The global fiscal distress depressed growth in the combined Arab economies to one of its lowest levels of around 1.5 per cent in 2009 while their current account balance was also jolted by lower oil prices, official data showed on Wednesday.
But the crisis also had its benefits as it pulled regional countries out of the throes of festering inflation that hit record high rates in some nations, mainly in the oil-rich Gulf, the Abu Dhabi Department of Economic Development (ADDED) said.
Except for Qatar, the world’s top LNG exporter, all Arab states recorded a single digit growth last year and the rate was way below that recorded in 2008, when oil prices peaked at an average $95 a barrel, ADDED said in its annual report, citing estimates by the Abu Dhabi-based Arab Monetary Fund (AMF), a key Arab League body.
The report showed the current account surplus sharply declined in many Arab countries while it turned into a deficit in some of them. After climbing to one of its highest levels in 2008, inflation in the region dipped to single digit rates, mainly in the six-nation Gulf Cooperation Council (GCC), according to the report.
Real growth in the combined Arab economies was put at around 1.5 per cent, far below the rate of 6.2 per cent recoded in 2008, when oil prices averaged at as high as $95 a barrel and most regional producers were pumping at near capacity.
The crisis hit the GCC worst given their heavy reliance on oil exports, which were severely affected by lower prices and a cut of nearly 1.5 million bpd in output.
From nearly 7.4 per cent in 2008, real growth in the UAE plunged to 1.3 per cent while in Kuwait it dipped from 6.3 per cent to a negative growth of 1.5 per cent.
Growth in Saudi Arabia was also negative at 0.8 per cent in 2009 compared with around 4.3 per cent in 2008 while the rate slumped from 6.1 to three per cent in Bahrain and from 7.7 to four per cent in Oman.
Outside the Gulf, growth in Egypt fell from seven to 4.7 per cent while it declined from 5.5 to four per cent in Jordan, from 8.5 to seven per cent in Lebanon, and from around 5.1 to three per cent in Syria, the report showed.
“The real economy in the Arab countries, as in other nations, declined in 2009 as a result of vulnerability to international changes, and most countries in the region saw a decline in GDP growth rates, particularly oil-producing countries due to the fall down of oil prices, and cutback in production quotas,” ADDED said.
The report showed the economic crisis also jolted the region’s trade balances and consequently their current account.
“A setback in the current accounts of most Arab countries was realized in 2009 especially oil exporting countries, due to the crisis…the current account of the GCC countries recorded a drop by more than 10 per cent of GDP,” the report said.
Some countries registered deficits in their current account for the first time in several years, such as UAE and Oman, it added, citing IMF estimates.
The surplus in current accounts of Saudi Arabia, Kuwait and Qatar, fell from 28.5 per cent, 44.6 per cent and 27.9 per cent of GDP respectively in 2008 to four per cent, 29.3 per cent and 10.7 per cent in 2009.
“The same happened in some neighboring countries such as Jordan, Egypt and Syria, which realized increased deficits in the current account balances in 2009 ranging between -2.6 and -6 per cent,” ADDED said.
“The decline in current account balances was attributed to the drop in oil revenues, which stifled creating current account surpluses in oil-producing countries. Reasons also include the mounting foreign remittances and transfers, withdrawal of hot money, a drop in tourism revenues, and the growing value of imports.”
According to the report, the positive effects of the global crisis on the countries of the region include low levels of inflation. Estimates by IMF and statistics centers in the GCC countries show that the combined inflation rate in the GCC fell dramatically from 10.7 per cent in 2008 to about 3.7 per cent in 2009.
Inflation in Saudi Arabia shrank from 9.8 per cent in 2008 to around 5.1 per cent in 2009 while it tumbled in the UAE from 12.3 to 1.5 per cent. Qatar’s inflation plummetted to near zero after soaring to around 15 per cent in 2008.
Inflation in Oman dipped from 12.6 per cent to 3.3 per cent while in Kuwait it receded from 10.5 per cent to 4.6 per cent. There was also a decline in Bahrain, Jordan, Egypt and other countries in the region, according to ADDED.
The report showed unemployment in the region deteriorated in 2009 as a result of lower growth and a large increase in the population. Another reason was a decision by many companies in the Gulf to shelve expansion plans and sack workers.
“Statistics indicate rising unemployment rates, which constituted a serious challenge to the development in Arab countries in 2009, due to the demobilization of a number of companies for their workers in countries that were adversely affected by the global crisis, especially the GCC countries, as well as the drawback in the productive sector due to the decrease in world aggregate demand,” the report said.
“It was estimated that average unemployment rate exceeded 14 per cent, while most countries in the region suffered from high joblessness rates. Unemployment is concentrated in the young age group between 15 and 24 years.”