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Saudi Foreign Assets Reach Record High While UAE Non Oil Foreign Trade Surges and Oman Rating Moves Into Positive Territory

Middle East : 12 July 2012

Saudi Arabian Foreign Assets Hit Record High Levels in May

After reporting massive increases in foreign assets last year, Saudi Arabia recorded record high levels in May, according to a recent SAMA bulletin. Foreign assets surged to SR 2,239.9bn, compared to SR 2,193.4bn in April. Overall assets rose by SR 182bn in the opening five months of this year, driving the Kingdom to another substantial fiscal surplus. Deposits in banks abroad accounted for a majority of the May increase, surging by SR 37bn in May.

The Kingdom also invested an additional SR 8bn in foreign securities, moving that total from SR 1,482bn to SR 1,490bn. SAMA assets experienced a sharp decline at the end of the ‘90s, but those figures rose as a result of rising oil prices and surging crude output.

A decline in production and prices drove foreign assets down by SR 130bn in 2009, encouraged by spending increases in response to the economic situation. Assets surged again in 2011, rising by around SR 352bn with higher oil prices and a 1.1mn bpd increase in production. This asset increase was the largest in three years.

Assets grew by SR 135bn in 2010, moving from SR 1,570bn at the close of 2009 to SR 1,705bn at the close of 2010. Last year’s increase was more than double the previous growth. Oil prices reached a record average high at $105 per barrel, combining with substantial production to boost the Kingdom’s surplus to almost AR 307bn last year, up from SR 87bn in the previous year.

Supported by robust oil prices, the Saudi budget also reached a record high of SR 690bn this year. Analysts expect actual spending to surpass budgeted figures, as has been the pattern in previous years.

Non-Oil Foreign Trade in the UAE Up 23 Percent

Overall non-oil foreign trade in the UAE increased last year, up from Dh 754.4bn in 2010 to Dh 927.6bn last year. The NBS (or National Bureau of Statistics) reported this Dh 173.3bn increase, amounting to a 23 percent surge.

Dubai recorded the most non-oil exports, contributing about 76 percent of the UAE’s total foreign trade for 2011 or Dh 700.4bn.

Abu Dhabi came in behind Dubai, with Dh 139.4bn in trade or 15 percent of the UAE’s foreign trade. Sharjah took third place with Dh 68.3bn, or 7 percent of the nation’s total foreign trade, according to NBS.

The remaining four emirates contributed about 3 percent of UAE foreign trade in 2011.

Imports totaled Dh 602.8bn last year, a 24.2 percent increase over the 2010 figure of Dh 485.4bn, according to NBS.

Exports rose from Dh 83.1bn in 2010 to Dh 114bn last year, an increase of 37.2 percent. Re-exports rose by 13.4 percent, from Dh 185.9bn to Dh 210.8bn.

India remains the nation’s largest trading partner.

Most imports come in from Eastern Asia, with India accounting for 17.1 percent and China at 10.3 percent. US imports amounted to 8.5 percent, according to NBS.

NBS stated that the UAE and India built a strong trade partnership, with non-oil exports rising by 33.7 percent. Switzerland non-oil exports rose by 16.2 percent and exports to Saudi Arabia rose by 4.5 percent.

Sharjah Chamber of Commerce and Industry chief economist Dr Mohammad Amerah spoke to local media, noted that economic performance of the UAE is positive indication, with improvements occurring despite worldwide recession and economic issues in the region.

Foreign trade growth in the UAE resulted from growth in aluminum and steel manufacturing industries, as well as Dubai commercial services, according to Amerah.

Omani S&P Rating to Stabilize With Rising Fiscal Surplus

Standard & Poor’s have revised the previous negative outlook for Oman, thanks to the Sultanate’s reforms and economic measures currently in place. S&P affirmed the long-term and short-term sovereign ratings for Oman at A/A-1, with the Sultanate’s T&C rating at AA-1.

S&P explained the revisions, citing Oman’s assets, prudent investment strategies and current political reforms. These features are contrasted by Oman’s dependence on hydrocarbons and regional political risks. S&P noted that Oman remains strongly allied to international powers and has maintained a neutral stance in the tumultuous region.

Job creation and increased wages for Omanis garnered the attention of S&P. Oman expects to create 75,000 jobs, with most in the public sector. Social spending is expected to increase over the next few years, although government resources are sufficient to cover the increases without dampening fiscal buffers.

Omanis make up about 14 percent of private sector employees currently, with foreign nationals making up a majority of those working in the private sector. S&P noted that Omanis should take up private sector positions in order to offer a surging youth population employment.

S&P also noted the vital role of His Majesty the Sultan, who championed improvements over the past year and provided a positive vision for Oman.

Hydrocarbons contributed heavily to economic growth in the past year, as average oil prices rose and bolstered foreign revenue considerably. S&P expects economic growth to reach 5 percent this year, supported by government spending and increased investment and private consumption.

S&P stated that a stablised domestic political climate prompted the rating revision. With government fiscal performance forecasted as positive for the coming period, this performance will support increased public spending and the stablised rating.

Should political pressures rise or fiscal performance weaken, S&P can revise Oman’s ratings again. Declining oil prices would also trigger revisions. Should economic growth improve, along with per capita income levels, S&P could further increase Omani’s ratings.

Paul Holdsworth, Staff Writer, Gulf Jobs Market News
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