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New Foreign Assets in the GCC Reached All-time High with Soaring Business Confidence and Stable Growth in Saudi Arabia

Middle East : 20 May 2012

GCC Exports of Hydrocarbon to Hit $730 Billion This Year

Net foreign assets in the GCC grew by $456bn to reach an all time high last year, mainly due to robust oil prices according to the IIF (or Institute for International Finance).

Hydrocarbon exports are expected to experience the massive boom for 2012, rising from about $685bn last year to $730bn in 2012.

Net foreign assets (combined) of the GCC members reached a record high of almost $1,605bn by the close of 2011, up from about $1,149bn at the close of the previous year. That figure declined in 2009, in response to the worldwide financial crisis of 2008.

The IIF reported that assets will reach $1,905bn by the close of this year, representing an increase of almost $300bn, and should hit $2,139bn over 2013 as a result of high oil prices.

Nominal GDP in the GCC rose on the backs of increasing output and prices, surging by almost 31 percent to hit $1.4tr in 2011.

Despite rising imports and fiscal expansions, surpluses across the GCC rose as a result of increasing hydrocarbon revenues. The external current account surplus (consolidated) for the GCC is forecasted to hit $358bn this year, up from $327bn last year.

Many of the member states reported higher net foreign assets last year. Saudi Arabia recorded an increase of $106bn, hitting almost $551bn, while the UAE’s assets rose $59bn to reach $521bn.

Kuwaiti net foreign assets are forecasted to rise from $396bn at the close of 2011 to $457bn in 2012. Qatar’s assets are expected to nearly double, moving from $59bn to $107bn. Oman and Bahrain are also forecasted to report modest increases.

Business Confidence Highest in Saudi Arabia

The highest levels of business confidence in the Middle East were found in Saudi Arabia and the UAE, according to the ACCA’s most recent Global Economic Conditions Survey, completed with the help of the IMA (or Institute of Management Accountants). Confidence levels were at 42 percent in Saudi and 38.5 percent in the UAE.

Both member states rely on robust and sustainable public spending, but Saudi Arabia can count on the highest levels of performance in investments and new orders, according to the report.

Egypt has not recovered from the political turmoil of 2011, even after the January elections, and reported negative figures for business confidence.

More professionals in the Middle East reported business confidence, up from 26 percent near the end of 2011 to 32 percent in Q1 of 2012, according to a global survey.

The latest ACCA/IMA report indicated that business confidence fell from the same period last year, with 30 percent of respondents reporting higher confidence levels in Q1 of 2011 and only 24 percent in Q1 of 2012.

Details of the survey indicate that more professionals feel confident about their organizations, as levels rose from 16 percent in 2011 to 29 percent in the opening quarter of this year.

Economic recovery sped up across the globe in the early stages of 2012, regaining some of the acceleration lost over the course of 2011, according to the report.

Around 2,200 accounting professionals were surveyed and results indicated that most, about 54 percent, still feel that the global economy continues to deteriorate or remains stagnate. In the previous quarter that figure was 73 percent.

NCB Report Forecasts Stable Growth in Saudi Arabia for 2012

After impressive economic growth in 2011, Saudi Arabia is forecasted to record stable levels of growth through this year, unless tensions over the nuclear programme in Iran escalate.

A weekly report by the NCB (or National Commercial Bank, the Kingdom’s largest bank) indicated that Saudi Arabia will, for the most part, remain unaffected by worldwide turmoil, thanks to massive levels of foreign assets surpassing $636bn by the close of this year.

According to the report, Saudi Arabia’s economy performed exceptionally well in 2011 and is expected to maintain that performance this year.

Geopolitical tensions around the Gulf region present some risk to economic growth. Although global turmoil dampens worldwide growth, Saudi should continue to respond with stable growth.

Both nominal and real GDP expanded sharply in 2011, resulting from surging oil prices and increased crude production, as well as healthy domestic demand and sensible policies of macroeconomics.

Royal decrees occurring in the opening quarter of 2011 helped to stimulate Saudi’s non-hydrocarbon private sector, with supplementary spending totaling SR400 billion. Around SR110 billion in spending occurred last year.

Saudi Arabia’s long-term rating was affirmed by the Fitch agency in April, coming in at AA- according to the NCB. Economic expansion of around 3.9 percent is expected for this year, along with a stable outlook supported by non-hydrocarbon sector expansion and rising oil production.

The report noted that the Kingdom’s long-term sustainability may be affected by its reliance on oil as the source of revenue, however Saudi’s massive reserves contain low risk assets that guarantee the government’s commitments to development and a more balanced economy.

According to the NCB report, Saudi’s net foreign assets will hit $636.7 billion in 2012 with US-denominated assets rising along with increased revenues.

Paul Holdsworth, Staff Writer, Gulf Jobs Market News
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