Nomura, the leading global investment bank headquartered in Japan, published a report looking at the prospects for the Gulf economies of Saudi Arabia, United Arab Emirates (UAE), Qatar and Kuwait. The report by Ann Wyman, Managing Director and Head of Emerging Market Research, Europe, said that regional economies seem to have put their recent trials behind them and are embarking on a new growth chapter, still fuelled by hydrocarbons, but armed with strengthened regulatory regimes and in some cases, a better handle on contingent government liabilities.
On Saudi Arabia, Ann Wyman said: “Saudi Arabia, the Gulf region’s largest economy, is setting a course for continued strong economic performance. Its swift and pre-emptive actions to maintain confidence in the banking sector during the credit crisis, followed by a decisive and substantial fiscal response to the global economic slowdown, have helped it to weather the storm. While the country’s medium-term growth prospects remain inextricably tied to hydrocarbon production, it is making strides toward economic diversification. Business and consumer confidence is returning, and bank lending looks to have resumed, albeit at a slower, and healthier, pace.”
The report expects economic growth of 3.7% in the Kingdom, led by increased oil output, loose fiscal and monetary policy and an increase in bank lending to the private sector.
Ann Wyman said the following about the UAE: “The United Arab Emirates remains one of the region’s powerhouses. Its plentiful hydrocarbon resources and successful diversification drive have combined to create an economy with strong medium-term prospects. But the economic crisis has hit the country particularly hard, exposing some weaknesses in its rapid non-oil expansion of recent years. Yet even as the economy has experienced a difficult year—buffeted by a large drop in oil prices along with rapid deleveraging and default in its corporate sector and banking sector strains—it is emerging from the crisis in a stronger position to put in place the elements needed for a healthier and more sustainable growth path. The adoption of stronger regulation and supervision, increased transparency, improved coordination among states and clarification of explicit public sector obligations are all part of the agenda. Implementation will be a key determinant of future success.”
The report was equally bullish towards Qatar; saying that as a result of vast hydrocarbon revenue and high levels of both public and private investment, the country remains one of the world’s fastest-growing economies.
Finally, on Kuwait, the report said: “Kuwait is the world’s fourth largest oil exporter, and estimates its own reserves at 100bn barrels, or more than 100 years of production. Endowed with plentiful hydrocarbon reserves and a small population, it remains one of the world’s most affluent countries, with per capita GDP in excess of US$50,000. The economy’s limited absorption capacity means that it regularly runs large fiscal and current account surpluses and has built a substantial pool of foreign assets, held both publicly and privately. The Kuwaiti economy weathered the global financial crisis and economic downturn relatively well, thanks to its oil cushion, though noisy domestic politics hampered the adoption of potentially beneficial fiscal stimulus. The eventual passage of legislation to sharply increase infrastructure spending over the next four years was a welcome development, though implementation will be the key to ensuring a more widespread economic impact.”
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