The Economonitor’s QE3 week is perfect timing as we’ve been thinking a lot about the effects of the latest bouts of global monetary stimulus on the Middle East and North Africa – as summarized in part of our omnibus MENA quarterly presentation. We argue there that even though EMs and to a lesser extent frontier […]
Its been an important week for two funds at different ends of the sovereign investment risk tolerance spectrum – Nigeria and Qatar, both of which have sparked a series of headlines and have intentionally or not taken some new strides. The Nigerian governors breaking the deadlock on the country’s new US$1 billion fund and Qatar […]
In the last month, even as markets have sold off on worsening macro news, many SWF watchers in the press remain agog over the recent flurry of purchases by the Qatar Investment Authority across the commodities space, particularly the energy sector, as well as some other extensive purchases. It seems a good time (if a […]
Saudi Arabia’s budget plan, announced December 26, is counter to trend in one important way – it is the first time in the last decade the Kingdom plans to spend less in the coming year than in the previous year. If it is implemented, and RGE thinks it will be difficult for economic officials to […]
It’s looking more and more precarious to be a member of the cabinet in the Middle East and North Africa… at least in terms of job security. Along with new subsidies, public housing investment and public sector wage hikes, cabinet shuffles have emerged a primary tool for rulers to deflect criticism, signal a policy change (even if one is not forthcoming) and to stall for time. Last week both the Syrian and Kuwaiti cabinets resigned in the face of political pressure. This follows resignations in Jordan, Egypt (several), Tunisia and Lebanon, the latter because Hezbollah withdrew from the inactive parliament back in January.
In December political tensions flared again in Kuwait, as opposition MPs criticized a government plan to strip a politician of his parliamentary immunity to face criminal charges. While this could be an isolated incident and we do not think Kuwait’s constitution is at risk, the fractious relationship between Kuwait’s parliament and the ruling class is long-standing. In 2008 and 2009, debates over consumer debt kept the country from responding with a fiscal stimulus that might have cushioned the country from its economic contraction. In that period, Kuwaitis went to the polls on several occasions after parliament was dissolved due to policy deadlock, as ministers are loath to endure frequent grilling by parliamentarians.
Across the Gulf, diversification has become a mantra. Resource depletion means that for Oman that is the ongoing rationale at the forefront of the policymaking imagination. Meanwhile, the recent pickup by oil and gas also lifts the spirit.
It’s a very big day for Qatar. As a long-time watcher of Russia and Qatar, among other hydrocarbon rich countries, the news that the countries will host consecutive world cups is really quite exciting. The decision is a leap of faith for FIFA, as the WSJ’s Matthew Futterman put it earlier today, as both countries still need a lot of infrastructure development. As David Roberts notes, Qatar is set to be even more in the spotlight, including in some ways it may not like. Though, these are after all events that are eight and twelve years in the future.
Yesterday was OPEC’s 50th birthday. The occasion is being met with celebration in Vienna, the host of the OPEC secretariat, and in OPEC capital cities (see FT beyond BRICS for more). Production still remains well below the 2008 peak, or even the average of 2006-8 (despite oil averaging around US$75 per barrel for most of the last year), but was inching up until mid-year and is currently at a price level where all but OPEC’s overspenders can balance their budgets. All in all, assume status quo of unchanged production at OPEC’s next meeting in October, as the prospects for oil demand growth cool along with the global economy. In the longer-term demand, particularly from EM Asia (and oil exporters themselves), should keep prices high.
At a time when policy makers worldwide are contemplating the proper exit policies after aggressive monetary easing and fiscal expansion in 2009, Kuwait is embarking on its own path, stepping up expansionary fiscal and monetary policy. In 2009, Kuwait’s policy response, especially on the fiscal side was very modest and even a drag on growth. Kuwait’s rather subdued policy intervention, exacerbated by political uncertainties. failed to offset its economic contraction in 2009. Led by the oil sector whose output shrank along with production cuts, RGE forecast that growth contracted by about 1.5-2%, but some financial institutions put as large as 5.5%. As we noted in most recent RGE outlook, Kuwait seems destined to underperform most of the GCC and the Middle East more broadly, growing well below trend, even as oil output gradually increases and government investment provides a boost.