5.21 AM Friday, 29 March 2024
  • City Fajr Shuruq Duhr Asr Magrib Isha
  • Dubai 04:56 06:10 12:26 15:53 18:37 19:52
29 March 2024

Arab FDI to dip to $50-55 bn in 2011

Published
By Nadim Kawach

Foreign direct investment (FDI) flow into the Arab countries is expected to plunge by at least 10 per cent to between $50 billion and $55 billion in 2011 after a sharp fall through 2010 but the combined Arab economy is projected to expand.

Real growth in the collective Arab GDP could widen by around 4.2 per cent this year compared with 3.8 per cent in 2010 while inflation will swell to nearly six per cent from 4.8 per cent in the same period, according to the Inter-Arab Investment Guarantee Corporation (IAIGCC), a key Arab League institution.

The report put the total nominal Arab GDP at around $2.34 trillion in 2011 and expected the fiscal and current account balance to be in surplus because of a projected rise in oil prices and production by key Arab producers.

““Although it is difficult to predict the precise impact of the current unrest in the MENA region on capital flow into the Arab world,  preliminary estimates show that direct investment in the Arab countries is expected to decline by between 10 and 15 per cent this year,” the Kuwaiti-based IAIGC said.

“This is because the current situation has thrown the region into a state of uncertainty in the short term although many world companies still view the investment climate in rich Arab region, mainly Gulf nations, as attractive….one major factor is the fact that the Arab region controls a gigantic oil wealth, the value of which is estimated at over $40 trillion, more than the market capitalization of all companies listed in global bourses.”

After a brief recovery in the wake of the 2008 global fiscal distress, FDI flow into the Arab world dipped by nearly 23 per cent in 2010 mainly because of a sharp decline in investment in Saudi Arabia, the report said.

It showed FDI flow into 18 Arab nations that provided investment data plunged by nearly 23 per cent to $64.3 billion in 2010 from around $83.9 billion in 2009.

It said Saudi Arabia, by far the largest Arab FDI recipient and the world’s top oil exporter, was the main victim as investment into the Kingdom dived by nearly 41 per cent to $21.6 billion from $35 billion in 2009. It attributed the decline to the shelving of some giant hydrocarbon projects in Saudi Arabia, mainly those which had been planned as joint ventures with foreign partners.

As for the economy, IAIGC’s forecasts showed the combined Arab GDP would pick up by 4.2 per cent and the highest growth would be recorded in the GCC.

Inflation will rise to 6.03 per cent and public debt to nearly $618 billion. The report also expected foreign debt to reach around 740.2 billion while the current account surplus will stand at $301.6 billion, nearly 12.9 per cent of real GDP.

It projected the total Arab foreign currency reserves at $1,013 billion, exports at nearly $1.32 trillion and imports at $969.2 billion. The report expected Arabs to produce 21.6 million bpd of oil and export nearly 16.2 million bpd in 2011.

The report estimated public spending at $855.1 billion, including nearly $256.5 billion in capital expenditure.