Connect with us


GCC Economies Expected to Expand by 6.9% in 2022



Spread the love

The economies of the Gulf Cooperation Council (GCC) are projected to expand by 6.9 %in 2022 before moderating to 3.7% and 2.4% in 2023 and 2024, according to the new World Bank Gulf Economic Update (GEU).

Easing of pandemic restrictions, and positive developments in the hydrocarbon market drove strong recoveries in 2021 and 2022 across the GCC. Strong economic recovery and supply chain bottlenecks raised inflation in the GCC to an average rate of 2.1% in 2021 — up from 0.8% in 2020.

Supported by higher hydrocarbon prices, the GCC region is expected to register strong twin surpluses in 2022 and continue over the medium term. The regional fiscal balance is projected to register a surplus of 5.3% of GDP in 2022 —the first surplus since 2014 — while the external balance surplus is expected to reach 17.2% of GDP.

This issue of the (GEU), titled “Green Growth Opportunities in the GCC,” examines the development of the green growth sectors and looks at the potential opportunities this could provide for the GCC countries. The report also discusses GCC countries’ plans to decrease the use of fossil fuels to generate electricity, their aims to increase the capacity of renewable energy to power domestic electricity needs, and their goals to enhance the role of the private sector and reduce the role of the public sector. At the same time, it looks at how the climate agenda could be used to further diversify their economies in high growth sectors, including the upstream and downstream industries for the energy transition.

“There is an excellent and timely opportunity to diversify the economy further using a green growth strategy, and playing a leading role in the global transition to low-carbon economies,” said Issam Abousleiman, World Bank Regional Director for the GCC. “The region could use the green growth transition to focus policies on developing green technologies and associated skilled labor that would reverse trends in productivity and enable the region to grow faster.”

The GCC countries’ total GDP is projected to be close to US$ 2 trillion in 2022. If the GCC continued business as usual, their combined GDP would grow to an expected US$ 6 trillion by 2050. However, if the GCC countries implemented a green growth strategy that would help and accelerate their economic diversification, GDP could have the potential to grow to over US$ 13 trillion by 2050.

The special focus section of the report highlights the size of the addressable market for green growth, focusing on the major upstream and downstream sectors of the green economy, including, renewable energy, green buildings, sustainable transport, water management and waste management. In addition, it covers green finance as a critical enabler for new investments.

Focusing on green growth in the Gulf region is entirely in line with GCC vision documents that outline an image of the economy of the future that relies increasingly on the private sector playing a leading role in investment, job creation and value addition.

GCC Country Outlooks

Bahrain: Bahrain’s economic outlook hangs on oil market prospects and the government’s commitment to the reform agenda. Growth is expected to accelerate to 3.8% in 2022; mainly driven by the non-hydrocarbon sector which is expected to exceed 4% growth, supported by the full reopening of the economy and a stronger manufacturing sector. Higher oil prices and resuming spending restraints under FBP are expected to significantly narrow the fiscal deficit to less than 4% of GDP in 2022. The current account balance, which recorded its first surplus in seven years in 2021, is forecasted to improve markedly to reach 11.3% of GDP in 2022 and remain in surplus over the medium term.

Kuwait: Economic growth is forecast to accelerate in 2022 to 8.5% before moderating to 2.5% in 2023 and 2024, respectively. The non-oil sector is anticipated to continue expanding in 2023 following a 7.7% uptick in 2022. More robust demand will be translated into additional upward inflationary pressures, though monetary tightening and decreasing global food prices will moderate inflation in the medium term. The fiscal balance is anticipated to register a surplus of 1.1% of GDP in 2022, with the possibility of a widening surplus (5.9% of GDP) if the newly elected Parliament approves government’s proposal to suspend FGF transfer during this fiscal year. Higher oil receipts are expected to more than compensate for the larger imports bill resulting in a significant external balance surplus of 28.6% of GDP in 2022.

Oman: The economy is projected to continue its recovery and strengthen over the medium-term, driven by robust energy prices, expansion of oil and gas production, and wide-ranging structural reforms. GDP growth is forecast to reach 4.5% in 2022 before moderating to an average of 3.2% in 2023-24. The overall fiscal deficit is expected to turn into a surplus of nearly 6% of GDP in 2022—the first surplus in almost a decade—reducing gross financing needs. Similarly, the external balance is swinging back into surplus (6% of GDP in 2022)—the first surplus in 7 years—on the back of higher oil receipts and recovery in non-oil exports.

Qatar: Real GDP is estimated to rise to 4% in 2022 with exports (5.4%) and government consumption (4.8%) leading on the demand side. Growth in private consumption may be slightly below 4.5%, driven by higher interest rates and prices. Consumer prices are projected to increase on average 4.6% this year and to remain a full percentage point above levels recorded last year as far out as 2024. Both the current account and fiscal balance surpluses are projected to widen significantly in 2022 given their dependence on booming hydrocarbon prices—with the former expected to reach 20% of GDP and the latter 6% of GDP during 2022.

Saudi Arabia: Growth is expected to accelerate to 8.3% in 2022 before moderating to 3.7% and 2.3% in 2023 and 2024, respectively. In spite of recent signals for a more cautious approach to OPEC+ planned production, the oil sector will remain the main driver behind this growth with output estimated to grow by 15.5% in 2022. The budget balance should register a surplus of 6.8% of GDP in 2022—the first surplus in nine years—driven by higher oil revenues. Meanwhile, higher oil receipts are expected to more than compensate for the larger imports bill resulting in a significant external balance surplus of 18.8% of GDP in 2022.

United Arab Emirates: Higher oil export volumes coupled with a revival in non-oil demand will support strong economic growth in 2022. This is further supported by a favorable business environment and world-class infrastructure. Real GDP is expected to grow by 5.9% in 2022 before moderating to 4.1% in 2023 as slower global demand dampens growth due to tightening financial conditions. Higher oil receipts supplemented with a gradual non-oil recovery will bolster fiscal revenue resulting in a fiscal surplus to hover around 4.4% of GDP in 2022. Recent bilateral free trade agreements with Asian partners supported by strong oil exports will place the current account surplus at 11.2% of GDP in 2022.

Courtesy: Modern Diplomacy

Spread the love
Continue Reading
Click to comment

Leave a Reply

Your email address will not be published. Required fields are marked *


Inquiry on General Babangida’s Involvement in Conventional Banking despite Introduction of Islamic Finance in Nigeria




Spread the love

Dear Editor,

I hope this letter finds you well. I am writing to express my curiosity and seek clarification on a matter that has caught my attention, specifically pertaining to General Babangida’s involvement in the conventional banking industry despite his role in introducing Islamic finance during the financial reforms of his military government in Nigeria. Vide your special article commemorating his 81st Birthday published in your esteemed news website:

It is indeed noteworthy that General Ibrahim Babangida played a pivotal role in shaping the economic landscape of Nigeria by introducing Islamic finance principles. It is fascinating to witness the implementation of Islamic finance in Nigeria, as it promotes principles that align with religious and ethical values. General Babangida’s efforts to introduce this form of finance were undoubtedly commendable, reflecting his commitment to establishing an alternative financial system that adheres to Islamic principles.

However, recent observations suggest his active participation in the conventional banking sector in Nigeria. Certainly, it is intriguing to see General Babangida’s continued involvement in the conventional banking industry, which operates under different principles. While some may argue that his involvement in both sectors is simply a matter of personal choice, it raises questions about the compatibility of his actions with the ideals and principles of Islamic finance. While the former is interest driven, the latter prohibits interest related transactions completely.

I wonder if General Babangida has ever publicly addressed this matter or explained his reasoning behind being active in both sectors. It would be enlightening to hear his perspective on how he reconciles his involvement in conventional banking with his efforts towards promoting Islamic finance. This has raised questions in my mind and perhaps in the minds of others as well.

I am keen to understand the rationale behind General Babangida’s dual engagement in both Islamic finance and conventional banking. Does this reflect a strategic approach to diversify Nigeria’s financial sector, or are there specific reasons behind his involvement in conventional banking despite advocating for Islamic finance principles?

Additionally, it would be interesting to explore the potential impact of his dual involvement on the perception and growth of Islamic finance in Nigeria. Does his presence in the conventional banking industry hinder the progress of Islamic finance, or does it have the potential to bridge the gap between the two sectors?

I believe that delving into these questions could provide valuable insights and generate constructive discussions within the Islamic finance community in Nigeria. By shedding light on General Babangida’s dual involvement and the potential implications, we can further enhance our understanding of the challenges and opportunities faced by the Islamic economy in our country.

Thank you for considering my questions, and I look forward to reading more about this topic in your esteemed Focus on Islamic Economy.



Abba Musa Mamman Lagos


Spread the love
Continue Reading


10 Megatrends Shaping the World in 2024




Spread the love

The report, “Navigating Megatrends Shaping Our Future in 2024”, was launched during the first day of the World Governments Summit (WGS) 2024, being held under the theme “Shaping Future Governments” from 12th-14th February in Dubai. The report examines the indicators that shape these megatrends, supported by evidence from today as well as future expectations. These trends inform decision-makers and foresight experts about various sectors and the potential opportunities in each.

Khalfan Belhoul, CEO of Dubai Future Foundation, said, “This report has been launched in line with DFF’s efforts to identify and communicate those trends with the most potential to shape opportunities and strengthen local and international partnerships to overcome current and future challenges.”

“The challenges that face us on our journey to the future require that we are agile enough to be able to adapt to rapid change. It is vital we pay attention to the signals we detect – only then can we be prepared to overcome challenges and seize opportunities. The World Governments Summit provides a platform for discussing these challenges and exploring the opportunities.”

Materials revolution

New types of materials will create a shift in the industry, with solutions based on artificial intelligence (AI) such as biopolymers, biorefineries, and chemical recycling paving the way. These solutions will facilitate the development of new biological and novel materials that could rival plastics.

Boundless Multidimensional Data

Enabled by developments such as 5G and 6G in addition to advanced connectivity, the availability of raw data will vastly increase. The Internet of Things (IoT) will continue being deployed in healthcare, agriculture, and smart cities, especially in the Middle East.

Technological Vulnerabilities

The cybersecurity sector will boom amid a sharp rise in smart home devices and wearable tech. According to a report by Allianz, the annual cost of ransomware is projected to reach around $265 billion by 2031. Meanwhile, the debate on the future of decentralised finance will continue.

Energy Boundaries

Advances in tech and the growing demand for energy will drive the pursuit of alternative sources of energy. Novel materials and machine intelligence will enhance current sources of energy, including their distribution around the world – and in space.

Saving Ecosystems

Approaches to conservation will be more interdisciplinary and future-focused, taking into account both societal and environmental factors. Driven by resource scarcity, climate change, and shifts in social values, environmental impact management will become increasingly holistic.

Borderless World – Fluid Economies

The world is witnessing a rise in unmediated transactions in finance, health, education, trade, services, and even space, which are blurring boundaries and creating more cross-border communities. Advances in communications, computing, and advanced machine intelligence will accelerate the creation of a borderless world that will change the way we work, live, and connect.

Digital Realities

The spread of 5G and 6G networks will enhance the applications of autonomous technologies and IoT. As quantum technologies become scalable and reliable, immersive experiences will become even more realistic.

Living with Autonomous Robots and Automation

Robotics and automation will increasingly be deployed across industries beyond automotive, manufacturing and supply chain logistics. This will provide opportunities for efficiency and innovation, although there will also be ethical challenges to address.

Future Humanity

New workplace norms will emerge, with people needing to adapt to non-traditional skill sets in areas such as digital literacy, communications, culture and sustainability.

Advanced Health and Nutrition

Accelerated progress in advanced machine intelligence, nano- and biotechnology, additive manufacturing, and IoT will transform health and nutrition, improving health and wellbeing for people of all ages. Technology will reduce, if not eradicate, some communicable and non-communicable diseases and enhance the sustainable use of and access to water and food.

Spread the love
Continue Reading


Africa’s New Online Foreign Exchange System will Enable Cross-border Payments in Local Currencies – what you need to know




Spread the love

The high cost of making cross border payments on the African continent has driven governments on the continent to seek options of settling trade and other transactions in local currencies. This has given birth to the Pan-African Payment and Settlement System which was formally launched in Accra, Ghana, in January 2022.  Development economist Christopher Adam, who has studied the exchange rate policies of African countries, answers some key questions.

Why are African countries exposed in the international currency market?

Three main reasons. First, African economies are small and as such are highly dependent on trade with the rest of the world. Their exports are dominated by primary commodities including oil and gas, minerals and cash crop agriculture. On the import side, they purchase a whole range of goods – from essential commodities not produced at home such as fooddrugs and medicines, to capital goods and energy. A large proportion of these are sourced from China and other major economies of the global north. But because African countries are small relative to their trading partners they rarely have the power to determine the prices of imports and exports. They are “price takers” in world markets. And with world prices being set in the major reserve currencies of the world (the US dollar, euro, yen and renminbi), African countries are exposed to movements in these world prices. Second, “intra-African” trade is still a relatively small proportion of the total trade of African countries.

Finally, since African countries’ currencies mostly can’t be directly exchanged in international transactions, the dollar remains the most widely used currency in trade, even between African countries.

What’s required for the system to get off the ground?

The basic idea of the system is to be able to settle trade between African countries without having to use the US dollar.  There are two major challenges with that. First, intra-African trade accounts for less than 15% of Africa’s exports at present (although supporters of the African Continental Free Trade Area expect this to grow significantly over the coming decades). The African payment system therefore does not eliminate the role of the dollar (or other foreign currencies) in trade settlement entirely.

The second issue is that trade is not balanced between African countries. For example, Kenya exports goods of higher total value to Ethiopia than it imports from Ethiopia. If Ethiopia paid in its own currency, Kenya would end up with Ethiopian currency that it didn’t need. Some form of settlement currency that is acceptable to all is required – most likely the US dollar.

What are the challenges and potential risks?

Since trade rarely occurs instantaneously, some institution in the trade financing chain carries the exchange rate risk. Because of the gap between placing an order for imports and receiving them to sell in the local economy, there is a risk that the value of local currency will change relative to the currency in which the import is denominated.

In the “old” system, this risk is borne by the trader because everything is priced in dollars. The local currency value of the income from exports or the local currency cost of imports will change with movements between the local currency and the dollar, but the banks and those counterparts pricing in the dollar are protected.

Under the new system the same allocation of risk will remain in “external trade”. This currency risk is also present for intra-African trade.

An important question for the new African payment system is: who bears the exchange risk if one African currency depreciates relative to another? Should the importer carry the risk, or the exporter? Can and should the African payment system bear this risk of exchange rate movements itself? Where both currencies are volatile, traders might still prefer the relative stability of settlement through the US dollar.

The success of this system also depends on scale. The more trade settlement is routed through it, the easier it will be to settle in local currencies. Large currency imbalances will be less common. But until the system achieves this scale, the African payment system will need a strong balance sheet so that traders and participants can have confidence that settlement will be swift and risk free. It is unclear at the moment how this is to be achieved.

What is the best case scenario?

If the system can address the trade imbalance problem, provide clarity on risk management and reach scale, it could be very successful. But this is all going to be driven by underlying economic performance. Improved settlement will help but what is really driving this is the structure of trade. The more the economies of Africa can develop intra-African trade and the less dependent they are on extra-African trade, the less will be dollar dependence in trade. This growth in trade depends to some degree on trade settlement and trade financing but much more on production, consumption, trade policy and fiscal policy.

Christopher Adam is a Professor of Development Economics, University of Oxford

Spread the love
Continue Reading


Copyright © 2023 Focus on Halal Economy | Powered by Africa Islamic Economic Foundation