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7/30/2019 Gcc Economics
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: acroeconom c u oo
Robust Growth Outlook with StronUnderlying Fundamentals
+971 4 363 4002
[email protected] 2013
7/30/2019 Gcc Economics
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Contents
Section
Political Backdrop 3
Economic Outlook 9
Country Sections 20
Strictly Private and ConfidentialGCC: 2013 Macroeconomic Outlook - February 2013
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Political BackdropI.
GCC: 2013 Macroeconomic Outlook - February 2013
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MENA Macro Snapshot Political Backdrop
KUWAIT
GDP: USD172.3 billion
QATAR
GDP: USD208.3 billion
UAE
GDP: USD361.9 billion
.
GDP Growth (2013f): 2.8%
GDP/capita: USD44,304
.
GDP Growth (2013f): 5.4%
GDP/capita: USD108,924
.
GDP Growth (2013f): 2.8%
GDP/capita: USD63,477
BAHRAIN
GDP: USD31.6 billion
Pop: 1.17 million
GDP Growth (2013f): 3.4%
GDP/capita: USD26,903
SAUDI ARABIA
GDP: USD746.9 billion
Pop: 29.4 million
OMAN
GDP: USD80.7 billion
Pop: 3.28 million
Strictly Private and Confidential 4GCC: 2013 Macroeconomic Outlook - February 2013
.
GDP/capita: USD25,385
,
Source: Regional Central Banks, IMF, EFG Hermes estimates
.
GDP/capita: USD24,617
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GCC Leaders Political Backdrop
Country Leader Date tookpower
Method Population Expats as % of Total
Bahrain King Hamad bin Isa al-Khalifa Mar-99 Succeeded his father, SheikhIsa
1.17 51
- - -al-Sabah
,Jaber
.
Oman Sultan Qaboos bin Said al-Said Jul-70 Coup, overthrowing his father 3.28 36
Qatar Emir Sheikh Hamad bin Khalifa al-Thani
Jun-95 Coup, overthrowing his father 1.91 81
SaudiArabia
King Abdullah bin Abdulaziz al-Saud Aug-05 Succeeded his half-brother,King Fahd
29.4 27
UAE President Sheikh Khalifa bin Zayed al-Nahyan
Nov-04 Succeeded his father, SheikhZayed
5.70 80
Strictly Private and Confidential 5GCC: 2013 Macroeconomic Outlook - February 2013
Source: MEED, EFG Hermes
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Socio-Political Backdrop Political Backdrop
Population Under 30 Years as % of Total Population, 2010
Large Youth Population Arab Spring has impacted GCC policy: Greater
policy focus on creating jobs for the youth (publicand private), increasing handouts and upgrading 65soc a n ras ruc ure ous ng, e uca on an ea .Job creation for the youth arguably remains one ofthe greatest challenges for the GCC. Saudi and Oman
particularly focused on job creation, although mosthave placed more focus on their job creation for45
50
55
60
na ona s. scuss ng ma ng pr va e sec ormore attractive (wages, holidays, etc).
We view education reform as vital forsustainable lon -term ob creation.
40
Oman
Sau
diAra
bia
Ba
hra
in
Qa
tar
Kuwa
it
UAE
% Unemployment by Age Group
High Youth Unemployment Example Saudi Arabia
Source: World Bank
Some, but limited promise of political reform inGCC compared with non-GCC MENA. More powerbeing given to consultative councils. Saudi has
, .
Greatest pressure in Bahrain and Kuwait call
for constitutional monarchies. Underlying factorsdifferent to the wider regional Arab Spring. Other20
25
30
35
GCC are watching developments in Bahrain andKuwait closely.
Saudi - royal family reformists have been 0
5
10
15
20-24 15-19 25-29 30-34 35-39 40-44 45-49 50-54 55-59 60-64 65+
Strictly Private and Confidential
Source: Central Department of Statistics and Information
7GCC: 2013 Macroeconomic Outlook - February 2013
turmoil in the regime-change countries.
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Hydrocarbon Endowment Political Backdrop
Barrels per person, based on total hydrocarbon reserves
GCC Hydrocarbon Wealth per Capita GCC countries vary in their hydrocarbonendowment: 1) Qatar, UAE and Kuwait arehydrocarbon rich per capita; 2) Saudi, Oman andBahrain are h drocarbon oor er ca ita.
Hydrocarbon richer per capita countries have also
built up greater reserves and generally have largerfiscal surpluses, with a lower portion of their100200300400500600700800
Oil Reserves / Capita Gas Reserves / Capita Total Hydrocarbon Reserves / Capita
y rocar on reserves e ng spen on suppor ng e rpopulations. Thus, they have a greater ability to increasespending and support their population.
GDP er ca ita varies between the two cate ories.
0
Qa
tar
UAE
Kuwa
it
Sau
diAra
bia
Oman
Ba
hra
in
USD, 2013f
GDP per Capita Varies with Hydrocarbon Endowment
Source: BP, EFG Hermes estimatesThere is more social pressure linked to lower
wages and job opportunities in the hydrocarbonpoorer per capita countries, where wages (public andprivate) tend to be lower in the hydrocarbon poorer percapita countries.
Kuwait youth population frustration linked togovernment inability to reform and upgrade
infrastructure despite ample resources. 60,000
80,000
100,000
120,000
GCC fiscal support for Bahrain and Oman. In 2011 USD1 billion per year was pledged for 10 years.Additional bilateral support, especially to Bahrain.
0
20,000
,
Qa
tar
UAE
Kuwa
it
Ba
hra
in
au
diAra
bia
Oman
Strictly Private and Confidential
Source: EFG Hermes estimates
8GCC: 2013 Macroeconomic Outlook - February 2013
S
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Economic OutlookII.
GCC: 2013 Macroeconomic Outlook - February 2013
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Headline Growth Lower in 2013 Economic OutlookWeaker hydrocarbon growth outlook for 2013
% change
GCC Headline Real GDP Growth We forecast that real weighted GDP growth willsoften to 4.1% in 2013, from 5.5% in 2012. This islargely as a result of weaker forecast hydrocarbonrowth. This is after GCC countries increased oil
production in 2012 to compensate for the loss of Iranianproduction.
Oman and Qatar forecast to see a rise in hydrocarbon 45
6
7
8
ou pu . or a ar, o pro uc on expec e o r se n2H2013, LNG production steady in 2013.
Saudi has cut oil production to tighten the oilmarket. This is a result of the increased out ut
0
1
2
Oman Qatar Saudi Arabia Bahrain Kuwait UAE WeightedGCC
Million barrels per day
GCC Average Oil Production
Source: EFG Hermes estimatesexpectations of US, non-OPEC and Iraqi supply. GCC will
likely have greater oil energy export reliance on Asianmarkets going forward.
2013 of USD107.0 p/b, from USD112.0 p/b in2012. This will moderate the nominal GDP growth in2013, with nominal oil GDP falling marginally. 8
10 2011 2012 2013 YTD
Brent has had a strong start to the year averagingUSD114.8 p/b YTD.
Real GDP growth to be driven by non-oil activity.0
2
4
Strictly Private and Confidential
Source: EIA
10GCC: 2013 Macroeconomic Outlook - February 2013
Saudi UAE Kuwait Oman Qatar
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Twin Surpluses to Continue Economic Outlook
USD billion
GCC Fiscal Balance GCC twin surpluses to continue in 2013 and 2014,despite the weaker oil revenue outlook for 2013.
Bahrain Kuwait Oman Qatar Saudi UAE
s w resu n con nue u up o reserves,albeit at a weaker rate underpinning macro stability.
Cumulative GCC fiscal surpluses seen between 2010 and2014 is more than in the revious 15 ears sur luses.
150200
250
300
350
400
Saudi best reflects the build-up in reserves in GCC, withmost FX reserves held by SAMA. Saudi Arabias FXreserve position has risen has risen more than fourfold
-100
-50
0
50
100
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
USD, 2013f
GCC Current Account Surplus
Source: Regional Central Banks, EFG Hermes estimatess nce , an ne ore gn asse s are more an
15 times higher than in 2002.
Saudi FX Reserve Position
USD billion (LHS), % of GDP (RHS)
200
300
400 Bahrain Kuwait Oman Qatar Saudi Arabia United Arab Emirates
80
100
500
700
FX Reserves (LHS) SAMA's NFA (LHS)
Fiscal Balance, USD bn (LHS) FX reserves, % of GDP (RHS)
(100)
0
100
90
91
92
93
94
95
96
97
98
99
00
01
02
03
04
05
06
07
08
09
10
11
12
13
14(20)
0
20
40
(100)
100
300
99
00
01
02
03
04
05
06
07
08
09
10
11
12
Strictly Private and Confidential
Source: IMF, EFG Hermes estimates
11GCC: 2013 Macroeconomic Outlook - February 2013
Source: EFG Hermes estimates
1 1 1 1 1 1 1 1 1 1 2 2 2 2 2 2 2 2 2 2 2 2 2 2 219
20
20
20
20
20
20
20
20
20
20
20
20
20
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Robust Outlook for Non-oil Activity Economic Outlook
% change
Real Non-oil GDP Growth
,
We forecast that real non-oil GDP growth willremain robust at 5.7% in 2013, albeit down from2012. The deceleration comes after two strong years ofrowth 2011 6.8% and 2012 6.3% . Oman and
Kuwait to see stronger activity in 2013, than in 2012.
Top MENA macro picks - Saudi, Qatar and Oman.We forecast above 5.0% real GDP growth for these
56
7
8
9
10
coun es an a s rong m x o nves men an spen nggrowth. We have upgraded the non-oil GDP growthoutlooks for Saudi, UAE and Oman (Jan and Feb 2013).UAE and Oman on a stronger investment outlook. 0
1
2
3
4
Qatar Saudi Arabia Oman UAE Kuwait Bahrain
PMI Index, a reading above 50 indicates a expansion in the economy
GCC PMI Strong on a Comparative Basis, January 2013
Source: EFG Hermes estimates Positive on Dubai fiscal reforms, debt restructuring
and stronger revenue growth is allowing a shift to anexpansionary fiscal stance. Pickup in investment activity the most viable will get funding. Abu Dhabi sometentative signs but momentum not there yet.
Kuwait could be the turnaround story with improvedparliament/government relations. Project awards have
increased (including a large PPP power project), but 5455
56
57
58
59
.
Bahrain tighter fiscal position limits growth support.
49
50
51
52
53
Saudi India UAE Brazil Russia EM China Global Hong
Strictly Private and Confidential
Source: EFG Hermes estimates
12GCC: 2013 Macroeconomic Outlook - February 2013
-global basis.
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Strong Fiscal Spending Outlook Economic Outlook
% change
Government Spending Likely to Remain Expansionary
,
Expansionary fiscal positions are supporting non-oil GDP growth. We have increased our weightedaverage spending growth forecast to 12.4% for 2013,from 8.5% in 2012 after most GCC countries announced 25more expansionary budgets than forecast (Saudi, Dubaiand Oman).
Current expenditure supporting consumption
15
20
ac v y - grow rema ns s rong an om na es overaspending. Public sector job creation, wage increases,etc.
Pro rammes also to increase rivate sector ob creation.
0
5
Oman Saudi Qatar UAE Kuwait Bahrain
Government spending as a % of nominal GDP
and Provide a Strong Stimulus to GDP
Source: Regional Central Banks, EFG Hermes estimatesSubsidy reform affecting individuals unlikely in the
outlook period, with social objective and a goal toincrease living standards.
in 2013, than in the previous two years.
30
40
50
2012f 2013f
0
10
20
Strictly Private and Confidential
Source: EFG Hermes estimates
13GCC: 2013 Macroeconomic Outlook - February 2013
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Investment a Cornerstone ofGovernment Polic
Economic Outlook
GCC Awarded and Planned Projects Investment is a central objective of the government to upgrade infrastructure and increase the economicbase. GCC governments are particularly stepping in to
Chemical Construction Gas Industrial Oil Power Transport Water
USD billion
, , ,etc).
Saudi Arabia - the investment programme will remainthe most broad-based in the region, including 200
300
400
500
* Total planned projects implementation tends to be weaker, but shows strong
upgrading utility and gas production capacity andtransportation. Notably, in Saudi, we are now seeingprivate investment (ie, outside the governmentsprogramme) to meeting rising domestic demand.
0
100
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013*
2014*
Projects by Sec tor Expected to be Awarded in 2013
pipeline
Source: MEED Projects
For Qatar, we see a narrower base in the investmentarena, with transportation being a key area ofconcentration, along with downstream projects. Wealso see an uptick in project awards linked to the FIFAWorld Cu 2022 from end-1013. USD billion
Oman is forecast to see a notable increase in gasproject awards. We also expect there to be further
progress on utility and transportation projects
40
60
80
Chemical Construction Gas Industrial Oil Power Transport Water
a oug no on e same sca e as our wo op p c s.
Dubai Need developing to increase capacity ininfrastructure for core sectors. External funding supportre uired.
0
20
Sau
di
Ara
bia
Kuwa
it
Qa
tar
UAE
Ba
hra
in
Oman
Strictly Private and Confidential
Source: MEED Projects
14GCC: 2013 Macroeconomic Outlook - February 2013
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Fiscal Space Remains Economic Outlook
% of GDP
GCC (ex-Bahrain) to Continue to see Fiscal Surpluses
We continue to see respectable fiscal surpluses inthe GCC (ex-Bahrain), albeit weakening in 2013.
s s o as a resu o e s rong spen ng growoutlook and weaker forecast oil revenue. We see anincrease in the fiscal surplus in 2014.
Fiscal s ace remains but is narrowin . GCC countries
20
30
40
(ex-Bahrain) still have a Budget Breakeven (BBE) oilprice of below USD100 p/b, in Brent crude terms.
Saudi is forecast to see the largest USD rise in BBE in
(10)
0
Kuwait Oman Saudi Qatar UAE Bahrain
USD p/b, Brent crude terms
GCC Counties (ex-Bahrain) still have a BBE Below USD100 p/b
Source: Regional Central Banks, IMF, EFG Hermes estimatesw e ower o pro uc on ou oo . a ar s a so
seeing a sharper rise than historically, with steady LNGproduction from 2011.
GCC countries could be at risk of a fiscal deficit b2016 if oil revenue stays broadly constant andspending remains in double digits. There is scope toreduce current expenditure growth.
80
100
120
140 2013f 2031 Brent Forecast
0
20
40
60
Strictly Private and Confidential
Source: EFG Hermes estimates
15GCC: 2013 Macroeconomic Outlook - February 2013
Kuwait Qatar Saudi Oman UAE Bahrain
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Strong FX Reserves and Low Debt Further S endin Buffers
Economic Outlook
FX reserves as a % of GDP
GCC FX Reserves Position, 2012 Substantial buildup in FX reserves over the last decadewith fiscal (and current account) surpluses. This providesGCC countries the ability to continue to spending in theevent of a fall in oil revenue or if overnmentexpenditure growth outstripping revenue growth.
Most GCC countries (ex-Bahrain and UAE) have reducedgovernment gross debt levels. GCC generally have a low
150
200
250
gross e eve s an on a ne as s are cre ors.
With GCC governments key objectives of job creationand investment to expand economic capacity, policy ismore likel to lean towards a continuation of the
0
50
UAE Kuwait Saudi Arabia Qatar Oman Bahrain
% of GDP
GCC Government Gross Debt
Source: Regional Central Banks, SWF Institute, EFG Hermes estimatesexpansionary fiscal position beyond 2016,
perhaps at a slightly weaker pace.
We believe there is scope to cut current expenditure, .
Most GCC countries can easily support a smallfiscal deficit (of under 5.0% of GDP) for a numberof years. 60
80
1002003 2013e
0
20
40
Strictly Private and Confidential
Source: EFG Hermes estimates
16GCC: 2013 Macroeconomic Outlook - February 2013
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Wider Support to the InvestmentPro ramme Stron Ca ital Inflows
Economic Outlook
USD million
GCC Sukuk Issuances Reached Record Level in 2012 Strong ability to access foreign capital - is alsosupporting the investment programme. Dubai is themost dependant on foreign funding debt and growth.
Bahrain Kuwait Qatar Saudi Arabia UAE
GCC benefitting from the strong macrofundamentals. Also ample liquidity with Islamic fundsis supporting demand for sukuks. Helping to increasematurities and reduce costs. 15,000
20,000
25,000
30,000
Banks are also turning to the debt market to raisecheaper longer-term funding than deposits. Importantfor USD and longer-term lending for project finance.Government de osits are also ensurin am le li uidit in
0
5,000
10,000
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
USD million
Increasing Corporate Issuance for the Investment Programme
Source: Zawyathe banking sector to support credit growth.
Net Banking Sector Claims on the Government
USD billion
10,00015,00020,00025,00030,000
2007 2008 2009 2010 2011 2012
(100)
(50)
0
502008 2012
0,
Governmen
tal
Inst
itu
tions
Financia
l
Serv
ices
Rea
lEsta
te
ower
&Utilities
Oil&Gas
Transport
Construct
ion
Leisure
&
Tourism
Cong
lomera
tes
Foo
d&
Beverages
(350)
(300)
(250)
(200)
(150)
Saudi Kuwait Oman Bahrain UAE Qatar
Strictly Private and Confidential
Source: Zawya
17GCC: 2013 Macroeconomic Outlook - February 2013
Source: EFG Hermes estimates
P
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Loose Monetary Policy Outlook Economic Outlook
%
Benchmark Rates on Hold; Real Rates Low or Negative in 2013
We expect interest rates to remain low. We do notexpect to see any changes in GCC benchmark interestrates in 2013 or 2014.
Credit growth and monetary policy not leading toinflationary pressure (see page 19).
GCC overnments want to ensure that access to1
3
5
domestic credit growth is available for the investmentprogramme.
Rather economic outlooks are reflected in the magnitude
(3)
(1)
Qatar Bahrain Kuwait Saudi UAE Oman
% change
GCC Private Sector Credit Growth
Source: Regional Central Banks, EFG Hermes estimatesan rea o cre grow . a ar, au an man
have double-digit credit growth outlooks. Saudi andOman are seeing corporate and consumer credit growth.Qatar so far mostly public sector driven, but theprivate sector is set to increase with World Cup projects.
UAE still sluggish credit growth outlook, despite thepickup in activity. Dubai banks, which generally havegreater exposure to GREs. Abu Dhabi projects need tobuild momentum.
15
20 2012 2013f
Kuwait also needs the investment programme to kickin. Limited corporate demand so far. Private sectorcredit growth being driven by retail, with public sector 0
5
10
Strictly Private and Confidential
Source: EFG Hermes estimates
18GCC: 2013 Macroeconomic Outlook - February 2013
.
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Contained Inflation Outlook Economic Outlook
% change
GCC inflation
We forecast inflation to remain contained acrossthe GCC. Supportive of the private consumptionoutlook. We forecast that GCC weighted inflation willonl rise mar inall to 3.4% in 2013 from 3.0% in2012.
Weakest inflation still in countries with ample housingsupply (UAE). Saudi, rental inflation is moderating, but 3.0
4.0
5.02012 2013f
s e s ronges n e .
Expansionary fiscal position not leading to a buildup indemand pressure met largely by imports.
0.0
1.0
2.0
Bahrain Kuwait Oman Qatar Saudi UAE
Swap points to USD
Market not Pricing a Move Away from the USD Pegs
Source: Regional Central Banks, EFG Hermes estimates
Some gradual increase forecast for imported inflation in2013 pick up in inflation in Asia and strengthening inAXJ currencies and EUR against the USD.
There is no pressure on the GCC pegged currencies tothe USD, with the contained inflation outlooks. GCC andUS interest requirements are also in line.
0
100
200
300
400 SAR 1Y FW SAR 2Y FW AED 1Y FW AED 2Y FW
(500)
(400)
(300)
(200)
n-0
9
ar-
09
ay-
09
ul-09
p-0
9
v-09
n-1
0
ar-
10
ay-
10
ul-10
p-1
0
v-10
n-1
1
ar-
11
ay-
11
ul-11
p-1
1
v-11
n-1
2
ar-
12
ay-
12
ul-12
p-1
2
v-12
n-1
3
Strictly Private and Confidential
Source: EFG Hermes estimates
19GCC: 2013 Macroeconomic Outlook - February 2013
J M MJ S N J M M
J S N J M MJ S N J M M
J S N J
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Country SectionsIII.
GCC: 2013 Macroeconomic Outlook - February 2013
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Saudi: Robust Broad-based Outlook
Country Sections
Index, a reading above 50 indicates growth
PMI Strong New Orders Outlook
% change, in real terms
Non-oil Activity to Drive Real Growth
New Orders
4.2 3.2
5.8
8.07.2
6.1 6.0
4
6
8
10-
65
75
Output / Business Activity IndexEmoloyment IndexOverall PMI
0
2
2008
2009
2010
2011
2012fe
2013f
2012f
45
Aug-0
9
Oct-0
9
Dec-
09
Feb-1
0
Apr-
10
Jun-1
0
Aug-1
0
Oct-1
0
Dec-
10
Feb-1
1
Apr-
11
Jun-1
1
Aug-1
1
Oct-1
1
Dec-
11
Feb-1
2
Apr-
12
Jun-1
2
Aug-1
2
Oct-1
2
Dec-
12
USD billion, project awards
Need to Upgrade Infrastructure in Most Areas
% change Y-o-Y, point of transaction sales
Private Consumption Supported by WageGrowth and Job Creation
,Hermes estimates
30
40
50
60
70 Value of Sales No. of Transactions
20
25
30
35
Chemical Construction GasIndustrial Oil PowerTransport Water
(20)
(10)
0
10
ep-0
8
ec-
08
ar-
09
un-0
9
ep-0
9
ec-
09
ar-
10
un-1
0
ep-1
0
ec-
10
ar-
11
un-1
1
ep-1
1
ec-
11
ar-
12
un-1
2
ep-1
2 0
5
10
15
Q10
Q10
Q10
Q10
Q11
Q11
Q11
Q11
Q12
Q12
Q12
Q12
Strictly Private and Confidential
Source: MEED ProjectsSource: SAMA
21GCC: 2013 Macroeconomic Outlook - February 2013
S D J S D J S D J S D J S 1 2 3 4 1 2 3 4 1 2 3 4
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Saudi: Macro Indicators Country Sections
In USD billion, unless otherwise stated
Macroeconomic Indicators
e
Real Sector
Average Brent Crude Spot Price (USD/B) 98.7 62.7 80.3 110.9 112.0 107.0 114.0
GDP at Current Market Prices (SAR bn) 1,786.1 1,637.7 1,975.5 2,510.7 2,727.4 2,800.8 3,065.5
GDP at Current Market Prices (USD bn) 476.3 436.7 526.8 669.5 727.3 746.9 817.5
Real GDP Growth Rate, % 4.2 0.1 4.7 8.5 6.8 4.6 5.1
Real Non-oil GDP Growth Rate, % 4.2 3.2 5.8 8.0 7.2 6.1 6.0
Population (million) 25.8 26.7 27.6 28.2 28.8 29.4 30.0
GDP /Capita (USD) 18,471 16,381 19,113 23,767 25,263 25,385 27,213
CPI Inflation Y-o-Y % Avera e 9.9 5.1 5.3 5.0 4.5 4.6 4.8
External Sector
Trade Balance (USD billion) 212.0 105.2 153.7 245.2 268.0 240.2 253.7
Current Account Balance (USD bn) 132.3 21.0 66.8 158.9 178.3 147.4 157.0
Current Account, % of GDP 27.8 4.8 12.7 23.7 24.5 19.7 19.2
. . . . . . .
Fiscal Sector
Budget Balance (USD bn) 154.9 (23.1) 23.4 81.6 103.1 51.6 45.0
Budget Balance, % of GDP 32.5 (5.3) 4.4 12.2 14.2 6.9 5.5
Net Banking Sector Claims on the Government . . . . . . .
Financial Sector
USD/SAR Exchange Rate, annual average 3.75 3.75 3.75 3.75 3.75 3.75 3.75
Annual Growth Rate in Broad Money, % 19.0 6.5 9.3 15.4 13.6 12.6 14.8
Growth in Credit to the Private Sector, % 27.1 (0.0) 5.7 10.7 16.4 15.5 14.7
Strictly Private and Confidential
Source: SAMA, Central Department of Statistics and Information, IMF, and EFG Hermes Estimates
23GCC: 2013 Macroeconomic Outlook - February 2013
enc mar en ng a e, en -o -per o , . . . . . . .
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UAE: Investment Outlook Improving
Country Sections
Index, a reading above 50 indicates growthchange
PMI Sharp Increase in New Orders
% change
We See Real Non-oil Growth RemainingAbove 4.0% in 2013
,
60
70
New OrdersOutput / Business Activity IndexEmoloyment IndexOverall PMI
6.0
1.43.1 4.4 4.12
4
6
8
40
50
Aug-0
9
Oct-0
9
Dec-
09
Feb-1
0
Apr-
10
Jun-1
0
Aug-1
0
Oct-1
0
Dec-
10
Feb-1
1
Apr-
11
Jun-1
1
Aug-1
1
Oct-1
1
Dec-
11
Feb-1
2
Apr-
12
Jun-1
2
Aug-1
2
Oct-1
2
Dec-
12
(2.9)
(4)
(2)
2008
2009
2010
2011
2012e
2013f
AED per Sq. Ft.
Property Recovery Supporting Consumptionand Investments
% hotel occupancy
Traditional Sectors Performing Strongly,Supporting Investment and Job Creation
Source: Markit EconomicsSource: National Bureau of Statistics, EFG Hermes estimates
75
80859095
Dubai Abu Dhabi
1,800
2,000
2,200
2,400
2,600
High Range Apartment Sales Price
High Range Villa Sales Price
50556065
-Jun-0
9
-Sep-0
9
-Dec-
09
Mar-
10
-Jun-1
0
-Sep-1
0
-Dec-
10
Mar-
11
-Jun-1
1
-Sep-1
1
-Dec-
11
Mar-
12
-Jun-1
2
-Sep-1
2 1,000
1,200
1,400
1,600
an-0
7
ay-
07
ep-0
7
an-0
8
ay-
08
ep-0
8
an-0
9
ay-
09
ep-0
9
an-1
0
ay-
10
ep-1
0
an-1
1
ay-
11
ep-1
1
an-1
2
ay-
12
ep-1
2
Strictly Private and Confidential
Source: Bloomberg, CluttonsSource: SAMA
24GCC: 2013 Macroeconomic Outlook - February 2013
01
01
01
01 0
101
01
01 0
101
01
01 0
101 J S J S J S J S J S J S
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UAE: Investment Outlook Improving
Country Sections
% change in Dubai Government spending
Fiscal Reforms and Stronger EconomicActivity Allows Increase in Dubai Spending
% change, value of project awards
Dubai Leading the Investment Recovery
2040
6080
100120
(5)
0
5
10
15
(80)
(60)(40)(20)
2008 2009 2010 2011 2012
(20)
(15)
(10)
2009
2010
2011
2012e
2013f
USD billion
2013 A Relatively Light Year in Debt Maturity
In bps, CDS spreads
Improved Sentiment on Dubai Debt Vital forExtending Debt Maturity and Reducing Cost
Source: Dubai Sukuk Prospectus , EFG Hermes estimatesSource: MEED Projects, EFG Hermes
40
50
Dubai World & SubsidiariesDubai Holding & SubsidiariesInvestment Corporation of Dubai & SubsidiariesOther Dubai Inc.Dubai GREs with Government Ownership below 50%Government of Dubai
500600
700800900
1000Abu Dhabi Dubai Saudi Arabia Qatar
0
10
20
2012
2013
2014
2015
Beyon
d0100200300400
ep-0
8
ec-
08
ar-
09
un-0
9
ep-0
9
ec-
09
ar-
10
un-1
0
ep-1
0
ec-
10
ar-
11
un-1
1
ep-1
1
ec-
11
ar-
12
un-1
2
ep-1
2
ec-
12
Strictly Private and Confidential
Source: IMFSource: Bloomberg
25GCC: 2013 Macroeconomic Outlook - February 2013
S D J S D J S D J S D J S D
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UAE: Macro Indicators Country Sections
In USD billion, unless otherwise stated
Macroeconomic Indicators
2008 2009 2010 2011 2012e 2013f 2014f
Real Sector
Average Brent Crude Spot Price (USD/B) 98.7 62.7 80.3 110.9 112.0 107.0 114.0
GDP at Current Market Prices (AED bn) 1,154.8 953.8 1,042.7 1,243.8 1,304.7 1,328.3 1,397.2
GDP at Current Market Prices (USD bn) 314.7 259.9 284.1 338.9 355.5 361.9 380.7
Real GDP Growth Rate, % 3.2 (4.8) 1.3 4.2 4.5 2.8 3.8
Real Non-Oil GDP Growth Rate, % 6.0 (2.9) 1.4 3.1 4.4 4.1 3.8
Population (million) 4.8 5.1 5.2 5.4 5.5 5.7 5.9
GDP /Capita (USD) 66,036 51,301 54,449 63,053 64,217 63,477 64,821
CPI Inflation Y-o-Y % Avera e 12.3 5.3 0.9 0.9 0.8 1.0 1.2
External Sector
Trade Balance (USD billion) 63.0 42.1 50.9 91.5 85.2 71.1 77.1
Current Account Balance (USD bn) 22.0 7.8 11.2 50.4 41.7 25.8 32.5
Current Account, % of GDP 7.0 3.0 3.9 14.9 11.7 7.1 8.5
et ore gn ssets n . . . . . . .
Fiscal Sector
Budget Balance (USD bn) 52.8 (33.4) (3.5) 10.4 19.1 9.8 12.6
Budget Balance, % of GDP 16.8 (12.8) (1.2) 3.1 5.4 2.7 3.3
Net Banking Sector Claims on the Government (USD bn) (23.1) 2.7 7.9 12.2 10.5 11.7 13.2
Financial Sector
USD/AED Exchange Rate, annual average 3.67 3.67 3.67 3.67 3.67 3.67 3.67
Annual Growth Rate in Broad Money, % 22.1 9.8 6.2 5.0 2.0 3.9 4.9
Growth in Credit to the Private Sector, % 41.7 4.6 0.7 3.4 2.5 3.7 3.5
Strictly Private and Confidential
Source: UAE Central Bank, National Bureau of Statistics, IMF, EFG Hermes Estimates
26GCC: 2013 Macroeconomic Outlook - February 2013
enc mar en ng a e, en -o -per o , . . . . . . .
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Qatar: Strongest Non-oil Activity-
Country Sections
% change
Non-hydrocarbon Activity Robust and Likelyto Strengthen in 2014
PP contribution to Growth
Headline GDP Slows with HydrocarbonActivity
,
1Q12 2Q12 3Q12
10
15
20
25-
0
5
10
15
ns dn ts n
d es
(5)
0
1Q11
2Q11
3Q11
4Q11
1Q12
2Q12
3Q12 T
ransport
&
Commun
ica
tio
Bu
ildinga
Construct
i
Tra
de,R
estaura
&Ho
tels
Electrici
tya
Wa
ter
Financia
lServ
ic
QAR million (LHS), Y-o-Y change (RH)
The Government has been IncreasingDeposits in the Banking Sector
PP contribution to credit growth
Public Sector will Reduce Borrowing from theBanking Sector if Needed for Private
Source: Qatar Statistic AuthoritySource: Qatar Statistics Authority
20
40
60
Others Public Sector Contracting
Real Estate Commerce Consumption
Total
40
60
80
100
120
130
150
170
190
Public Sector Deposits (LHS) Y-o-Y Change ( RHS)
(20)
0
Jan-1
1
Mar-
11
ay-
11
Jul-11
Sep-1
1
Nov-
11
Jan-1
2
Mar-
12
ay-
12
Jul-12
Sep-1
2
Nov-
12
(40)
(20)
0
20
50
70
90
Jan-0
8
May-
08
Sep-0
8
Jan-0
9
May-
09
Sep-0
9
Jan-1
0
May-
10
Sep-1
0
Jan-1
1
May-
11
Sep-1
1
Jan-1
2
May-
12
Sep-1
2
Strictly Private and Confidential
Source: Central Bank of QatarSource: Central Bank of Qatar
27GCC: 2013 Macroeconomic Outlook - February 2013
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Qatar: Macro Indicators Country Sections
In USD billion, unless otherwise stated
Macroeconomic Indicators
2008 2009 2010 2011 2012e 2013f 2014f
Real Sector
Average Brent Crude Spot Price (USD/B) 98.7 62.7 80.3 110.9 112.0 107.0 114.0
GDP at Current Market Prices (QAR bn) 403.0 356.3 463.4 631.7 714.2 758.1 855.6
GDP at Current Market Prices (USD bn) 110.7 97.9 127.3 173.6 196.2 208.3 235.1
ea row a e, . . . . . . .
Real Non-Oil GDP Growth Rate 27.8 9.6 13.3 12.9 9.2 8.5 9.7
Population (million) 1.45 1.64 1.70 1.77 1.84 1.91 1.99
GDP /Capita (USD) 76,459 59,719 74,883 98,165 106,688 108,924 118,182
CPI Inflation (Y-o-Y % Average) 15.6 (4.9) (2.4) 1.9 1.8 3.5 4.2
External Sector
Trade Balance (USD billion) 42.1 24.5 51.8 77.2 81.9 79.2 86.4
Current Account Balance (USD bn) 33.0 10.0 33.5 49.1 54.7 51.5 58.1
Current Account, % of GDP 29.8 10.2 26.3 28.3 27.9 24.7 24.7
. . . . . . .
Fiscal Sector
Budget Balance (USD bn) 11.5 15.0 3.7 14.9 11.8 9.1 8.4
Budget Balance, % of GDP 10.4 15.3 2.9 8.6 6.0 4.4 3.6
Net Banking Sector Claims on the Government . . . . . . .
Financial Sector
QAR/USD Exchange Rate, annual average 3.64 3.64 3.64 3.64 3.64 3.64 3.64
Annual Growth Rate in Broad Money, % 19.7 16.9 23.1 17.1 14.0 13.6 15.2
Growth in Credit to the Private Sector, % 45.0 10.8 7.6 19.2 12.5 17.5 19.2
Strictly Private and Confidential
Source: Central Bank of Qatar, Qatar Statistical Authority, EFG Hermes Estimates
28GCC: 2013 Macroeconomic Outlook - February 2013
Benchmark Lending Rate, end-of-period, % 5.5 5.5 5.5 4.5 4.5 4.5 4.5
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Kuwait: Politics Still Being Defined
Country Sections
KWD million (LHS), % change (RHA)
So Far Domestic Growth has been Driven byPublic Sector Wage Increases
USD billion, project awards
Investment Push from 4Q2012 and DecemberElection - Political and Implementation Risks
Chemical Construction Gas Industrial Total Spending on Wages (LHS) % Change (RHS)
3
4
5
6 Oil Power Transport Water
1015
20
25
30
35
2,000
3,000
4,000
5,000
6,000
0
1
1Q10
2Q10
3Q10
4Q10
1Q11
2Q11
3Q11
4Q11
1Q12
2Q12
3Q12
4Q12
0
5
0
1,000
2005/06
2006/07
2007/08
2008/09
2009/10
2010/11
2011/12
2012/13f
USD billion (LHS), % of GDP (RHS)
Government has Substantial Ability toIncrease Spending
PP contribution to credit growth
Increased Project Implementation WillProvide Strong Credit Growth Stimulus
Source: Central Bank of Kuwait, EFG Hermes estimatesSource: MEED Projects
4
6
8
10
CorporateNon Bank Financial InstitutionsRetailOtherTotal
20
25
30
35
30
40
50
60
Fiscal balace (USD bn, LHS)
Fiscal Balance (as % of GDP, RHS)
(4)
(2)
0
2
ug-1
0
ct-1
0
ec-
10
eb-1
1
pr-
11
un-1
1
ug-1
1
ct-1
1
ec-
11
eb-1
2
pr-
12
un-1
2
ug-1
2
ct-1
2
ec-
12
0
5
10
0
10
20
004/05
005/06
006/07
007/08
008/09
009/10
010/11
011/12
012/13f
013/14f
014/15f
Strictly Private and Confidential
Source: Central bank of Kuwait, EFG Hermes estimatesSource: Central Bank of Kuwait
29GCC: 2013 Macroeconomic Outlook - February 2013
A D F J A D F J A D 2 2 2
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Kuwait: Macro Indicators Country Sections
In USD billion, unless otherwise stated
Macroeconomic Indicators
2008 2009 2010 2011 2012e 2013f 2014f
Real Sector
Average Brent Crude Spot Price (USD/B) 98.7 62.7 80.3 110.9 112.0 107.0 114.0
GDP at Current Market Prices (KWD bn) 39.5 30.5 34.4 44.4 47.8 48.4 52.5
GDP at Current Market Prices (USD bn) 147.4 106.0 120.0 160.9 171.3 172.3 188.7
ea row a e, . . . . . . .
Real Non-Oil GDP Growth Rate, % 4.6 (4.0) 16.2 4.6 3.8 4.0 4.2
Population (million) 3.4 3.5 3.6 3.7 3.8 3.9 4.0
GDP /Capita (USD) 42,824 30,409 33,490 43,700 45,254 44,304 47,191
CPI Inflation (Y-o-Y % Average) 10.6 4.0 4.0 4.8 2.9 3.3 3.7
External Sector
Trade Balance (USD billion) 64.2 35.9 47.5 82.3 85.8 77.8 85.1
Current Account Balance (USD bn) 60.4 28.3 38.2 70.8 73.4 65.0 71.6
Current Account, % of GDP 41.0 26.7 31.9 44.0 42.9 37.7 38.0
. . . . . . .
Fiscal Sector
Budget Balance (USD bn) 10.2 22.4 18.1 48.8 43.2 43.8 44.1
Budget Balance, % of GDP 6.9 21.1 15.1 30.4 25.2 25.4 23.4
Net Banking Sector Claims on the Government . . . . . . .
Financial Sector
USD/KWD Exchange Rate, annual average 0.27 0.29 0.29 0.28 0.28 0.28 0.28
Annual Growth Rate in Broad Money, % 15.6 13.4 2.4 9.2 6.2 4.4 5.0
Growth in Credit to the Private Sector, % 16.7 6.1 1.9 2.6 2.7 4.7 4.2
Strictly Private and Confidential
Source: Central Bank of Kuwait, EFG Hermes Estimates
30GCC: 2013 Macroeconomic Outlook - February 2013
enc mar en ng a e, en -o -per o , . . . . . . .
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Oman: Non-oil Growth to Accelerate-
Country Sections
PP contribution to government spending growth
More Broad-based Government Spending in2013
PP contribution to real GDP growth
Real Headline and Non-Oil GDP to Strengthenin 2013 Oman a top MENA Macro Pick
,
Current Expenditure Investment Expenditure
46
8
10
12
14-
10
20
30
40 Support to Private Sector Total expenditure
(4)
(2)
0
2
2007
2008
2009
2010
2011e
2012e
2013f
2014f (20)
(10)
2007
2008
2009
2010
2011
2012f
2013f
2014f
Salary per month of low-income Omanis with
Key Government Focus Job Creation andWage Growth
USD billion, 2013 planned projects
A number of Key Capacity Increasing ProjectsPlanned Hydrocarbon and Wider
Source: Central Bank of Oman, EFG Hermes EstimatesSource: Central Bank of Oman, EFG Hermes estimates
Public Authority or Social Insurance
3.0
4.0
5.0
Construction Gas Industrial Oil Power Transport Water
80,000
100,000
120,000
end-2008 end-2009 end-2010 end-2011 end-2012
0.0
1.0
2.0
1Q2013
2Q2013
3Q2013
4Q2013
0
20,000
40,000
,
120an
d
be
low
21-1
80
81-2
00
01-3
00
01-4
00
01-5
00
Strictly Private and Confidential
Source: Ministry of National EconomySource: MEED Projects
31GCC: 2013 Macroeconomic Outlook - February 2013
1 1
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Oman: Macro Indicators Country Sections
In USD billion, unless otherwise stated
Macroeconomic Indicators
Real Sector
Average Brent Crude Spot Price (USD/B) 98.7 62.7 80.3 110.9 112.0 107.0 114.0
GDP at Current Market Prices (OMR bn) 23.3 18.5 22.7 27.9 29.7 31.0 33.8
GDP at Current Market Prices (USD bn) 60.7 48.2 59.2 72.6 77.2 80.7 87.8
Real GDP Growth Rate, % 12.8 3.9 5.0 4.0 4.6 5.4 4.2
Real Non-Oil GDP Growth Rate, % 15.0 2.3 4.6 4.7 5.0 5.8 5.2
Population (million) 2.8 2.9 3.0 3.1 3.2 3.3 3.4
GDP /Capita (USD) 21,779 16,721 19,843 23,544 24,283 24,617 25,943
CPI Inflation (Y-o-Y % Average) 12.6 3.7 3.1 4.1 3.0 3.5 4.0
External Sector
Trade Balance (USD billion) 17.0 11.6 16.6 27.4 27.9 23.2 22.5
Current Account Balance (USD bn) 5.0 (0.6) 5.1 13.2 13.1 8.2 7.3
Current Account, % of GDP 8.3 (1.2) 8.6 18.2 16.9 10.2 8.3
. . . . . . .
Fiscal Sector
Budget Balance (USD bn) 8.5 (0.6) 4.5 6.9 9.5 5.6 5.2
Budget Balance, % of GDP 14.0 (1.1) 7.6 9.6 12.3 6.9 5.9Net Banking Sector Claims on the GovernmentUSD bn 6.2 6.0 6.8 10.1 10.8 12.2 13.0
Financial Sector
USD/OMR Exchange Rate, annual average 0.38 0.38 0.38 0.38 0.38 0.38 0.38
Annual Growth Rate in Broad Money, % 23.1 4.8 11.3 12.2 10.7 10.4 11.6
Growth in Credit to the Private Sector, % 43.8 4.9 6.5 12.8 15.0 13.0 11.0
Strictly Private and Confidential
Source: Central Bank of Oman, Ministry of National Economy, IMF, EFG Hermes Estimates
32GCC: 2013 Macroeconomic Outlook - February 2013
enc mar en ng a e, en -o -per o , . . . . . . .
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Bahrain: Macro Indicators Country Sections
In USD billion, unless otherwise stated
Macroeconomic Indicators
2008 2009 2010 2011 2012e 2013f 2014f
Real Sector
Average Brent Crude Spot Price (USD/B) 98.7 62.7 80.3 110.9 112.0 107.0 114.0
GDP at Current Market Prices (BHD bn) 8.2 8.6 9.7 10.9 11.3 11.9 12.9
GDP at Current Market Prices (USD bn) 21.9 22.9 25.7 29.0 30.2 31.6 34.2
ea row a e, . . . . . . .
Real Non-Oil GDP Growth Rate, % 7.2 3.7 5.5 1.4 6.0 4.2 4.0
Population (million) 0.8 1.0 1.1 1.1 1.2 1.2 1.2
GDP /Capita (USD) 28,116 22,077 23,228 25,679 26,222 26,903 28,576
CPI Inflation (Y-o-Y % Average) 3.5 2.8 2.0 (0.4) 2.8 3.2 3.7
External Sector
Trade Balance (USD billion) 3.1 2.3 2.5 7.5 6.2 5.5 6.4Current Account Balance (USD bn) 2.3 0.6 0.8 3.2 2.8 1.8 2.5
Current Account, % of GDP 10.3 2.4 3.0 11.2 9.3 5.8 7.2
. . . . . . .
Fiscal Sector
Budget Balance (USD bn) 1.0 (1.7) (2.1) (0.9) (1.6) (2.1) (1.6)
Budget Balance, % of GDP 4.5 (7.6) (8.0) (3.0) (5.4) (6.5) (4.6)
Net Banking Sector Claims on the Government. . . . . . .
Financial Sector
USD/BHD Exchange Rate, annual average 0.38 0.38 0.38 0.38 0.38 0.38 0.38
Annual Growth Rate in Broad Money, % 19.7 5.8 10.5 3.4 8.2 5.4 9.4
Growth in Credit to the Private Sector, % 43.0 (0.7) 6.2 15.0 7.5 7.0 6.0
Strictly Private and Confidential
Source: Central Bank of Bahrain, IMF, EFG Hermes Estimates
33GCC: 2013 Macroeconomic Outlook - February 2013
Benchmark Lending Rate, end-of-period, % 2.8 2.3 2.3 2.3 2.3 2.3 2.3
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