No need to tap reserves says Saudi"
Saudi Arabia will not need to tap into its reserves this year to finance additional budget spending but it is considering whether to issue Islamic or conventional bonds to help fund specific projects, the country's Finance Minister Ibrahim Alassaf told Reuters. The world's top oil exporter pledged early this year to spend an estimated $130 billion, or nearly 30 percent of its economic output, on housing and other social measures for its citizens over an unspecified period. That came on top of a record 2011 government budget of 580 billion riyals ($154 billion), raising the possibility that Saudi Arabia might have to dip into its fiscal reserves, estimated by analysts at about $280 billion, to fund spending. But Alassaf said he saw no need for this, since robust oil prices had helped to fill state coffers. 'We have 2-1/2 months until the end of the year and lots of things can happen, but I would expect that we wouldn't need to tap into our reserves,' Alassaf said. Source: Reuters"
Turkey: Sustaining growth"
Turkey’s second-quarter GDP growth, released by the central bank on September 11, surprised on the up side, with an 8.8% year-on-year (y-o-y) rise that easily surpassed the 6.4% expected by the market. Growth is down from the 11.6% posted in the first quarter, however, and a looming slowdown in the Eurozone has many concerned about Turkey’s exposure. Turkish fiscal and monetary policymakers will have a challenge on their hands as they attempt to sustain a boom in the face of a potential double-dip recession in the country’s biggest trading partner. Burgeoning domestic demand, low debt ratios that allow for fiscal stimulus, and access to non-Western markets will all be key to maintaining Turkey’s record economic growth. The fastest growing sectors were construction (13.2%), trade (13%), transport and communication (11.7%), hotels and restaurants (8.3%), and manufacturing (8%). Of these, however, only hotels and restaurants grew on a quarter-on-quarter (q-o-q) basis, and total GDP grew only 1.3% q-o-q, compared with the 1.7% achieved in the first quarter. Meanwhile, Turkey’s Purchasing Managers Index (PMI), a leading economic indicator which tracks purchasing, fell from 52.3 to 48.8 from July to August, the first contraction since April 2009. All of this comes amid worsening global economic news. In a September analysis, financial services firm UBS, cut its global GDP growth projections for 2012 to 3.3%, with the US at 2.2% and the Eurozone at a weak 1%. Domestic demand continues to drive the Turkish economy, with 28% y-o-y growth in private consumption responsible for 6.3 percentage points of GDP growth in the second quarter. This increase has been cited as a threat that may overheat the economy, leading many to call for Turkey’s central bank to raise interest rates. Now, with a slowdown likely, continued low rates may be what are necessary to keep the economy chugging along. Source: Oxford Business Group"
UAE rules out exposure to euro zone debt"
The UAE central bank has no exposure to euro zone debt in its reserves and it only invests in countries and corporates rated AAA as required by law, a senior central bank official said. Gulf oil exporters such as the UAE mainly invest in dollar assets since most peg their currencies to the US dollar with crude oil, priced in dollars, accounting for a majority of budget revenue, said a report in the Gulf Daily News. Asked whether the UAE central bank held any euro zone debt in its reserves, Saif Hadef Al Shamsi, senior executive director at its treasury department, said: 'Currently, no.' 'It is very much prescribed in a law, we only invest in AAA-strong countries,' he said after a meeting of Gulf central bank governors in the UAE capital Abu Dhabi, when asked if investing in troubled European assets was an option. Al Shamsi also said the central bank invested in diversified and liquid instruments: 'Problem countries? No. Investments...in securities is through a careful examination, survey.' The central bank's foreign currency assets edged down to a three-month low of Dh199.1 ($54.2 billion) in June. But within that total, holdings of foreign securities rose to Dh86 billion in June, the highest level since at least 2007, its data show. Source: TradeArabia News Service"
Oman: A competitive edge"
Oman’s economy has become more competitive in the past 12 months, according to a recent report, and is steadily making the transition from having an efficiency-driven economic base to an innovation-powered one, a process that will gain further momentum thanks to increased government budget outlays. In its latest Global Competitiveness Report, issued September 7, the World Economic Forum (WEF) ranked Oman 32nd out of the 142 countries covered in the annual study, an improvement of two places from last year, and well up on its 41st placing in 2009. The annual report, which assesses strengths and weaknesses of world economies based on 12 criteria, ranked Oman highly in several categories and praised its excellent macroeconomic environment, high-quality infrastructure and liberal tax regime. One area where the Sultanate’s performance was assessed as below its overall average was higher education, with the study underscoring the need to improve research and training services availability and provide more places for students in the system. Both measures are seen as vital if Oman is to develop a more diverse and innovative economy. It seems though that the authorities are well aware of this, with a royal decree earlier this year mandating the creation and funding of 8500 scholarships for higher education students. Though some other areas for improvement were noted by the WEF, such as a lack of scientists and engineers and the country’s relatively low broadband Internet subscription rate, overall Oman’s performance stacked up well, especially when compared to some regional neighbors. Most notable was the retreat of the UAE, which slipped two rungs, coming in at 27th globally, having peaked at 23rd in 2009 before easing to 25th in the 2010 report. Middle Eastern states such as Egypt, Jordan, Bahrain and Tunisia all saw their ratings drop as social unrest and weakened economic circumstances reduced their overall growth. To reinforce its own competitiveness, the Omani government has been increasing budgetary outlays to strengthen key economic elements, while also investing in programs aimed at boosting employment. On September 6, the finance minister, Darwish Al Balushi, announced that government expenditure would come close to $24 billion this year, up from the $21 billion originally projected in December, which in turn was a 13.2% increase on the 2010 total. Source: Oxford Business Group"
Embattled European banks offloading Gulf loans"
Embattled European lenders are offloading parts of their Middle Eastern loan books to raise dollar liquidity, allowing regional banks to buy at a discount high-quality assets previously off limits to them, said sources. Secondary loan markets have seen a significant increase in supply of Middle Eastern paper in the past few weeks, Gulf-based banking sources said, which has pushed out prices already hit by market volatility. 'Most of the selling in the last few weeks has been from French and Belgian banks who have large portfolios of high-quality regional debt,' said Ahmad Alanani, director of fixed income sales at Exotix in Dubai. 'They are selling back to the region with the aim of fetching better prices and to attain better recoveries on decent quality names from relatively cash-rich buyers.' Much of the debt is described by bankers as being high-quality quasi-sovereign names from Abu Dhabi and Qatar, as well as project finance loans from those two states and Saudi Arabia. Loans from financial institutions have also formed a large part of the recent trading activity. Source: Reuters"
RAK: Targeting small businesses"
Small and medium-sized enterprises (SMEs) play a growing role in RAK’s economy, enjoying government support and benefitting from continued upgrades to the local infrastructure. Indeed, SMEs play an important role in the wider economy’s overall growth: according to Belaid Rettab, the senior director of economic research and sustainable business development at the Dubai Chamber of Commerce, SMEs account for as much as 30% of the UAE’s GDP. For its part, the RAK government has supported the establishment of SMEs within the emirate through two separate governmental organizations, the RAK Free Trade Zone (RAK FTZ) and the RAK Investment Authority (RAKIA). Established in 2000 by an Emiri decree, the goal of the RAK FTZ is to attract value-added and knowledge-based businesses. To entice these types of organizations, RAK FTZ offers a number of incentives, including corporate tax exemptions, a lack of foreign exchange controls and repatriation of 100% of capital and profits. Source: Oxford Business Group"
UAE sets up $2.72 billion development bank"
The UAE has issued a federal law establishing the Emirates Development Bank (EDB) with a capital of Dh10 billion ($2.72 billion). The bank is established in line with the vision of the UAE government to support the nation’s economic development and to guarantee coverage of its entire short and long-term development requirements, said a statement. The law was issued by the Minister of State for Financial Affairs, Obaid Humaid Al Tayer. Al Tayer indicated that the bank will aid in promoting a diversified economy that is built on innovation, and allow for the establishment of development projects to maintain the high living standards enjoyed by UAE citizens. The bank will also provide a range of financing and savings solutions to aid citizens in owning houses through reasonable monetary schemes, he said. Al Tayer added that the new law was established to support the UAE’s various development initiatives, including industrial and real estate projects, and to facilitate real estate credit applications for building, maintaining, and renovating personal residential properties. It will also offer financing services for agricultural and craftsmanship activities, residential and building projects on behalf of the UAE government, infrastructure projects, small and medium enterprises, and projects pertaining to organizations that provide public benefit. The bank will also offer financial and economic consultation and feasibility studies. Source: TradeArabia News Service"
Egypt: Challenging times for banking"
Although a number of Egypt’s largest banks posted notable growth during the turbulent first half of 2011, the second half may prove more challenging as tourism, investments and fund flows continue to decline. The Central Bank of Egypt (CBE) has played an active role in mitigating the effects of the political turmoil in early 2011 on the banking system. Throughout the summer it has kept overnight deposit and lending rates unchanged at 8.25% and 9.75%, respectively. These levels, the lowest since November 2006, were held steady in an attempt to boost economic growth. With the political unrest having knock-on effects for a number of sectors, Egypt’s GDP saw negative growth of 4.2% in the first quarter of 2011, a rate not seen since the CBE began releasing quarterly GDP data in 2001. Yet in spite of the challenging macro environment and the corresponding 26% decline in investment, some of the country’s banks have actually posted increases in income this year. The National Bank of Egypt, the country’s oldest bank and its largest by assets, saw net income for the year ending June 30 reach LE2.2 billion ($370.4m), up from LE2 billion ($336.7 million) a year earlier. Net profits also increased 10% to more than LE1 billion ($168.4m) due to higher foreign exchange transactions, net interest income and increased fees. Still, the bank missed its full-year net income target of LE2.6 billion ($437.7 million). Tarek Amer, the bank’s chairman, attributed this to rising staff wages and benefits after the country’s political transition this year. National Société Générale Bank (NSGB), Egypt’s second-biggest private bank by market capitalization, also fared well. It saw an 8% increase in its net income y-o-y to LE733 million ($123.4m). The bank’s second-quarter net profit rose 14% y-o-y to LE369.2 million ($62.2 million) from LE323.1 million ($54.4m) in second-quarter 2010. Likewise, NSGB’s net interest income increased to LE512.4m ($86.3 million) from LE462.3 million ($77.8 million) the previous year. Not all local banks fared so well, however. Crédit Agricole Egypt’s first-half profits fell 30% from a year earlier, the bank said in late July. The bank, which is 60% owned by France’s Crédit Agricole, also reported a net profit drop to LE140.7 million ($23.7 million) from LE201.6 million ($34m) in the first half of 2010. Source: Oxford Business Group"
Intra-Gulf trade to hit over $90bn in 2011"
Trade among Gulf oil producing countries is expected to grow around 14% in 2011 recovering from a contraction two years ago at the height of the global financial downturn, two officials said in late October. 'There was a contraction in trade in 2009, but now we are projecting it will reach over $90 billion in 2011,' Abdel Aziz Abu Hamad Aluwaisheg, director general for international economic relations at the GCC Secretariat General, told Reuters. Trade among GCC members reached $79 billion dollars in 2010, he said on the sidelines of a GCC economic and financial integration forum in the UAE capital. 'Traders are discovering good values in the Gulf and they are no longer restricting themselves in the local markets. They go outside to buy cheaper and better goods in the GCC,' he said, adding stability and security in key Gulf countries will also contribute to growth. The six GCC countries are working towards a full launch of the customs union in 2015 but are still to overcome some obstacles. A key remaining challenge still is to develop a formula to divide the revenues from customs, Aluwaisheg said, which is now being discussed at the finance ministries' level of the GCC. Source: Reuters"
Qatar: World’s fastest"
Qatar looks set to retain its position as the world’s fastest-growing economy this year, with the country’s core sectors performing strongly and diversification continuing apace. While many economies worldwide are still sluggish, or face the prospect of slipping back into recession, Qatar is expected to see 21% real growth in 2011, according to a recent report by Doha-based financial institution QNB Capital. Qatar was the world’s fastest-growing economy between 2006 and 2010, with a compound annual growth rate (CAGR) of 15.7%, according to QNB Capital, and the institution expects this to continue in 2011 as well. QNB Capital, part of Qatar National Bank, has said public investments in the natural gas industry and other sectors have helped drive both “rapid growth and diversification of the economy”. The non-hydrocarbons economy achieved a CAGR of 16.4% between 2006 and 2010, with sectors such as manufacturing, financial services and construction expanding rapidly. Even as economies around the world were hit by the slowdown in 2009, Qatar saw real GDP growth of 8.6%, according to the International Monetary Fund (IMF). And though this number was down from 25.4% the previous year, it is a rate that would still be considered remarkable by most countries, even in an excellent year. Source: Oxford Business Group"
UAE signs Swiss double taxation pact"
The UAE Ministry of Finance said it has signed a double taxation avoidance agreement with Switzerland in line with the emirates' efforts to enhance global financial relations. The move reflects the UAE’s commitment to enhance economic relations and import and export activities between the two countries in addition to improving trade through providing full protection from direct and indirect double taxation processes, said a ministry statement. Younis Haji Al Khouri, undersecretary of the Ministry of Finance and Wolfgang Amadeus Bruelhart, Ambassador of Switzerland to the UAE signed the deal at the ministry headquarters in Dubai. The agreement reflects the UAE’s efforts in supporting the free movement of factors of production, increasing investment opportunities, avoiding obstacles pertaining to mutual trade and investment activities and encouraging import and export between the two countries. The double taxation avoidance agreements play an important part in allowing countries to implement their development strategies, diversify sources of income, and attract foreign investments. Source: TradeArabia News Service"
Kuwait: Still waiting"
Bank lending in Kuwait remained relatively flat during the first half of 2011, though this may have more to do with demand than banks being unwilling to extend credit. According to the Central Bank of Kuwait, credit to residents amounted to KD25.2 billion ($92.3 billion) at the end of the second quarter of 2011, an increase of just 0.2% over the end of 2010. The year-on-year result was slightly better, rising by 1%. However, between 2008 and 2009 this same figure rose by 6%. Michel Accad, the CEO of Gulf Bank, told OBG, “Today, the reason why you may not have larger growth in lending is because the borrowers are reluctant because of uncertainty. In a world of uncertainty, you try to reduce your borrowing. It is the demand for credit that has reduced, not the supply.” Accad also noted that there is ample liquidity in the banking system, which continues to place downward pressure on interest rates. Indeed, lending remains muted in spite of a cost of borrowing that is historically low. According to Bloomberg, the three-month interbank interest rate in Kuwait has hovered around 0.81% for most of the past three months. This is lower than the prevailing rates in regional neighbors such as the UAE, Qatar and Bahrain. Source: Oxford Business Group"