving forward. Lower demand could become the result of declining global growth, according to Simon Williams.

Paul Holdsworth, Staff Writer, Gulf Jobs Market News
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