Economic Development and Globalization Division

Financing for Development Section

Outline

• Overview

• The impact of the crisis on:– The banking sector– Stock markets– Sovereign Wealth Funds (SWFs)– The oil sector– Growth

• Regional endeavors

• Recommendations

Overview

• The direct impact of the crisis is felt through:– Declines in equity markets– Liquidity constraints/higher funding costs– Reversal capital inflows

• Other risks stem from weaker demand for oil…

• …And from a major correction in the real estate market in some countries

The banking sector

GCC countries

Gross external debt Foreign assets

2005 2006 2007 June 2008 2005 2006 2007 June 2008

Bahrain 6.5 9.1 26.5 29.7 5 9 28 31

Kuwait 15.4 22.2 41.5 45.6 24 34 49 49

Oman 5.8 7.1 11.0 11.6 3 4 4 4

Qatar 10 17.3 39.3 43.3 11 18 24 26

Saudi Arabia

31.8 32.2 57.8 75.6 25 36 40 41

The United Arab

Emirates (UAE)

40.7 82.1 133.0 151.9 23 48 87 81

GCC 110.1 169.6 309.2 357.7 91 149 233 232

Table 1: GCC banks’ foreign liabilities and assets, 2005-2008

In billions of US dollars

Stock markets

Figure 1: ESCWA stock markets, end 2008

Index loss (%)

SWFs

Fund Currency composition Asset allocation

Abu Dhabi Investment Authority USD (50%); EUR, GBP, JPY (36%); other (14%)

equity (50-60%); fixed income (20-25%); private equity (5-10%);

alternatives (5-10%)

Mubadala (Abu Dhabi) USD (40%); EUR(50%); other (10%)

equities (60%); alternatives (20%); bonds (20%)

Dubai International Capital; Istithmar (Dubai)

USD (35%); EUR, GBP (50%); Asian currencies (15%)

equities (50%); alternatives (40%); deposits, bonds (10%)

Kuwait Investment Authority USD (40%); EUR, GBP, JPY (40%); other (20%)

equity (60%); bonds (25%); alternatives (15%)

Qatar Investment Authority USD (40%); EUR (40%); GBP, Asian currencies (20%)

equities (60%); alternatives (20%); bonds (20%)

State General Reserve Fund (Oman) USD (50%); other (50%) alternatives (50%); equities (20%); bonds (30%)

Saudi Arabian Monetary Authority USD (75%); other (25%) deposits (10%); fixed income (65%); equities (25%)

Table 2: Estimated currency composition and asset allocation of

major SWFs, 2007In percent

Oil sector

0

10

20

30

40

50

60

70

80

90

100

1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

US

do

lla

rs/

ba

rrel

Figure 2: OPEC basket price, annual average (1996-2009)

In US dollars/barrel

Growth

Country/Sub-region

Real GDP growth Inflation

2008 2009 2008 2009

Bahrain 6.3 2.0 3.5 3.5

Kuwait 6.1 0.7 10.4 5.7

Oman 6.0 1.5 12.4 6.0

Qatar 16.0 7.0 15.0 11.2

Saudi Arabia 4.2 0.7 9.9 4.5

UAE 7.4 0.5 18.6 5.2

GCC 5.8 1.1 12.0 5.2

Egypt 6.5 4.5 17.1 9.7

Jordan 6.0 3.6 14.0 6.5

Lebanon 5.5 3.0 11.7 5.7

Sudan 8.5 4.2 15.0 11.0

Syria 6.5 3.2 14.7 6.0

Yemen 4.5 2.0 19.0 12.7

More diversified economies

6.6 4.0 13.9 8.2

Total ESCWA 6.1 2.1 12.7 6.3

Table 3: Real GDP growth rate and consumer inflation rate, 2008, 2009

Annual percentage change

Recommendations

• Continue to apply expansionary fiscal policies, notably in mega-infrastructural projects

• Pursue the deepening of the intra-regional economic integration:– Establish a Stabilization Fund to cope with

exogenous shocks– Increase intra-regional investments, notably in

agriculture, agro-business, clothing and footwear– Reorient some of the SWFs’ investments into the

region

Thank you