Economy

Qatar Banking – Advantage larger banks

Qatar banking sector overall accounts for 126% of the country’s nominal GDP in 2014 and banks’ credit to GDP stood at 87%. According to Marmore’s report on Qatar banking, the post-crisis growth in loans, deposits, assets and revenues (2009-2014) has been significantly lower than pre-crisis growth (2003-2008), but the overall size of the sector has increased. Qatar banks witnessed a credit growth of 15.5% in 2014, Loan Loss Provisions (LLPs) decreased by 7% with total provisions amounting to USD 0.65bn...

Weak Oil and Strong Dollar – A puzzling relationship

Introduction The relationship between oil price and dollar value is intriguing not only to the US and the oil-exporters, but to researchers and governments all over the world. Most commodities, including oil tend to be negatively correlated with the US dollar as most commodities are traded in dollar. The magnitude of the impact of dollar on oil and vice versa and its short term and long term impact on the economy provide interesting insights about the widely studied relationship between...

Implications of the Chinese Crisis for GCC Economies & Markets

According to a report published by Marmore (Is China Stalling?), the ensuing volatility in global markets was exacerbated by fears of rapid economic slowdown in China - the largest economy in the world (PPP terms), which stoked fears of impending global recession and led to a massive sell-off. Figure 1: Black Monday (August 24, 2015) Source: Reuters China, which now accounts for almost 15% of global economic growth, was perceived as an important global growth driver. Economists opined Chinese growth...

Implications of the Iran Nuclear Deal for GCC

On July 14, 2015, it was announced that the P5+1 -- the United States, the United Kingdom, France, China, Russia and Germany -- along with the European Union (EU), had achieved a long-term nuclear deal with Iran . According to the U.S., the deal will “[…] will verifiably prevent Iran from acquiring a nuclear weapon and ensure that Iran's nuclear program will be exclusively peaceful going forward.” Table 1: Key Elements of the July 2015 Nuclear Deal Key provisions of...

The Two Sides of Shale Oil

Shale will decline   Shale will be resilient Oil price has dropped from over $100 a barrel last year to $57 today   The Saudis misjudged or underestimated the growth of the shale industry leading up to 2014, from 2005 Over half a trillion dollars of capital invested so far, mainly through junk bonds   US shale frackers are not high-cost; they are mostly mid-cost Austerity rife among shale producers   Frackers could potentially induce cost savings of upto 45%...

Funding 2.0 for GCC SMEs

Traditionally in the Middle East and North Africa (Mena), SMEs have found it difficult to access funding from banks. In the GCC countries, the share of SME loans in total bank loans has tended to be around 2%, as the following graphic illustrates. Figure: Share of SME Loans in Total Loans (%) Source: Union of Arab Banks Survey, 2011 Entrepreneurs in the GCC, with respect to receiving bank loans, are known to face time-consuming documentation, daunting penalties on early repayments,...

Fuel Price Hike in the UAE

In July 2015, the UAE announced that, effective from August 1, 2015, it was moving from a system of fixed and subsidized fuel prices to a system of adjusting prices monthly, in line with global price trends . Though the exact details of the pricing formula were not released, it was made clear that the prices would be based on the average global prices, along with the addition of operating costs. In effect, the price of petrol would register an...

Fast Tracking Reforms in the UAE through Spending Cuts

A report released by the UAE central bank towards the end of July 2015 indicated that the government is likely to cut spending by 4.2% in the fiscal year of 2015. According to the report, consolidated government spending is expected to decline to Dh460.6bn ($125.5 bn), from Dh480.8bn ($131 bn) in 2014. It is notable that the projected spending cut is the first such instance in 13 years. Many analysts pin the reason for the spending cut on the recent...

Implications of removing Currency Peg for GCC

Key Questions What is currency pegging? Why do countries opt for it? When a country fixes the exchange rate of its currency to another country’s currency to control the value of a currency, it is known as currency pegging or "fixed exchange rate" or "pegged exchange rate". For example, if a country pegs its currency to the U.S. dollar, the value of its currency will be controlled so that it rises and falls with the dollar. The reason why countries...

Innovation using offsets

Offsets, in defense and civil trade, are essentially compensations that a procuring government or buyer seeks from the seller for the purchase of goods and/or services. A practice that originated in the 1950s, offsets have grown in stature over the years and is now evident in about 120 countries around the world, from a mere 20 from approximately 25 years ago. According to Marmore’s report on GCC Offsets, there are broadly two classes of offset programmes, i.e., Direct Offsets (DOs)...