Building Bridges To The Future In The Gulf


Christine LagardeBy Christine Lagarde

(Versions in عربي)

Two days ago, I had the pleasure of visiting Kuwait, a member country of the Gulf Cooperation Council (GCC). It was a whirlwind visit, with many places to see and people to meet, in a thriving corner of the global economy. Kuwait has extended to me its emblematic tradition of hospitality— a testament to its ancient and noble culture. I was awed by the magnificent artifacts of the al-Sabah collection, which I saw in the beautifully restored Dar al-Athar al-Islamiyyah cultural center.

Back to economics. The member countries of the council—Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, and the United Arab Emirates—have some of world’s highest living standards. The region has also become a major destination for foreign workers and a source of remittances for their families back home. And it is a financial center and a hub for international trade and business services.

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Without Better Data, Middle East Policymakers Risk Getting Lost


By Nemat Shafik

(Version in عربي)

Recently I went orienteering with my children as part of a school trip.  Orienteering is a sport whereby you have to find your way to various checkpoints through unknown terrain with only a compass and a topographical map.

Wandering through the woods with six 9-year-olds was a good lesson in the value of good directions and data to find your way when you are in unchartered territory.

Likewise, making policy decisions without adequate and timely data would also result in getting lost, wasting time and money, and making policy mistakes with obvious negative consequences for growth and development.

The Middle East and North Africa (MENA) region suffers significant shortcoming in data, which are particularly problematic at a time economic transition (see table below).  There are important data gaps, poor data quality and in many cases, internationally agreed standards of statistical methodologies, compilation periodicity and timeliness, and data dissemination practices are not followed.  I emphasized these issues during my participation at the ArabStat Conference in Morocco this month.

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Meeting the Employment Challenge in the GCC


By Masood Ahmed

(Version in عربي)

The issue of how to create more jobs is high on the minds of policymakers everywhere. The economies of the six Gulf Cooperation Council (GCC) countries—Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, and the United Arab Emirates—are no exception.

By many measures, these economies are doing very well. Abundant oil and gas reserves are producing large budget and external surpluses, growth is up, and considerable strides have been made on social indicators.

Yet, economic activity is dominated by the oil/gas sector and—given that many GCC countries have proven reserves of at least another 50–100 years at current rates of production—will remain so. However, that sector creates relatively few jobs directly—it employs less than 3 percent of the region’s labor force.

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Is There a Silver Lining to Sluggish Credit Growth in the Gulf Countries?


By Masood Ahmed

(Version in عربي )

Bank credit has been very slow to pickup in the six nations of the Gulf Cooperation Council (GCC). How big a problem is this for their economic recovery?

Sluggish credit growth in the post-crisis period was hardly a unique development, as indicated in our latest Regional Economic Outlook. More than a dozen countries in the Middle East and Central Asia region, and countless more outside the region, shared this experience. But while there are clearer signs of recovery in some countries, credit to the private sector is still barely growing in the GCC, notwithstanding policy efforts to revive it.

It might seem easy to ring the alarm bells. After all, won’t the prospect of weak credit growth restrain economic activity in the short-term? Perhaps. But we believe the negative impact of credit growth may not be quite so severe.

Why not? In part, that answer lies in how we arrived at the current situation. Continue reading

Did Islamic Banks in the Gulf Do Better Than Conventional Ones in the Crisis?


By Masood Ahmed

The IMF’s latest regional economic outlook for the Middle East compares the performance of Islamic banks in the countries of the Gulf Cooperation Council (GCC) with conventional ones during the global financial crisis.

Islamic banks were less affected during the initial phase of the crisis, reflecting a stronger first-round impact on conventional banks through mark-to-market valuations on securities in 2008. But, in 2009, data for the first half of the year indicate somewhat larger declines in profitability for Islamic banks, revealing the second-round effect of the crisis on the real economy, especially real estate.  

Going forward, Islamic banks overall are better poised to withstand additional stress, according to the IMF analysis.

Portfolio risk

Islamic banks have grown substantially in recent years, with their assets currently estimated at close to $850 billion. Overall, the risk profile of Islamic banks is similar to conventional banks in that the risk profile of Shariah-compliant contracts is largely similar to that in conventional contracts, and credit risk is the main risk for both types of banks.

Islamic banks are not permitted to have any direct exposure to financial derivatives or conventional financial institutions’ securities—which were hit most during the global crisis (photo: Karim Sahib/AFP/Getty Images)

Islamic banks are not permitted to have any direct exposure to financial derivatives or conventional financial institutions’ securities—which were hit most during the global crisis (photo: Karim Sahib/AFP/Getty Images)

Unlike conventional banks, however, Islamic banks are not permitted to have any direct exposure to financial derivatives or conventional financial institutions’ securities—which were hit most during the global crisis.

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