Economy

Fitch forecasts tough year for Gulf banks

Fitch Ratings said that the difficult global economic environment has begun to have a negative impact on banks in the Gulf and made the outlook in 2009 for all banks more challenging. The preliminary 2008 results released by the ten main commercial banks in Saudi Arabia confirmed that the fourth quarter was the worst quarter of the year for all the banks. Nevertheless, the ten main commercial banks in Saudi Arabia remain among the highest rated by Fitch across the Gulf and generally have sound domestic franchises.

Gulf economies dwindle to US$923.6 billion in 2009

Global Investment House (Global) anticipates oil, capital investment and current account surpluses in GCC member-states to manifest a steep decline this year, thereby putting pressure on regional economies’ real growth in gross domestic product. A report by the Kuwait-based finance house and consultancy estimates that Gulf economies grew from a combined US$822.2 billion in 2007 to US$1.04 trillion in 2008. However, the latter figure is expected to fall to US$923.6 billion in 2009.

India, Gulf working on multi-faceted cooperation

India is working on a multi-faceted cooperation structure with the Gulf nations to become key trading partners. India and the Gulf also share the need for continued political stability and security in the region, according to Minister of State for External Affairs, E. Ahamed. "Common political and security concerns could translate into efforts for peace, security and stability in the region," Ahamed said.

Job cuts mount, Dubai port freezes growth

Major European employers including Philips and ING announced thousands of job cuts this month and Dubai container port operator DP World halted all development as the downturn hit. News that a giant US$68 billion takeover of US-based Wyeth by world number-one drug-maker Pfizer was close offered evidence that big corporate deals can still be done. And shares in British bank Barclays, hammered in mid-January, leapt after it said its projected 2008 pre-tax profit of more than £5.3 billion (US$7.3 billion) would include the impact of £8 billion in gross write-downs.

NoozzVIEW; Pressure for Gulf economic data

While hard-pressed investors scramble around for potential silver linings to be found among the dark and worsening clouds of the credit crunch and accompanying slowdown, experts analysing the financial picture in the oil-rich Gulf states are hopeful that the credit crisis and weak oil prices may prompt governments in the region to release more detailed and timely official statistics. They argue that to do so would be a vital tool in persuading outsiders that they are still important targets for investment and note that some Gulf Arab states have not yet released vital economic growth data for 2007, let alone 2008. This lack of transparency is regarded by many investors as an unacceptable hurdle during such hard economic times as now being endured.

NoozzVIEW; Arabs push for economic integration

For the second time in less than a month, an Arab Summit has worked to iron out differences in order to press for more economic integration in the Arab world. But as so often been the case in the past, certain internal difficulties have emerged in achieving total harmony at the end of the meeting. The latest effort was the two day Economic Summit at which members of the 22-strong Arab League gathered in Kuwait to try and find ways to cope with the international credit crunch and the consequent downturn that it has provoked in financial markets across the world.

Al Khabeer signs MoU with Jazan Development Co. for Jazan Economic City

Al-Khabeer Merchant Finance Corporation Al-Khabeer, a leading provider of a full range of Shari'a-compliant financial products and services in the Kingdom of Saudi Arabia, has announced that it has recently signed an MoU with Jazan Development Co. involving the allocation of SR400 million for real estate investments within Jazan Economic City. Farouq Fouad Ghulam, Al-Khabeer's Executive Partner & Head of Asset Management Division, and Sheikh Saleh Mohamed Bin Laden the Vice President of Saudi Bin Laden Group representing Jazan Co, formally signed the MoU.

NoozzVIEW; Dubai relying on diversification

While some jeremiahs have been predicting that the so-called “Dubai bubble” will be the first in the Gulf to burst as a result of the global economic pressures derived from the credit crunch and consequent turmoil afflicting the world’s markets, there are a still a majority of observers who feel it has the strength to withstand the difficulties. As Abdulkhaleq Abdulla, respected professor of political science at the Emirates University, argued in a spirited defence of Dubai withstanding the test, diversification remains one of its greatest strengths in withstanding the drop in confidence and other reasons why some have been quick to rush into print and onto the airwaves to predict that “the party is over.”

Mideast IPOs at US$13 billion in 2008

A recent report alluded to a notable decrease in initial public offerings floated in the Middle East between October and November 2008, mirroring investor concern over global economic slowdown. IPOs in the region raised US$22.4 million from three offerings between the two cited months; as opposed to US$6 billion from 10 IPOs issued in October and November 2007. Saudi Arabia, the UAE and Egypt spearheaded IPOs floated in the Middle East in 2008 with respect to volume of revenue, each country accounting for the following ratio of regional IPOs issued over the period; 78, 10.3 and 4.7 per cent, respectively, according to a report by Ernst & Young.

NoozzVIEW; Saudis to boost public spending

As part of a concerted new battle by the Gulf states to counter the knock-on effects of the credit crunch, the Saudis have shown that they are prepared to go along with the remedies favoured by Gordon Brown in the UK and soon, by the new US leader, President Barack Obama and sanction a significant increase in a public spending in a bid to counter the slowdown in the Arab world’s largest economy. As a result, Riyadh, the world’s largest oil producer and the main economic engine inside the six member Gulf Cooperation Council is planning to mark 2009 by running a budget deficit for the first time in seven years. The action will be taken despite the collapse that has afflicted oil prices since last July’s peak of just over US$147 a barrel.

Dubai would be ideal location for Gulf central bank

The 29th summit of the Gulf Cooperation Council (GCC) held in the Omani capital of Muscat dealt responsibly with common projects aimed at integrating economies of the six-nation group. More specifically, summit participants opted to move forward on the ambitious monetary union project. Also, leaders reviewed progress made on initiatives dealing with integrating regional economies, notably the common market. Amongst all, Muscat would be noted for addressing key outstanding issues designed to implement the monetary union project by the due date of 2010. The summit adopted the accord including legal and organisational framework.

NoozzVIEW; Bahrain suffers a downgrade

The tumbling price of oil has taken its first Gulf victim of 2009 – the credit rating of Bahrain, which has been downgraded by Moody’s Investors Services from its previous standing as stable to its new position as negative. And blame for the fall is laid squarely on the shoulders of oil prices, which are reported to have slumped well below the Gulf Island’s previous budgetary plans. Also in the frame for the credit rating agency’s revised decision is the pain which the ongoing credit crunch will cause to Bahrain’s thriving financial services sector. The decision took some observers by surprise because it is known that Bahrain is already one of the most diversified economies within the six member GCC.