Gcc Economics

7/30/2019 Gcc Economics

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: acroeconom c u oo

Robust Growth Outlook with StronUnderlying Fundamentals

+971 4 363 4002

[email protected] 2013


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Contents

Section

Political Backdrop 3

Economic Outlook 9

Country Sections 20

Strictly Private and ConfidentialGCC: 2013 Macroeconomic Outlook - February 2013


3/34

Political BackdropI.

GCC: 2013 Macroeconomic Outlook - February 2013


4/34

MENA Macro Snapshot Political Backdrop

KUWAIT

GDP: USD172.3 billion

QATAR


UAE


.

GDP Growth (2013f): 2.8%

GDP/capita: USD44,304

.



.



BAHRAIN


Pop: 1.17 million



SAUDI ARABIA


Pop: 29.4 million

OMAN


Pop: 3.28 million

Strictly Private and Confidential 4GCC: 2013 Macroeconomic Outlook - February 2013

.


,

Source: Regional Central Banks, IMF, EFG Hermes estimates

.



5/34

GCC Leaders Political Backdrop

Country Leader Date tookpower

Method Population Expats as % of Total

Bahrain King Hamad bin Isa al-Khalifa Mar-99 Succeeded his father, SheikhIsa

1.17 51

- - -al-Sabah

,Jaber

.

Oman Sultan Qaboos bin Said al-Said Jul-70 Coup, overthrowing his father 3.28 36

Qatar Emir Sheikh Hamad bin Khalifa al-Thani

Jun-95 Coup, overthrowing his father 1.91 81

SaudiArabia

King Abdullah bin Abdulaziz al-Saud Aug-05 Succeeded his half-brother,King Fahd

29.4 27

UAE President Sheikh Khalifa bin Zayed al-Nahyan

Nov-04 Succeeded his father, SheikhZayed

5.70 80

Strictly Private and Confidential 5GCC: 2013 Macroeconomic Outlook - February 2013

Source: MEED, EFG Hermes


6/34


7/34

Socio-Political Backdrop Political Backdrop

Population Under 30 Years as % of Total Population, 2010

Large Youth Population Arab Spring has impacted GCC policy: Greater

policy focus on creating jobs for the youth (publicand private), increasing handouts and upgrading 65soc a n ras ruc ure ous ng, e uca on an ea .Job creation for the youth arguably remains one ofthe greatest challenges for the GCC. Saudi and Oman

particularly focused on job creation, although mosthave placed more focus on their job creation for45

50

55

60

na ona s. scuss ng ma ng pr va e sec ormore attractive (wages, holidays, etc).

We view education reform as vital forsustainable lon -term ob creation.

40

Oman

Sau

diAra

bia

Ba

hra

in

Qa

tar

Kuwa

it

UAE

% Unemployment by Age Group

High Youth Unemployment Example Saudi Arabia

Source: World Bank

Some, but limited promise of political reform inGCC compared with non-GCC MENA. More powerbeing given to consultative councils. Saudi has

, .

Greatest pressure in Bahrain and Kuwait call

for constitutional monarchies. Underlying factorsdifferent to the wider regional Arab Spring. Other20

25

30

35

GCC are watching developments in Bahrain andKuwait closely.

Saudi - royal family reformists have been 0

5

10

15

20-24 15-19 25-29 30-34 35-39 40-44 45-49 50-54 55-59 60-64 65+

Strictly Private and Confidential

Source: Central Department of Statistics and Information

7GCC: 2013 Macroeconomic Outlook - February 2013

turmoil in the regime-change countries.


8/34

Hydrocarbon Endowment Political Backdrop

Barrels per person, based on total hydrocarbon reserves

GCC Hydrocarbon Wealth per Capita GCC countries vary in their hydrocarbonendowment: 1) Qatar, UAE and Kuwait arehydrocarbon rich per capita; 2) Saudi, Oman andBahrain are h drocarbon oor er ca ita.

Hydrocarbon richer per capita countries have also

built up greater reserves and generally have largerfiscal surpluses, with a lower portion of their100200300400500600700800

Oil Reserves / Capita Gas Reserves / Capita Total Hydrocarbon Reserves / Capita

y rocar on reserves e ng spen on suppor ng e rpopulations. Thus, they have a greater ability to increasespending and support their population.

GDP er ca ita varies between the two cate ories.

0

Qa

tar

UAE

Kuwa

it

Sau

diAra

bia

Oman

Ba

hra

in

USD, 2013f

GDP per Capita Varies with Hydrocarbon Endowment

Source: BP, EFG Hermes estimatesThere is more social pressure linked to lower

wages and job opportunities in the hydrocarbonpoorer per capita countries, where wages (public andprivate) tend to be lower in the hydrocarbon poorer percapita countries.

Kuwait youth population frustration linked togovernment inability to reform and upgrade

infrastructure despite ample resources. 60,000

80,000

100,000

120,000

GCC fiscal support for Bahrain and Oman. In 2011 USD1 billion per year was pledged for 10 years.Additional bilateral support, especially to Bahrain.

0

20,000

,

Qa

tar

UAE

Kuwa

it

Ba

hra

in

au

diAra

bia

Oman


Source: EFG Hermes estimates


S


9/34

Economic OutlookII.



10/34

Headline Growth Lower in 2013 Economic OutlookWeaker hydrocarbon growth outlook for 2013

% change

GCC Headline Real GDP Growth We forecast that real weighted GDP growth willsoften to 4.1% in 2013, from 5.5% in 2012. This islargely as a result of weaker forecast hydrocarbonrowth. This is after GCC countries increased oil

production in 2012 to compensate for the loss of Iranianproduction.

Oman and Qatar forecast to see a rise in hydrocarbon 45

6

7

8

ou pu . or a ar, o pro uc on expec e o r se n2H2013, LNG production steady in 2013.

Saudi has cut oil production to tighten the oilmarket. This is a result of the increased out ut

0

1

2

Oman Qatar Saudi Arabia Bahrain Kuwait UAE WeightedGCC

Million barrels per day

GCC Average Oil Production

Source: EFG Hermes estimatesexpectations of US, non-OPEC and Iraqi supply. GCC will

likely have greater oil energy export reliance on Asianmarkets going forward.

2013 of USD107.0 p/b, from USD112.0 p/b in2012. This will moderate the nominal GDP growth in2013, with nominal oil GDP falling marginally. 8

10 2011 2012 2013 YTD

Brent has had a strong start to the year averagingUSD114.8 p/b YTD.

Real GDP growth to be driven by non-oil activity.0

2

4


Source: EIA


Saudi UAE Kuwait Oman Qatar


11/34

Twin Surpluses to Continue Economic Outlook

USD billion

GCC Fiscal Balance GCC twin surpluses to continue in 2013 and 2014,despite the weaker oil revenue outlook for 2013.

Bahrain Kuwait Oman Qatar Saudi UAE

s w resu n con nue u up o reserves,albeit at a weaker rate underpinning macro stability.

Cumulative GCC fiscal surpluses seen between 2010 and2014 is more than in the revious 15 ears sur luses.

150200

250

300

350

400

Saudi best reflects the build-up in reserves in GCC, withmost FX reserves held by SAMA. Saudi Arabias FXreserve position has risen has risen more than fourfold

-100

-50

0

50

100

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

USD, 2013f

GCC Current Account Surplus

Source: Regional Central Banks, EFG Hermes estimatess nce , an ne ore gn asse s are more an

15 times higher than in 2002.

Saudi FX Reserve Position

USD billion (LHS), % of GDP (RHS)

200

300

400 Bahrain Kuwait Oman Qatar Saudi Arabia United Arab Emirates

80

100

500

700

FX Reserves (LHS) SAMA's NFA (LHS)

Fiscal Balance, USD bn (LHS) FX reserves, % of GDP (RHS)

(100)

0

100

90

91

92

93

94

95

96

97

98

99

00

01

02

03

04

05

06

07

08

09

10

11

12

13

14(20)

0

20

40

(100)

100

300

99

00

01

02

03

04

05

06

07

08

09

10

11

12


Source: IMF, EFG Hermes estimates



1 1 1 1 1 1 1 1 1 1 2 2 2 2 2 2 2 2 2 2 2 2 2 2 219

20

20

20

20

20

20

20

20

20

20

20

20

20


12/34

Robust Outlook for Non-oil Activity Economic Outlook

% change

Real Non-oil GDP Growth

,

We forecast that real non-oil GDP growth willremain robust at 5.7% in 2013, albeit down from2012. The deceleration comes after two strong years ofrowth 2011 6.8% and 2012 6.3% . Oman and

Kuwait to see stronger activity in 2013, than in 2012.

Top MENA macro picks - Saudi, Qatar and Oman.We forecast above 5.0% real GDP growth for these

56

7

8

9

10

coun es an a s rong m x o nves men an spen nggrowth. We have upgraded the non-oil GDP growthoutlooks for Saudi, UAE and Oman (Jan and Feb 2013).UAE and Oman on a stronger investment outlook. 0

1

2

3

4

Qatar Saudi Arabia Oman UAE Kuwait Bahrain

PMI Index, a reading above 50 indicates a expansion in the economy

GCC PMI Strong on a Comparative Basis, January 2013

Source: EFG Hermes estimates Positive on Dubai fiscal reforms, debt restructuring

and stronger revenue growth is allowing a shift to anexpansionary fiscal stance. Pickup in investment activity the most viable will get funding. Abu Dhabi sometentative signs but momentum not there yet.

Kuwait could be the turnaround story with improvedparliament/government relations. Project awards have

increased (including a large PPP power project), but 5455

56

57

58

59

.

Bahrain tighter fiscal position limits growth support.

49

50

51

52

53

Saudi India UAE Brazil Russia EM China Global Hong




-global basis.


13/34

Strong Fiscal Spending Outlook Economic Outlook

% change

Government Spending Likely to Remain Expansionary

,

Expansionary fiscal positions are supporting non-oil GDP growth. We have increased our weightedaverage spending growth forecast to 12.4% for 2013,from 8.5% in 2012 after most GCC countries announced 25more expansionary budgets than forecast (Saudi, Dubaiand Oman).

Current expenditure supporting consumption

15

20

ac v y - grow rema ns s rong an om na es overaspending. Public sector job creation, wage increases,etc.

Pro rammes also to increase rivate sector ob creation.

0

5

Oman Saudi Qatar UAE Kuwait Bahrain

Government spending as a % of nominal GDP

and Provide a Strong Stimulus to GDP

Source: Regional Central Banks, EFG Hermes estimatesSubsidy reform affecting individuals unlikely in the

outlook period, with social objective and a goal toincrease living standards.

in 2013, than in the previous two years.

30

40

50

2012f 2013f

0

10

20





14/34

Investment a Cornerstone ofGovernment Polic

Economic Outlook

GCC Awarded and Planned Projects Investment is a central objective of the government to upgrade infrastructure and increase the economicbase. GCC governments are particularly stepping in to

Chemical Construction Gas Industrial Oil Power Transport Water

USD billion

, , ,etc).

Saudi Arabia - the investment programme will remainthe most broad-based in the region, including 200

300

400

500

* Total planned projects implementation tends to be weaker, but shows strong

upgrading utility and gas production capacity andtransportation. Notably, in Saudi, we are now seeingprivate investment (ie, outside the governmentsprogramme) to meeting rising domestic demand.

0

100

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013*

2014*

Projects by Sec tor Expected to be Awarded in 2013

pipeline

Source: MEED Projects

For Qatar, we see a narrower base in the investmentarena, with transportation being a key area ofconcentration, along with downstream projects. Wealso see an uptick in project awards linked to the FIFAWorld Cu 2022 from end-1013. USD billion

Oman is forecast to see a notable increase in gasproject awards. We also expect there to be further

progress on utility and transportation projects

40

60

80

Chemical Construction Gas Industrial Oil Power Transport Water

a oug no on e same sca e as our wo op p c s.

Dubai Need developing to increase capacity ininfrastructure for core sectors. External funding supportre uired.

0

20

Sau

di

Ara

bia

Kuwa

it

Qa

tar

UAE

Ba

hra

in

Oman


Source: MEED Projects



15/34

Fiscal Space Remains Economic Outlook

% of GDP

GCC (ex-Bahrain) to Continue to see Fiscal Surpluses

We continue to see respectable fiscal surpluses inthe GCC (ex-Bahrain), albeit weakening in 2013.

s s o as a resu o e s rong spen ng growoutlook and weaker forecast oil revenue. We see anincrease in the fiscal surplus in 2014.

Fiscal s ace remains but is narrowin . GCC countries

20

30

40

(ex-Bahrain) still have a Budget Breakeven (BBE) oilprice of below USD100 p/b, in Brent crude terms.

Saudi is forecast to see the largest USD rise in BBE in

(10)

0

Kuwait Oman Saudi Qatar UAE Bahrain

USD p/b, Brent crude terms

GCC Counties (ex-Bahrain) still have a BBE Below USD100 p/b

Source: Regional Central Banks, IMF, EFG Hermes estimatesw e ower o pro uc on ou oo . a ar s a so

seeing a sharper rise than historically, with steady LNGproduction from 2011.

GCC countries could be at risk of a fiscal deficit b2016 if oil revenue stays broadly constant andspending remains in double digits. There is scope toreduce current expenditure growth.

80

100

120

140 2013f 2031 Brent Forecast

0

20

40

60




Kuwait Qatar Saudi Oman UAE Bahrain


16/34

Strong FX Reserves and Low Debt Further S endin Buffers

Economic Outlook

FX reserves as a % of GDP

GCC FX Reserves Position, 2012 Substantial buildup in FX reserves over the last decadewith fiscal (and current account) surpluses. This providesGCC countries the ability to continue to spending in theevent of a fall in oil revenue or if overnmentexpenditure growth outstripping revenue growth.

Most GCC countries (ex-Bahrain and UAE) have reducedgovernment gross debt levels. GCC generally have a low

150

200

250

gross e eve s an on a ne as s are cre ors.

With GCC governments key objectives of job creationand investment to expand economic capacity, policy ismore likel to lean towards a continuation of the

0

50

UAE Kuwait Saudi Arabia Qatar Oman Bahrain

% of GDP

GCC Government Gross Debt

Source: Regional Central Banks, SWF Institute, EFG Hermes estimatesexpansionary fiscal position beyond 2016,

perhaps at a slightly weaker pace.

We believe there is scope to cut current expenditure, .

Most GCC countries can easily support a smallfiscal deficit (of under 5.0% of GDP) for a numberof years. 60

80

1002003 2013e

0

20

40





17/34

Wider Support to the InvestmentPro ramme Stron Ca ital Inflows

Economic Outlook

USD million

GCC Sukuk Issuances Reached Record Level in 2012 Strong ability to access foreign capital - is alsosupporting the investment programme. Dubai is themost dependant on foreign funding debt and growth.

Bahrain Kuwait Qatar Saudi Arabia UAE

GCC benefitting from the strong macrofundamentals. Also ample liquidity with Islamic fundsis supporting demand for sukuks. Helping to increasematurities and reduce costs. 15,000

20,000

25,000

30,000

Banks are also turning to the debt market to raisecheaper longer-term funding than deposits. Importantfor USD and longer-term lending for project finance.Government de osits are also ensurin am le li uidit in

0

5,000

10,000

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

USD million

Increasing Corporate Issuance for the Investment Programme

Source: Zawyathe banking sector to support credit growth.

Net Banking Sector Claims on the Government

USD billion

10,00015,00020,00025,00030,000

2007 2008 2009 2010 2011 2012

(100)

(50)

0

502008 2012

0,

Governmen

tal

Inst

itu

tions

Financia

l

Serv

ices

Rea

lEsta

te

ower

&Utilities

Oil&Gas

Transport

Construct

ion

Leisure

&

Tourism

Cong

lomera

tes

Foo

d&

Beverages

(350)

(300)

(250)

(200)

(150)

Saudi Kuwait Oman Bahrain UAE Qatar


Source: Zawya



P


18/34

Loose Monetary Policy Outlook Economic Outlook

%

Benchmark Rates on Hold; Real Rates Low or Negative in 2013

We expect interest rates to remain low. We do notexpect to see any changes in GCC benchmark interestrates in 2013 or 2014.

Credit growth and monetary policy not leading toinflationary pressure (see page 19).

GCC overnments want to ensure that access to1

3

5

domestic credit growth is available for the investmentprogramme.

Rather economic outlooks are reflected in the magnitude

(3)

(1)

Qatar Bahrain Kuwait Saudi UAE Oman

% change

GCC Private Sector Credit Growth

Source: Regional Central Banks, EFG Hermes estimatesan rea o cre grow . a ar, au an man

have double-digit credit growth outlooks. Saudi andOman are seeing corporate and consumer credit growth.Qatar so far mostly public sector driven, but theprivate sector is set to increase with World Cup projects.

UAE still sluggish credit growth outlook, despite thepickup in activity. Dubai banks, which generally havegreater exposure to GREs. Abu Dhabi projects need tobuild momentum.

15

20 2012 2013f

Kuwait also needs the investment programme to kickin. Limited corporate demand so far. Private sectorcredit growth being driven by retail, with public sector 0

5

10




.


19/34

Contained Inflation Outlook Economic Outlook

% change

GCC inflation

We forecast inflation to remain contained acrossthe GCC. Supportive of the private consumptionoutlook. We forecast that GCC weighted inflation willonl rise mar inall to 3.4% in 2013 from 3.0% in2012.

Weakest inflation still in countries with ample housingsupply (UAE). Saudi, rental inflation is moderating, but 3.0

4.0

5.02012 2013f

s e s ronges n e .

Expansionary fiscal position not leading to a buildup indemand pressure met largely by imports.

0.0

1.0

2.0

Bahrain Kuwait Oman Qatar Saudi UAE

Swap points to USD

Market not Pricing a Move Away from the USD Pegs

Source: Regional Central Banks, EFG Hermes estimates

Some gradual increase forecast for imported inflation in2013 pick up in inflation in Asia and strengthening inAXJ currencies and EUR against the USD.

There is no pressure on the GCC pegged currencies tothe USD, with the contained inflation outlooks. GCC andUS interest requirements are also in line.

0

100

200

300

400 SAR 1Y FW SAR 2Y FW AED 1Y FW AED 2Y FW

(500)

(400)

(300)

(200)

n-0

9

ar-

09

ay-

09

ul-09

p-0

9

v-09

n-1

0

ar-

10

ay-

10

ul-10

p-1

0

v-10

n-1

1

ar-

11

ay-

11

ul-11

p-1

1

v-11

n-1

2

ar-

12

ay-

12

ul-12

p-1

2

v-12

n-1

3




J M MJ S N J M M

J S N J M MJ S N J M M

J S N J


20/34

Country SectionsIII.



21/34

Saudi: Robust Broad-based Outlook

Country Sections

Index, a reading above 50 indicates growth

PMI Strong New Orders Outlook

% change, in real terms

Non-oil Activity to Drive Real Growth

New Orders

4.2 3.2

5.8

8.07.2

6.1 6.0

4

6

8

10-

65

75

Output / Business Activity IndexEmoloyment IndexOverall PMI

0

2

2008

2009

2010

2011

2012fe

2013f

2012f

45

Aug-0

9

Oct-0

9

Dec-

09

Feb-1

0

Apr-

10

Jun-1

0

Aug-1

0

Oct-1

0

Dec-

10

Feb-1

1

Apr-

11

Jun-1

1

Aug-1

1

Oct-1

1

Dec-

11

Feb-1

2

Apr-

12

Jun-1

2

Aug-1

2

Oct-1

2

Dec-

12

USD billion, project awards

Need to Upgrade Infrastructure in Most Areas

% change Y-o-Y, point of transaction sales

Private Consumption Supported by WageGrowth and Job Creation

,Hermes estimates

30

40

50

60

70 Value of Sales No. of Transactions

20

25

30

35

Chemical Construction GasIndustrial Oil PowerTransport Water

(20)

(10)

0

10

ep-0

8

ec-

08

ar-

09

un-0

9

ep-0

9

ec-

09

ar-

10

un-1

0

ep-1

0

ec-

10

ar-

11

un-1

1

ep-1

1

ec-

11

ar-

12

un-1

2

ep-1

2 0

5

10

15

Q10

Q10

Q10

Q10

Q11

Q11

Q11

Q11

Q12

Q12

Q12

Q12


Source: MEED ProjectsSource: SAMA


S D J S D J S D J S D J S 1 2 3 4 1 2 3 4 1 2 3 4


22/34


23/34

Saudi: Macro Indicators Country Sections

In USD billion, unless otherwise stated

Macroeconomic Indicators

e

Real Sector

Average Brent Crude Spot Price (USD/B) 98.7 62.7 80.3 110.9 112.0 107.0 114.0

GDP at Current Market Prices (SAR bn) 1,786.1 1,637.7 1,975.5 2,510.7 2,727.4 2,800.8 3,065.5

GDP at Current Market Prices (USD bn) 476.3 436.7 526.8 669.5 727.3 746.9 817.5

Real GDP Growth Rate, % 4.2 0.1 4.7 8.5 6.8 4.6 5.1

Real Non-oil GDP Growth Rate, % 4.2 3.2 5.8 8.0 7.2 6.1 6.0

Population (million) 25.8 26.7 27.6 28.2 28.8 29.4 30.0

GDP /Capita (USD) 18,471 16,381 19,113 23,767 25,263 25,385 27,213

CPI Inflation Y-o-Y % Avera e 9.9 5.1 5.3 5.0 4.5 4.6 4.8

External Sector

Trade Balance (USD billion) 212.0 105.2 153.7 245.2 268.0 240.2 253.7

Current Account Balance (USD bn) 132.3 21.0 66.8 158.9 178.3 147.4 157.0

Current Account, % of GDP 27.8 4.8 12.7 23.7 24.5 19.7 19.2

. . . . . . .

Fiscal Sector

Budget Balance (USD bn) 154.9 (23.1) 23.4 81.6 103.1 51.6 45.0

Budget Balance, % of GDP 32.5 (5.3) 4.4 12.2 14.2 6.9 5.5

Net Banking Sector Claims on the Government . . . . . . .

Financial Sector

USD/SAR Exchange Rate, annual average 3.75 3.75 3.75 3.75 3.75 3.75 3.75

Annual Growth Rate in Broad Money, % 19.0 6.5 9.3 15.4 13.6 12.6 14.8

Growth in Credit to the Private Sector, % 27.1 (0.0) 5.7 10.7 16.4 15.5 14.7


Source: SAMA, Central Department of Statistics and Information, IMF, and EFG Hermes Estimates


enc mar en ng a e, en -o -per o , . . . . . . .


24/34

UAE: Investment Outlook Improving

Country Sections

Index, a reading above 50 indicates growthchange

PMI Sharp Increase in New Orders

% change

We See Real Non-oil Growth RemainingAbove 4.0% in 2013

,

60

70

New OrdersOutput / Business Activity IndexEmoloyment IndexOverall PMI

6.0

1.43.1 4.4 4.12

4

6

8

40

50

Aug-0

9

Oct-0

9

Dec-

09

Feb-1

0

Apr-

10

Jun-1

0

Aug-1

0

Oct-1

0

Dec-

10

Feb-1

1

Apr-

11

Jun-1

1

Aug-1

1

Oct-1

1

Dec-

11

Feb-1

2

Apr-

12

Jun-1

2

Aug-1

2

Oct-1

2

Dec-

12

(2.9)

(4)

(2)

2008

2009

2010

2011

2012e

2013f

AED per Sq. Ft.

Property Recovery Supporting Consumptionand Investments

% hotel occupancy

Traditional Sectors Performing Strongly,Supporting Investment and Job Creation

Source: Markit EconomicsSource: National Bureau of Statistics, EFG Hermes estimates

75

80859095

Dubai Abu Dhabi

1,800

2,000

2,200

2,400

2,600

High Range Apartment Sales Price

High Range Villa Sales Price

50556065

-Jun-0

9

-Sep-0

9

-Dec-

09

Mar-

10

-Jun-1

0

-Sep-1

0

-Dec-

10

Mar-

11

-Jun-1

1

-Sep-1

1

-Dec-

11

Mar-

12

-Jun-1

2

-Sep-1

2 1,000

1,200

1,400

1,600

an-0

7

ay-

07

ep-0

7

an-0

8

ay-

08

ep-0

8

an-0

9

ay-

09

ep-0

9

an-1

0

ay-

10

ep-1

0

an-1

1

ay-

11

ep-1

1

an-1

2

ay-

12

ep-1

2


Source: Bloomberg, CluttonsSource: SAMA


01

01

01

01 0

101

01

01 0

101

01

01 0

101 J S J S J S J S J S J S


25/34

UAE: Investment Outlook Improving

Country Sections

% change in Dubai Government spending

Fiscal Reforms and Stronger EconomicActivity Allows Increase in Dubai Spending

% change, value of project awards

Dubai Leading the Investment Recovery

2040

6080

100120

(5)

0

5

10

15

(80)

(60)(40)(20)

2008 2009 2010 2011 2012

(20)

(15)

(10)

2009

2010

2011

2012e

2013f

USD billion

2013 A Relatively Light Year in Debt Maturity

In bps, CDS spreads

Improved Sentiment on Dubai Debt Vital forExtending Debt Maturity and Reducing Cost

Source: Dubai Sukuk Prospectus , EFG Hermes estimatesSource: MEED Projects, EFG Hermes

40

50

Dubai World & SubsidiariesDubai Holding & SubsidiariesInvestment Corporation of Dubai & SubsidiariesOther Dubai Inc.Dubai GREs with Government Ownership below 50%Government of Dubai

500600

700800900

1000Abu Dhabi Dubai Saudi Arabia Qatar

0

10

20

2012

2013

2014

2015

Beyon

d0100200300400

ep-0

8

ec-

08

ar-

09

un-0

9

ep-0

9

ec-

09

ar-

10

un-1

0

ep-1

0

ec-

10

ar-

11

un-1

1

ep-1

1

ec-

11

ar-

12

un-1

2

ep-1

2

ec-

12


Source: IMFSource: Bloomberg


S D J S D J S D J S D J S D


26/34

UAE: Macro Indicators Country Sections



2008 2009 2010 2011 2012e 2013f 2014f

Real Sector


GDP at Current Market Prices (AED bn) 1,154.8 953.8 1,042.7 1,243.8 1,304.7 1,328.3 1,397.2


Real GDP Growth Rate, % 3.2 (4.8) 1.3 4.2 4.5 2.8 3.8

Real Non-Oil GDP Growth Rate, % 6.0 (2.9) 1.4 3.1 4.4 4.1 3.8


GDP /Capita (USD) 66,036 51,301 54,449 63,053 64,217 63,477 64,821

CPI Inflation Y-o-Y % Avera e 12.3 5.3 0.9 0.9 0.8 1.0 1.2

External Sector




et ore gn ssets n . . . . . . .

Fiscal Sector

Budget Balance (USD bn) 52.8 (33.4) (3.5) 10.4 19.1 9.8 12.6

Budget Balance, % of GDP 16.8 (12.8) (1.2) 3.1 5.4 2.7 3.3

Net Banking Sector Claims on the Government (USD bn) (23.1) 2.7 7.9 12.2 10.5 11.7 13.2

Financial Sector

USD/AED Exchange Rate, annual average 3.67 3.67 3.67 3.67 3.67 3.67 3.67


Growth in Credit to the Private Sector, % 41.7 4.6 0.7 3.4 2.5 3.7 3.5


Source: UAE Central Bank, National Bureau of Statistics, IMF, EFG Hermes Estimates




27/34

Qatar: Strongest Non-oil Activity-

Country Sections

% change

Non-hydrocarbon Activity Robust and Likelyto Strengthen in 2014

PP contribution to Growth

Headline GDP Slows with HydrocarbonActivity

,

1Q12 2Q12 3Q12

10

15

20

25-

0

5

10

15

ns dn ts n

d es

(5)

0

1Q11

2Q11

3Q11

4Q11

1Q12

2Q12

3Q12 T

ransport

&

Commun

ica

tio

Bu

ildinga

Construct

i

Tra

de,R

estaura

&Ho

tels

Electrici

tya

Wa

ter

Financia

lServ

ic

QAR million (LHS), Y-o-Y change (RH)

The Government has been IncreasingDeposits in the Banking Sector

PP contribution to credit growth

Public Sector will Reduce Borrowing from theBanking Sector if Needed for Private

Source: Qatar Statistic AuthoritySource: Qatar Statistics Authority

20

40

60

Others Public Sector Contracting

Real Estate Commerce Consumption

Total

40

60

80

100

120

130

150

170

190

Public Sector Deposits (LHS) Y-o-Y Change ( RHS)

(20)

0

Jan-1

1

Mar-

11

ay-

11

Jul-11

Sep-1

1

Nov-

11

Jan-1

2

Mar-

12

ay-

12

Jul-12

Sep-1

2

Nov-

12

(40)

(20)

0

20

50

70

90

Jan-0

8

May-

08

Sep-0

8

Jan-0

9

May-

09

Sep-0

9

Jan-1

0

May-

10

Sep-1

0

Jan-1

1

May-

11

Sep-1

1

Jan-1

2

May-

12

Sep-1

2


Source: Central Bank of QatarSource: Central Bank of Qatar



28/34

Qatar: Macro Indicators Country Sections



2008 2009 2010 2011 2012e 2013f 2014f

Real Sector


GDP at Current Market Prices (QAR bn) 403.0 356.3 463.4 631.7 714.2 758.1 855.6


ea row a e, . . . . . . .

Real Non-Oil GDP Growth Rate 27.8 9.6 13.3 12.9 9.2 8.5 9.7


GDP /Capita (USD) 76,459 59,719 74,883 98,165 106,688 108,924 118,182

CPI Inflation (Y-o-Y % Average) 15.6 (4.9) (2.4) 1.9 1.8 3.5 4.2

External Sector




. . . . . . .

Fiscal Sector

Budget Balance (USD bn) 11.5 15.0 3.7 14.9 11.8 9.1 8.4

Budget Balance, % of GDP 10.4 15.3 2.9 8.6 6.0 4.4 3.6


Financial Sector

QAR/USD Exchange Rate, annual average 3.64 3.64 3.64 3.64 3.64 3.64 3.64




Source: Central Bank of Qatar, Qatar Statistical Authority, EFG Hermes Estimates


Benchmark Lending Rate, end-of-period, % 5.5 5.5 5.5 4.5 4.5 4.5 4.5


29/34

Kuwait: Politics Still Being Defined

Country Sections

KWD million (LHS), % change (RHA)

So Far Domestic Growth has been Driven byPublic Sector Wage Increases

USD billion, project awards

Investment Push from 4Q2012 and DecemberElection - Political and Implementation Risks

Chemical Construction Gas Industrial Total Spending on Wages (LHS) % Change (RHS)

3

4

5

6 Oil Power Transport Water

1015

20

25

30

35

2,000

3,000

4,000

5,000

6,000

0

1

1Q10

2Q10

3Q10

4Q10

1Q11

2Q11

3Q11

4Q11

1Q12

2Q12

3Q12

4Q12

0

5

0

1,000

2005/06

2006/07

2007/08

2008/09

2009/10

2010/11

2011/12

2012/13f

USD billion (LHS), % of GDP (RHS)

Government has Substantial Ability toIncrease Spending

PP contribution to credit growth

Increased Project Implementation WillProvide Strong Credit Growth Stimulus

Source: Central Bank of Kuwait, EFG Hermes estimatesSource: MEED Projects

4

6

8

10

CorporateNon Bank Financial InstitutionsRetailOtherTotal

20

25

30

35

30

40

50

60

Fiscal balace (USD bn, LHS)

Fiscal Balance (as % of GDP, RHS)

(4)

(2)

0

2

ug-1

0

ct-1

0

ec-

10

eb-1

1

pr-

11

un-1

1

ug-1

1

ct-1

1

ec-

11

eb-1

2

pr-

12

un-1

2

ug-1

2

ct-1

2

ec-

12

0

5

10

0

10

20

004/05

005/06

006/07

007/08

008/09

009/10

010/11

011/12

012/13f

013/14f

014/15f


Source: Central bank of Kuwait, EFG Hermes estimatesSource: Central Bank of Kuwait


A D F J A D F J A D 2 2 2


30/34

Kuwait: Macro Indicators Country Sections



2008 2009 2010 2011 2012e 2013f 2014f

Real Sector


GDP at Current Market Prices (KWD bn) 39.5 30.5 34.4 44.4 47.8 48.4 52.5


ea row a e, . . . . . . .

Real Non-Oil GDP Growth Rate, % 4.6 (4.0) 16.2 4.6 3.8 4.0 4.2


GDP /Capita (USD) 42,824 30,409 33,490 43,700 45,254 44,304 47,191

CPI Inflation (Y-o-Y % Average) 10.6 4.0 4.0 4.8 2.9 3.3 3.7

External Sector




. . . . . . .

Fiscal Sector

Budget Balance (USD bn) 10.2 22.4 18.1 48.8 43.2 43.8 44.1

Budget Balance, % of GDP 6.9 21.1 15.1 30.4 25.2 25.4 23.4


Financial Sector

USD/KWD Exchange Rate, annual average 0.27 0.29 0.29 0.28 0.28 0.28 0.28




Source: Central Bank of Kuwait, EFG Hermes Estimates




31/34

Oman: Non-oil Growth to Accelerate-

Country Sections

PP contribution to government spending growth

More Broad-based Government Spending in2013

PP contribution to real GDP growth

Real Headline and Non-Oil GDP to Strengthenin 2013 Oman a top MENA Macro Pick

,

Current Expenditure Investment Expenditure

46

8

10

12

14-

10

20

30

40 Support to Private Sector Total expenditure

(4)

(2)

0

2

2007

2008

2009

2010

2011e

2012e

2013f

2014f (20)

(10)

2007

2008

2009

2010

2011

2012f

2013f

2014f

Salary per month of low-income Omanis with

Key Government Focus Job Creation andWage Growth

USD billion, 2013 planned projects

A number of Key Capacity Increasing ProjectsPlanned Hydrocarbon and Wider

Source: Central Bank of Oman, EFG Hermes EstimatesSource: Central Bank of Oman, EFG Hermes estimates

Public Authority or Social Insurance

3.0

4.0

5.0

Construction Gas Industrial Oil Power Transport Water

80,000

100,000

120,000

end-2008 end-2009 end-2010 end-2011 end-2012

0.0

1.0

2.0

1Q2013

2Q2013

3Q2013

4Q2013

0

20,000

40,000

,

120an

d

be

low

21-1

80

81-2

00

01-3

00

01-4

00

01-5

00


Source: Ministry of National EconomySource: MEED Projects


1 1


32/34

Oman: Macro Indicators Country Sections



Real Sector


GDP at Current Market Prices (OMR bn) 23.3 18.5 22.7 27.9 29.7 31.0 33.8


Real GDP Growth Rate, % 12.8 3.9 5.0 4.0 4.6 5.4 4.2

Real Non-Oil GDP Growth Rate, % 15.0 2.3 4.6 4.7 5.0 5.8 5.2


GDP /Capita (USD) 21,779 16,721 19,843 23,544 24,283 24,617 25,943

CPI Inflation (Y-o-Y % Average) 12.6 3.7 3.1 4.1 3.0 3.5 4.0

External Sector


Current Account Balance (USD bn) 5.0 (0.6) 5.1 13.2 13.1 8.2 7.3

Current Account, % of GDP 8.3 (1.2) 8.6 18.2 16.9 10.2 8.3

. . . . . . .

Fiscal Sector

Budget Balance (USD bn) 8.5 (0.6) 4.5 6.9 9.5 5.6 5.2

Budget Balance, % of GDP 14.0 (1.1) 7.6 9.6 12.3 6.9 5.9Net Banking Sector Claims on the GovernmentUSD bn 6.2 6.0 6.8 10.1 10.8 12.2 13.0

Financial Sector

USD/OMR Exchange Rate, annual average 0.38 0.38 0.38 0.38 0.38 0.38 0.38




Source: Central Bank of Oman, Ministry of National Economy, IMF, EFG Hermes Estimates




33/34

Bahrain: Macro Indicators Country Sections



2008 2009 2010 2011 2012e 2013f 2014f

Real Sector


GDP at Current Market Prices (BHD bn) 8.2 8.6 9.7 10.9 11.3 11.9 12.9


ea row a e, . . . . . . .

Real Non-Oil GDP Growth Rate, % 7.2 3.7 5.5 1.4 6.0 4.2 4.0


GDP /Capita (USD) 28,116 22,077 23,228 25,679 26,222 26,903 28,576

CPI Inflation (Y-o-Y % Average) 3.5 2.8 2.0 (0.4) 2.8 3.2 3.7

External Sector

Trade Balance (USD billion) 3.1 2.3 2.5 7.5 6.2 5.5 6.4Current Account Balance (USD bn) 2.3 0.6 0.8 3.2 2.8 1.8 2.5


. . . . . . .

Fiscal Sector

Budget Balance (USD bn) 1.0 (1.7) (2.1) (0.9) (1.6) (2.1) (1.6)

Budget Balance, % of GDP 4.5 (7.6) (8.0) (3.0) (5.4) (6.5) (4.6)

Net Banking Sector Claims on the Government. . . . . . .

Financial Sector

USD/BHD Exchange Rate, annual average 0.38 0.38 0.38 0.38 0.38 0.38 0.38


Growth in Credit to the Private Sector, % 43.0 (0.7) 6.2 15.0 7.5 7.0 6.0


Source: Central Bank of Bahrain, IMF, EFG Hermes Estimates


Benchmark Lending Rate, end-of-period, % 2.8 2.3 2.3 2.3 2.3 2.3 2.3


34/34

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