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Job Market in the Gulf Remains Strong: UAE Economy Improving; Saudi and Omani Revenues Increase

Middle East : 18 September 2011

Daman Chief Executive Sees Positive Economic Indicators in the UAE

Many of the UAE’s economic indicators are positive, stated Shehab Gargash, chief executive at Daman Investments Group, with more improvement forecasted for this year. Speaking to reporters about the financial condition of the Emirates, Gargash noted that retail is booming again, hotel occupancies are approaching 80 percent and growth is being seen in loans and deposits.

Gargash noted that activity is occurring in certain economic sectors. Deposits recorded 11.5 percent growth (year-on-year) until July of the current year and loans reported a 2.6 percent increase over the same time period.

Gargash does not expect the equity markets to see surging activity overnight, however he forecasted that the markets would return.

He stated that strengthening investor sentiment for the equity markets would improve activity levels. The UAE index was down four percent YTD at the Dubai Financial Market, while the General Index in Abu Dhabi saw a decline of around 8 percent.

He mentioned that institutional money, local and foreign, has been kept away from the markets for an extended period of time. These funds need to return to the market, according to Gargash, who also noted that the bourses in the UAE are not accommodating or welcoming towards this source.

Gargash noted the historical indicators that show short-term speculative investments from individuals driving the market. He also stated that having the MSCI rate the UAE as a frontier or emerging market would not seriously impact the Emirati market, although it might improve sentiment.

Real estate remains a significant sector in the UAE, according to Gargash, contributing 21 percent of the GDP (combined with construction) in 2010 and accounting for 31 percent of the non oil GDP.

Activity in this sector is increasing with larger developers selling off assets during restructuring. He noted that Arab Spring liquidity is trickling into real estate as deposits and home, building and office purchases.

Gains In Saudi Economy to Surpass $95 Billion This Year

The fiscal surplus will grow and real GDP will surge 5.6 percent in Saudi Arabia this year. Due to rising oil prices, the Saudi economy will experience over $95 billion in growth for 2011, recording the highest real GDP growth rate in six years, based on data from a local investment firm.

A Jadwa Investments study reported that higher crude prices coupled with increased output would transform a deficit budget into a fiscal surplus, even with a marked increase in actual public spending.

The nominal GDP of the Kingdom grew from about SR 1,630bn ($435bn) last year to almost SR 1,988.4bn (or $530.3 billion) this year. This represents a jump of almost 21.9 percent. It could be one the highest growth rates for nominal GDP in the Kingdom’s history. These projections are based on an average crude price of $99.3 per barrel, compared with $77.7 per barrel last year.

Real GDP in 2010 grew 3.8 percent and only 0.2 percent the previous year. These forecasts put the 2011 growth at 5.6 percent. Jadwa expects the hydrocarbon sector to surge 8.9 percent and forecasts a 4.2 percent expansion in the non-oil sectors and 5 percent expansion in the government sector.

Jadwa forecasted oil production in Saudi Arabia to reach 8.8 million bpd (or barrels per day) on average, an increase from the 8.2 million bpd recorded last year. This increase will be mainly due to the crude supply boost intended to offset the shrinking Libyan oil exports.

Increased output and higher prices should see Saudi export earnings reach $278.4bn this year, a marked increase from the $214.9bn seen in 2010. These figures would transform the SR40bn budgeted deficit into a fiscal surplus of almost SR127bn, higher than the SR109bn surplus seen the previous year.

Actual public expenditures in the Kingdom are expected to increase by 42.5 percent, hitting SR821bn. However, Jadwa noted that increased prices and output of crude would drive the actual revenue figures to SR948bn, an almost 75 percent increase.

Public debt, which was higher than Saudi GDP in the late 90’s, would drop to the lowest figures in 15 years with Jadwa’s forecast, reaching SR160bn or about 8 percent of the GDP.

Omani Revenue Up By 29 Percent

Total revenue in Oman increased by 29 percent over the opening six months of 2011, reaching RO 5.443bn and up from the RO 4.22bn seen in the same period of 2010. Public spending increased by 12.1 percent to hit RO 3.943bn.

Citing Ministry of Finance data, the Directorate-General of Statistics released a monthly bulletin indicating that oil is the main component of general revenues, despite international prices increasing by 42.9 percent. Oil revenue in the past six month period reached RO 4bn (and 60mn) with gas revenue up by 12.9 percent to hit RO 503mn.

Customs taxes fell by 28.7 percent, reaching RO 63mn with company income tax increasing by 2.1 percent to hit RO 232mn. Capital revenue was down by 25.7 percent, reaching RO 10.1mn with other revenue coming in at RO 575mn, a 4.8 percent drop. Investment expenditures grew by 21.5 percent to hit 1.39bn by volume. Civil ministry developments accounted for the largest portion of those expenditures, with oil production at RO 889mn, gas expenditures reaching RO 337mn and the capital expenditures of the ministry coming in at RO 10.6mn.

Current expenditures increased by 10.2 percent over the opening six months of 2010.

Under a Royal Directive, the government began implementation of a financial package valued at 1 billion and designed to improve living conditions in the nation. The Minister Responsible for Financial Affairs, Darwish bin Ismaeel al Balushi, stated that public expenditures will hit RO 9.1bn, resulting in a RO 1.9bn deficit. This would be covered if oil prices came in at $58 per barrel, bringing in additional returns. Forecasted general oil prices range from $75 to $80.

Paul Holdsworth, Staff Writer, Gulf Jobs Market News
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