The following post is brought to you by?Adam McDonald who writes about finance and the Middle East.
Although oil has turned the Middle East into a hotchpotch of competing interests both politically and economically, its made it the investment hotspot that we see today. Agree or disagree with the reality that across much of the region the wealth generated through oil is controlled by a handful of powerful families ? dynasties would be a better word such complexities tend to be lost on the countries, companies and individuals looking to secure their particular piece of the action.
Having said that, much which has changed in the Middle East over the past half-century has been extremely positive. Certainly, oil has been both a catalyst for change and a bulwark against instability, particularly where Western interests are concerned. The arrival of the Arab Spring, however, has concentrated minds both in the region and across the world, resulting in levels of concessions within Middle Eastern countries ranging from grudging acceptance of change to downright hostility. How it will all eventually pan out is the question most commentators are wrestling with. Unfortunately, there are no crystal balls.
But taking the geopolitics out of the equation, the region looks to be emerging from the worldwide economic downturn of recent years in much better shape than most other areas of the world. Despite all that has happened, it almost feels like its business as usual in some quarters. Investment and international trade in the UAE, for example, appears to be continuing apace, albeit at subdued levels. Nonetheless, GDP growth rates of around 4% for the emirate of Dubai would be greeted with howls of delight in many Western countries.
Kuwait is another success story. The planning of new infrastructure projects, says? the Oxford Business Group (OBG), and growth in the banking sector showed that the country was recovering well from the effects of the 2009 economic crisis. The global publisher and consultancy firm says Kuwait?s GDP is on target to expand by an average of 5% per year over the next few years, according to the IMF, building on a strong performance in 2011 which produced growth of 5.7%.
Meanwhile, the Saudi Arabian economy recorded another solid year of expansion in 2012, says the OBG, sustained by its energy sector and a steady rise in state spending. While growth may moderate in 2013, a number of sectors, including construction and banking, look set to continue expanding.
The OBG adds, ?At the end of 2012, GDP was expected to grow as much as 8.8%, Al Rajhi Capital, a Riyadh-based financial services company, said in a November report. Much of this expansion was expected to come from strong energy prices, higher-than-expected oil output and increased state spending, part of the governments long-term capital works programme.
?However, growth is anticipated to moderate this year. Local financial groups have projected GDP to expand by between 3.3% and 3.5% in 2013 as demand for energy eases. The outlook for the non-oil sector is seen as stronger, with growth of between 5% and 9% expected.?
And finally to Qatar, often dubbed the richest country in the world. According to the OBG, a bid by Qatars government to consolidate several years of economic expansion, while channelling a budgetary surplus towards large-scale capital works projects, helped the country achieve its aim of more moderate growth for 2012.
The OBG added, ?Yousuf Hussein Kamal, the minister of economy and finance, said in December the government expected GDP growth to ease to 5.4% by the end of the year, falling further to 5% in 2013 and beyond.
?The estimates are down significantly on figures from 2011 when Qatars economy expanded by 14.8%. The minister, who was speaking at a finance conference in Doha, added that forecasts were in line with plans to achieve and maintain fiscal stability, while also focusing on diversifying the economy.?
The OBG is a mine of fascinating economic information on more than 30 countries across the world. Check out the OBG website here.
