Saudi Arabia & GCC Case

Presented By: Eng. Meshary Al Ali

Introduction

- Currency Circle

- Currency ≈ Demand & Supply

- The Global Effect

- The Currency Changed Effecting on SAR

The differences in the value of currency affect -The ability to buy the imports -The ability to sell the exports.

(Varvares, 2015)

`

-When supply and demand for any currency changes it also changes the values of those currencies, imports of USA is less expensive

- When interest rates of any currency are higher than other the demand of the foreign currency increased. Trade deficit importers prefer stronger currency and exporters prefer weaker currency.

An increase in real GDP will lead to the appreciation of local currency. An increase in real GDP signifies an increase in productivity which will drive the general price level in the economy down. Price level will reduce as per the quantitative theory of money which states that, MV = PY If we keep M and V constant; an increase in Y will lead to a decrease in P. From the definition of relative PPP (Purchasing Power Parity), %change in exchange rate = Inflation in local economy - Inflation in foreign economy Therefore, a decrease in price level will drive down the inflation and also the exchange rates

Devalues its currency due to these reasons: • To Raise their Exports – When the Riyal devalued its value then

the local products are cheaper and in this case exports level is increased.

• Decrease the Trade Deficit – When the Riyal lose its value then exports are increased and imports decreased and its result can be seen in the form of a favorable balance of payments.

• Payoff of the Sovereign Debt – If Saudi Arabia issues massive amount of debt and its currency is also devalued then it pays off its debt early over the period of time.

- Oil prices - Sustainability - sharp cuts - With depending in different sources

other than oil such as Mining, Tourism, and sustainable products

GCC countries depends upon oil and as the prices of oil are low so their huge

budget surpluses transform in massive deficits.

Saudi Arabia largest oil producer of the world, enough fiscal amount to

survive next five years and now they are trying to preserve cash.

UAE, Kuwait and Qatar good conditions - balance their budgets.

Gross domestic product (GDP) Statistics is the monetary value of all the finished goods and services produced within a country's borders in a specific time period

8.50%

5.40% 3.60% 2.70%

1.60%

7.80%

14.50%

20.20%

25.10%

29.50%

33.40%

0.00%

5.00%

10.00%

15.00%

20.00%

25.00%

30.00%

35.00%

40.00%

20

10

20

11

20

12

20

13

20

14

20

15

E

20

16

E

20

17

E

20

18

E

20

19

E

20

20

E

Saudi Arabia Public Debt level (% of GDP)

11.30%

30%

-5.40%

4.40%

11.60% 13.60%

6.50%

-2.00%

-19.70%

-13.20%

-30.00%

-20.00%

-10.00%

0.00%

10.00%

20.00%

30.00%

40.00%

20

07

20

08

20

09

20

10

20

11

20

12

20

13

20

14

20

15

20

16

Saudi Arabia Fiscal Deficit (%of GDP)

Middle East GDP Growth Outlook (2011-2020)

0

200

400

600

800

1000

1200

KSA UAE IRAN IRAQ QATAR KUWAIT OTHERS

2011

2020

All values in US $ Billion – Others include Oman- Yemen- Lebanon – Jorden – and Bahrain

Oil Revenue,% Share

Gross International Reserves in GCC – US $ Billion

0

5

10

15

20

25

30

35

40

45

502

00

1

20

02

20

03

20

04

20

05

20

06

20

07

20

08

20

09

20

10

20

11

20

12

20

13

20

14

BAHRAIN

OMAN

KUWAIT

QATAR

UAE

Saudi Arabia

Real GDP Growth, 2014 and 2015

World U.S. Euro Area Emerging

Markets China Russia

2014 3.3 2.4 0.9 4.4 7.4 0.6

2015 3.5 3.6 1.2 4.3 6.8 -3.0

2015 Revision from Oct. 2014 WEO

-0.3 0.5 -0.2 -0.6 -0.3 -3.5

MENAP Oil Exporters GCC

Non-GCC Oil

Exporters MENAP Oil Importers

CCA Oil Exporters

CCA Oil Importers

2014 2.7 3.7 1.5 3.0 5.2 4.7

2015 3.0 3.4 2.4 3.9 4.9 4.4

2015 Revision from Oct. 2014 WEO

-0.9 -1.0 -0.7 0.0 -0.8 -0.4

Thank you & Any Question

@MesharyNAlAli