Weekly GCC news to 25 Oct: IMF forecasts and Saudi FDI

• The IMF’s latest forecasts point to the return of a GCC deficit this year. [see (1) below]
• Moody’s argues that if AAOIFI shariah standard 62 is implemented it will slow sukuk issuance.
• Investment banking fees in the region surged by 27% y/y YTD, led by HSBC, SC and FAB.
• Saudi FDI in 2023 was revised up to nearly double the preliminary figure, with inflows of 2.4% of GDP. [see (2) below]
• Neom is reportedly delaying plans for a debut sukuk because 2023 accounts are not yet ready.
• The UAE president and Saudi foreign minister attended the BRICS Plus summit in Russia.
• Adnoc is planning a second oil pipeline to Fujairah, enabling 3.3m b/d to bypass Hormuz.
• A Chinese bank in Dubai implemented the region’s first renminbi interest rate swap.
• Most of Qatar’s CPI basket is in deflation, with recreation mainly driving overall inflation of 0.8%.
• Qatar is facing competition from the UAE, Oman and US in LNG deals with Japan and Korea.
• A new Muscat master plan envisages doubling the population to 2.7m by 2040.
• OQ is preparing yet another spin-off IPO for its methanol and LPG unit, valued at up to $1.5bn.
• Iran’s foreign minister visited Bahrain, days after one of his predecessors revived irredentist claims.
• Gaza talks are set to resume in Doha, considering an Egyptian proposal for an initial two-week ceasefire.
• Lebanon strikes continued, including on a Hezbollah-linked credit union.

These headlines are taken from a 3,600-word report from my economic research service with GlobalSource Partners, a leading source of independent emerging market intelligence. Click on any report to get guest access and contact me or GlobalSource’s sales team for more information about the service, which also includes the most extensive comparative Databank of GCC economic data available (updated weekly) and direct analytical support. Clients include banks, asset managers and governments spanning the GCC, Asia, Europe and the Americas.

Here are two brief samples from the report:

(1) IMF sees a GCC deficit in 2024 but revises up Oman's surplus

• The IMF rolled out its six-monthly WEO forecasts. The regional economic outlook will be published next week, with additional indicators relevant to the region, such as oil production and non-oil growth.
• Real GDP growth was once again revised down in 2024-25, particularly for Saudi Arabia and Kuwait, presumably because of the extension in OPEC+ cuts announced in June.
• Fiscal forecasts put Oman in the lead in 2024, perhaps for the first time ever, with a 5.0% of GDP surplus (revised up by +1.4pp since the April WEO).
• The IMF fiscal series mainly align with central government accounts, but makes a few adjustments for better comparability including adding in Omani revenue transferred to various funds pre-budget (worth about 4.5% of GDP in 2023) and Bahraini off-budget spending (estimated at about 4% of GDP in 2023).
• The forecast shown for Kuwait is based on the recent Article IV report because the WEO uses a general government methodology, including sizable off-budget sovereign wealth fund income.
• Compared with the World Bank, the IMF sees slightly stronger results for Bahrain and Oman, but weaker ones for Qatar and Saudi Arabia, while they are closely aligned on the UAE.
• Debt ended 2023 at $641bn (30% of GDP) for the GCC in aggregate and is forecast to rise to 35% by 2029 (up from 32% in the April WEO forecast), with increases in KSA, Kuwait and Bahrain but declines in Qatar, Oman and UAE.
• There were some upward revisions to population estimates, and hence projections, for some countries, particularly the UAE, where the 2023 population was revised up by 1m to 10.7m.
• Inflation forecasts were revised down slightly for 2024-25, with a regional average of 1.9% expected in both years.

(2) Greenfield FDI in Saudi Arabia was the strongest since 2016

• The Ministry of Investment released its 2023 FDI report and workbook . This shows that net inwards FDI in 2023 was revised up to SR85.5bn (2.1% of GDP), which was 18% above the July estimate and nearly double the preliminary figures first published in SAMA’s Balance of Payments table.
• If the pipeline privatisations in 2021 and 2022 are excluded, then greenfield FDI in 2023 was up by about a third y/y and was the strongest year since 2016.
• Inward inflows alone (not offset by outflows) totaled 2.4% of GDP which is?ahead of the National Investment Strategy target for the year, on the way to the Vision 2030 goal of 5.7% of GDP by 2030.
• Despite some progress on FDI, it is still lagging potential and the preliminary data for H1 2024 puts it at just 1.0% of GDP, although this could be revised up.
• In an IMF press conference, the regional director Jihad Azour was asked about Saudi FDI. He said it has not met aspirations but expressed hope for the future because: “In the past year there was a revisiting of the priorities, and the priority was more priority was given to technology, AI, climate.? All of this opens the door for more direct investment from abroad”.

N.B. You can choose to receive email or push notifications for newsletters like this: https://www.dhirubhai.net/mypreferences/d/notification-subcategories/newsletters