Political unrest in the Middle East and North Africa (Mena) is positively affecting Gulf hydrocarbon producers as investors and tourists are turning to the oil-rich region as a safe haven, a top Arab banker has said.
With oil prices at record high levels, Gulf Cooperation Council (GCC) countries have not only recovered from the repercussions of the 2008 global fiscal distress but have started to play an active role in leading recovery in Mena, said Adnan Youssif, chairman of the Beirut-based Union of Arab Banks (UAB).
In an article published in UAB’s magazine this week, Youssif said the 2008 crisis had led to a shift in the GCC’s trade with the West to Asia, adding that Gulf oil exports to Asia surpassed those to the EU in 2009 for the first time.
“In addition to the transformation of the Gulf economic relations from the West to Asia, the GCC countries were positively affected by the political unrest in Egypt, Tunisia, Libya and others regional nations. We realize that amidst the current situations, GCC states shifted to a safe haven in the fields of tourism and capital inflow, rise in oil process and the increase of the Gulf oil production to compensate the shortage caused by the Libyan crisis,” he said.
“We believe that the affect of global economic fluctuations on the Gulf economies will be limited since the main source for affecting these economies is the decline of demand on oil and the decrease of its price in the global markets. However, research centers such as the Institute of International Finance believe that even in such a case as having the oil price tumble to $75 a barrel, the GCC states will achieve a current account surplus of $160bn.”
Youssif also expected that the GCC’s combined expenditure would surge in 2011 by 32 per cent to nearly $389bn from $294bn in 2010. Revenue would also be up by 25 per cent to $548bn in 2011.
“Declaring such sizeable budgets presents huge capabilities to execute a lot of projects and stimulate the financial and economic situations in the GCC, where it is expected to have projects amounting to $30bn in 2011, particularly in the fields of infrastructure in these countries,” he said.
He said the expansion in government spending policy allowed member states to create jobs and push ahead with projects to develop the infrastructure and services projects in the fields of health, education and housing.
High spending also contributed this year to diminishing the damaging effects of the implications of the global economic crisis on Gulf economies, he added.
“The strong global economic status that the GCC states are now presenting regionally and internationally is placing a lot of responsibilities and challenges on them to preserve the sustainability of growth,” Youssif said.
“This in turn, from our point of view, needs continued gradual structural reforms which focus on the diversification of income resources, product base especially knowledge-based industries, in addition to raising the contribution of services industries such as tourism, financial sector, education and health in the GDP by expanding partnership between the private and public sectors while giving special attention to human resources development and providing more job opportunities for the young population.”