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Oil Income in Arab World Reaches New High in 2011 with Kuwait Set for 5.4% GDP Growth and Saudi Leading the Pack in Internal FDI

Middle East : 03 August 2012

Qatar’s oil income went from $20.5bn to $27.3bn, while Algerian oil earnings jumped from $28bn to $37.2bn. Data from Tunisia was unavailable, but Egyptian oil income reached $4.6bn and Bahrain recorded $6.3bn of oil earnings in 2011.

Libya was the only member state that recorded a decrease, dropping from $38.7bn in 2010 to almost $7.3bn, resulted from regional conflict and Gaddafi’s death.

Kuwaiti Non-Oil Industry Set to Grow By 4% with GDP Growth Reaching 5.4%

Kuwait GDP continues to grow at healthy levels, moving up 5.4% this year, although the non-oil industry is expected to see only 4% growth. Slow implementation of the government’s development plans and the aftereffects of global financial distress have reduced business confidence in Kuwait. Also, structural reformation within products and the labor markets are required to trigger growth and improvement.

Year-on-year numbers for crude oil increased by 16 percent, moving to 2.9 mbpd (or million barrels per day) in the middle of this year. This record output level could be even higher, according to alternate sources that quote a figure closer to maximum capacity of 3.3 mpbd.

Although oil prices have fallen recently, outputs are expected to remain at current levels in 2012 and 2013, as OPEC member states work to strengthen worldwide crude inventories to meet global demand. Those expectations create growth of about 8% in real oil GDP for 2012 and stabilized levels in 2013.
Politics and technical factors have delayed expansion plans in the oil sector, and these impressive expectations reiterate the importance of those expansions.

In the non-oil sector, consumer spending remains positive and driven by positive employment figures and massive salary boosts and bonuses for Kuwaiti nationals. Spending growth has been made possible through new retail developments.

Other non-oil sectors have experienced steady levels, with companies hesitating to increase debt loads and unable to find triggers for investment. Sales of land and buildings has been the exception, and the residential property market is booming.

A 5 percent increase in targeted spending within the public development plan for this year and next brings that total to KD 5.5bn. Previous years have seen actual spending reach 58 to 62 percent of targeted spending, meaning that the above figures could increase total fixed investments by 0.3 percent of Kuwaiti GDP. Some of this spending may be spread out beyond the nation’s borders.

The electricity sector will see the most planned spending increases, and red tape continues to block PPPs (or proposed public-private project) .

Consumer price inflation should hover at about 3 to 4 percent in 2012 and 2013, largely unchanged. Food prices have come down a little in response to worldwide decreases. Inflation is expected to be deterred or controlled by softer levels of consumer spending and a strong US dollar.

Saudi Still Leads Internal FDI in Arab World

Inter-Arab FDI brought in a total of $6.82bn last year, according to the Arab Investment and Export Credit Guarantee Corp’s recent annual report.

In 2010 this report involved ten Arab nations and reported inflows of $12.5bn. The latest report contained data from five Arab nations, including Yemen and Tunisia, Jordan, Egypt and Algeria.

Accumulated totals for inter-Arab FDI stretching from 1995 to last year reached $178.5bn. A large percentage of that figure, 82 percent or $144.4bn, headed into seven Arab nations, the UAE, Algeria, Bahrain, Sudan, Saudi Arabia, Lebanon and Egypt.

Saudi Arabia leads in internal FDI, a position the Kingdom has held for 17 years. Sudan comes in second place, followed by Egypt and Lebanon. Algeria rounds out the top five list.

Report findings indicate that inter-Arab FDI figures have surged from 2005 to last year, hitting an accumulated total of $151.7bn and averaging $21.7bn annually. In the previous seven-year-period (from 1998 to 2004), the accumulated inflows totaled $21.7bn and averaged $3.1bn annually.

According to the report, the US invests the largest amount of foreign money into Arab nations, accumulating $26.1bn (or 14 percent) of the total FDIs. France came in second, at 10 percent or $19bn and Germany ranked third with 9 percent and $16.6bn. The UK and Japan rounded out the list of top five foreign investors.

The service sector received the lost FDIs, tabulating from the early 1990’s until current times. A total of 43 percent of FDIs went into services, followed by the industrial sector, which received 29.6 percent. Agriculture received only 1.3 percent of FDIs, with the remaining percentage (26.1%) distributed around various unclassified sectors

Paul Holdsworth, Staff Writer, Gulf Jobs Market News
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