As the Middle East Burns, Saudi Economy Glows
Bahrain and Yemen aside, the turmoil in the Middle East has turned into a boon for Saudi Arabia, as the country’s coffers swell with the proceeds of climbing oil prices and production. And, a series of subsidies and other measures worth as much as $xx billion will help ensure the bounty reaches ordinary Saudis.
National Commercial Bank, a Saudi lender, raised its outlook this week to 5.1% from a previous 4%. Barclays Capital is planning to revise its forecasts shortly as is Bank of America. A Reuters poll of economists taken last week before the second of two government spending plans was unveiled showed the Saudi economy growing by 4.5% this year, slightly faster than previous expected.
As supplies from Libya have fallen and worries that other exporters may cut output as well, oil prices have risen about 20% this year. Benchmark Brent crude for May delivery traded at about $115 for a barrel on Thursday. Economists estimate that for every $10 increase in the price, Saudi Arabia can increase its budget by 6% of gross domestic product.
And, with the world’s biggest reserves and excess capacity, Saudi Arabia is benefitting twice over by raising output to fill the Libyan gap. Official figures aren’t available, but the country is believed to have boosted output by about 700,000 barrels a day to 9.2 million barrels.
“On the oil side, recent events have been unambiguously positive,” Daniel Kaye, senior economist for National Bank of Kuwait, told The Media Line.
Middle East Is World’s Riskiest Region for Water Security, Study Says
The Middle East and North Africa have the world’s least secure water supplies, a danger that heightens political risk in an already volatile region and may even lead to higher oil prices in the future, according to a study released on Tuesday.
The Water Risk Index, developed by the British risk consultants Maplecroft, found that out of 18 countries around the world at “extreme risk” to their water security, 15 are in the Middle East. The list numbers several key oil exporters, including Saudi Arabia, Kuwait, the United Arab Emirates, Libya and Algeria, whose water woes could have global implications.
The turmoil raging across the Middle East has been ascribed to a host of political and economic problems, among them inflation fanned by rising food and energy prices. Water hasn’t factored into the unrest, but experts have warned that the region’s lack of water, poor management and disputes over sharing resources may emerge as a new source of instability.
For business people and investors, water security should factor into their strategy, Maplecroft analyst Tom Styles said. Aside from political risk, water shortages are likely to prompt governments to regulate consumption more severely and raise costs, which could hurt industries reliant on water.
Companies also must be cognizant of “reputation risk” if their facilities are seen by the public as using too much water or degrading its quality,
Lebanon Gets Ensnared in Bahrain’s Domestic Disputes
The conflict in Bahrain has taken on new regional and sectarian implications, after the tiny Gulf emirate entered into a war of words with the leader of the Lebanese Shiite movement, Hizbullah, and cut off air links between the two countries..
Hassan Nasrallah, the leader of Hizbullah, which is allied to Iran, opened a new front in the struggle after the Saudi deployment, with sharply critical remarks, calling the Saudi action “murder.” Bahrain's Foreign Ministry condemned Nasrallah's statement, calling him a "representative of a terrorist organization," a rare case of an Arab government using that label to describe an Arab militant group. On Wednesday, Bahraini national carriers Bahrain Air and Gulf Air suspended their flights to and from Lebanon indefinitely.
A statement issued by Bahrain's civil aviation authority made clear that the severing of air links was more than a symbolic movement. Positioning Bahrain within the broader framework of the Gulf Cooperation Council (GCC), whose membership includes the super-wealthy, oil-exporting Arab countries of the Gulf, the statement hinted it was intending to strike a blow to Lebanon’s economy.
The Bahraini threats were picked up loud and clear by anti-Hizbullah elements, both Sunni and Christian, in Lebanon. Lebanese parliament member Antwan Zahra noted that 600,000 Lebanese worked in GCC states, contributing through remittances to a third of Lebanon's economy.
Car Sales Race Ahead as Palestinian Economy Purrs
On a blustery, winter day in Ramallah, new car sales are hot.
“You can see the numbers are escalating tremendously,” says Samech Masri, a Detroit-educated civil engineer and general manager of the United Motor Trade Co., the largest car dealership in Ramallah. “It’s gone from about 1,000 cars to 20,000 cars within about 10 years and that is something to talk about.”
Not nearly as high as the record 216,000 vehicles sold in nearby Israel last year, still, the Palestinian new car sales numbers reflect growing prosperity and are one of the best measures to see how the economy is faring.
Set among swank coffee shops and designer boutiques, Masri’s upscale automobile dealership is the sole importer of Volkswagen, Audi and Skoda vehicles. He accounts for a quarter of all car sales in the West Bank and counts among his clients Palestinian Authority Prime Minister Salam Fayyad
Car sales topped $110 million last year, about half of which went to taxes. Masri’s dealership employs about 150 people. His was the first to go on line with the manufacturer in Germany where computers run diagnostic tests on the cars.
Masri says sales could reach over 30,000 cars but complains that he is shackled by Israeli import restrictions. He bemoans the need to get his vehicles through the Israeli ports where they can be held up for weeks due to security checks or by an employee going on vacations.
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