MARKET OUTLOOK
The near-term outlook for the GCC Gulf countries are diversifying and opening their economies with a strong focus on foreign direct investment, tourism, technology and the financial services sector although they are still heavily reliant on oil revenue
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CC countries are restructuring and opening their economies, rethinking the role of foreign investors as well as SMEs as part of their broader strategy to ease fiscal burdens and do away with heavy reliance on oil revenues. There is a flurry of structural reforms across the region to modernise the legislation and enhance the business environment. The twin shocks of the COVID-19 pandemic and low oil prices tossed the world economy into the greatest recession since World War II. However, a senior official of the International Monetary Fund (IMF) said that oil-rich Gulf countries are projected to generate an additional $350 billion in foreign reserves in the next three years amid a rally in oil prices. Oil prices have soared almost 60% to above $82 a barrel this year as the
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economic recovery from the pandemic and the global rollout of coronavirus vaccines has boosted mobility and stoked energy demand. “Despite recent turbulence and uncertainty, there is no doubt that the global economy has strongly grown this year, even if the pace is now slowing. 2021 will go down in the economic annals as one of exceptional growth,” said Rasha Badawi, Head of Barclays Private Bank in the UAE. Though most Arabian Gulf countries including Kuwait, Qatar, Saudi Arabia and Oman are still reliant on oil and gas—which accounts for 70% of their total goods exports and total revenues— the governments are diversifying and opening their economies with a strong focus on foreign direct investment, tourism, technology, and the financial services sectors.
Banking and Finance news in the MEA market
Fiscally fit Saudi Arabia, which revised its forecast for this year’s budget deficit to 2.7% of GDP from 4.9% in its preliminary 2022 budget statement, is projecting revenues from its exports of as much as $241 billion in 2022—a 4.5% increase compared to last year’s projections. To plug its budget deficit, the Gulf state tapped international debt markets with a $5 billion dual-tranche dollardenominated bond in January 2021, a $1.8 billion euro-denominated bond in February and raised $3.25 billion by issuing dual-tranche bonds last month. Moody’s Investors Service upgraded Saudi Arabia’s outlook to stable from negative in November 2021, citing the country’s ability to reverse most of its 2020 debt increase while preserving fiscal buffers. The rating agency said that it “expected fiscal improvement over the next several years will be facilitated by higher oil prices, although the stable outlook also takes into account the expectation that oil prices will remain volatile.” The UAE’s cabinet approved its 2022 to 2026 federal budget of $78.96 billion in October 2021 and focused most of next year’s budget of $16 billion on spending on social benefits and development. The Gulf state said that 16% of the budget
