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Kuwait and Qatar Economy to Grow; Middle East Businesses See Expansion as a Priority

Middle East : 13 February 2012

Kuwait Set to See 3.8 Percent Growth This Year

Driven by positive performance in Kuwait’s consumer sector, the nation is poised to grow by 3.8 percent this year, based on information released by NBK (or National Bank of Kuwait).

Kuwait’s CPI (or consumer price index) inflation is expected to continue at a moderate 4 percent, according to the most recent brief on the GCC by NBK.

Oil prices are expected to continue receiving support from slight growth seen around the globe, as the world escapes a recession. Tight oil supply conditions are forecasted to continue as well, although oil should be coming progressively out of Libya.

The report outlined a steady consumer sector, as evidenced by strengthened confidence, growth in loans, salaries and spending throughout last year. NBK expects those same areas to offer economic support in 2012.

Business services and construction, as well as the balance of other economic sectors, began stirring at the end of 2011, and NBK forecasted an improvement in those areas for 2012. The report noted that the current development plan put forth by the government would affect those sensitive economic sectors.

Spending plans for this fiscal year ending in March 2012 total KD 5.4 billion (or $19.3 billion), according to the GCC Brief released by NBK.

NBK expects Kuwait to implement a spending pace to reach 70 to 75 percent execution rate, despite early signs that indicate spending would reach only 60 percent.

CPI inflation came in at 4.8 percent last year, driven mainly by increased prices of international food. NBK expects the 2012 inflation rate to fall to 4 percent as global food prices ease off slightly.

NBK’s report noted that Kuwait holds an enviable fiscal position, posting a KD 5.3 billion surplus in the 2010-2011 fiscal year, representing 21 percent of the nation’s GDP. Kuwait has posted twelve consecutive surpluses.

NBK stated that Kuwait is expected to report a larger surplus for the 2011-2012 fiscal year, coming in at KD 9 billion.

Qatar Reports Healthy 25.6 Percent Surplus Reported in Q2

A healthy surplus was reported in the state budget of Qatar, equal to 25.6 percent of the nation’s quarterly output for Q2 of the 2011-2012 fiscal year driven by higher revenues.

Qatar is the global leader of liquefied natural gas exports and realized a 42.2 billion riyals surplus (or $11.6 billion) for the period from July to September of last year, according to early estimates issued by the nation’s central bank. That result reversed the deficit reported in the previous quarter, totaling 1.4 percent of GDP or 2.2 billion riyals.

Revenue surged by more than 60 percent over last year’s figures, reaching almost 78bn riyals in the July to September 2011 quarter. Drive by increasing oil prices and higher gas production rates, this amount of revenue helped push the cumulative income total over the first half of the fiscal year to 68 percent of targeted levels, based on calculations from Reuters.

Government spending increased by almost 24 percent from last year’s levels and cumulative expenditures reached 50 percent of the yearly target, based on the data.

Forecasts state that Qatar’s surplus will hit 8.6 percent of the nation’s GDP for the current fiscal year, a substantial increase over a 2.9 percent surplus reported in the 2010-2011 fiscal year.

Although economic growth in Qatar is forecasted to be in the single digits this fiscal year, government spending will jump by 19 percent, reaching a six-year high and driven by an expanding gas industry and healthy oil prices.

Qatar had planned to spend 139.9 billion riyals and record a 22.5 billion surplus (4.9 percent of Qatar’s GDP) for the 2011-2012 year.

However, raises in social benefits and basic salaries were given to state workers equaling a 60 percent increase and military personnel were handed 50 to 120 percent raises.

Despite these measures, and considering the massive infrastructure investment plans Qatar will embark on prior to the 2022 World Cup, the governor of Qatar’s central bank stated that Qatar expects to continue reporting huge surpluses throughout the coming years.

Middle East Businesses See Expansion as a Priority

A recent Business Outlook report by Hay Group found that organizational effectiveness and the management of talent are priorities for Middle East companies.

Six hundred companies in the area were involved in the December 2011 study looking forward at 2012.

Results state that 36 percent of the businesses involved consider expansion to be the main priority for 2012. Profitability was named the top priority for 17 percent of those respondents, with cost reductions named next and the improvement of competitiveness following.

Business leaders appear confident in short to mid-term success. In terms of the fulfillment of strategic objective, 38 percent of businesses involved felt that was possible within the coming year, with 58 percent stating that success would come in 12 to 18 months.

Human resource departments in the Middle East are focused on competiveness in their staff packages, as 64 percent of respondents reported that as a priority in Hay Group’s study.

Vijay Gandhi of Hay Group noted that this is a recent shift. Gandhi stated that regional HR departments focused on reducing payroll costs and costs in general from 2009 to the middle of last year. The desire to retain talent indicates recovery within the area.

The statement revealed that 51 percent of the responding firms expect their HR departments to focus on retaining talent through 2012, while 33 percent of respondents say that recruitment is set to become the HR focus.

Further results divulged more information, as 40 percent of respondents feel the need to cut back on business-related travel. Forty-two percent of businesses involved in the study intend to deal with poor employee performance this year.

In terms of revenue, 29 percent expect more than 15 percent growth and only 3 percent of respondents expect a drop in revenue.

Paul Holdsworth, Staff Writer, Gulf Jobs Market News
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