Economic Development and Globalization Division Financing for Development Section

Outline Overview The impact of the crisis on: –The banking sector –Stock markets –Sovereign Wealth Funds (SWFs) –The oil sector –Growth Regional endeavors Recommendations

Overview The direct impact of the crisis is felt through: –Declines in equity markets –Liquidity constraints/higher funding costs –Reversal capital inflows Other risks stem from weaker demand for oil… …And from a major correction in the real estate market in some countries

The banking sector GCC countries Gross external debtForeign assets June June 2008 Bahrain Kuwait Oman Qatar Saudi Arabia The United Arab Emirates (UAE) GCC Table 1: GCC banks’ foreign liabilities and assets, In billions of US dollars

Stock markets Figure 1: ESCWA stock markets, end 2008 Index loss (%)

SWFs FundCurrency compositionAsset allocation Abu Dhabi Investment AuthorityUSD (50%); EUR, GBP, JPY (36%); other (14%) equity (50-60%); fixed income (20- 25%); private equity (5-10%); alternatives (5-10%) Mubadala (Abu Dhabi)USD (40%); EUR(50%); other (10%) equities (60%); alternatives (20%); bonds (20%) Dubai International Capital; Istithmar (Dubai) USD (35%); EUR, GBP (50%); Asian currencies (15%) equities (50%); alternatives (40%); deposits, bonds (10%) Kuwait Investment AuthorityUSD (40%); EUR, GBP, JPY (40%); other (20%) equity (60%); bonds (25%); alternatives (15%) Qatar Investment AuthorityUSD (40%); EUR (40%); GBP, Asian currencies (20%) equities (60%); alternatives (20%); bonds (20%) State General Reserve Fund (Oman)USD (50%); other (50%)alternatives (50%); equities (20%); bonds (30%) Saudi Arabian Monetary AuthorityUSD (75%); other (25%)deposits (10%); fixed income (65%); equities (25%) Table 2: Estimated currency composition and asset allocation of major SWFs, 2007 In percent

Oil sector Figure 2: OPEC basket price, annual average ( ) In US dollars/barrel

Growth Country/Sub- region Real GDP growthInflation Bahrain Kuwait Oman Qatar Saudi Arabia UAE GCC Egypt Jordan Lebanon Sudan Syria Yemen More diversified economies Total ESCWA Table 3: Real GDP growth rate and consumer inflation rate, 2008, 2009 Annual percentage change

Recommendations Continue to apply expansionary fiscal policies, notably in mega-infrastructural projects Pursue the deepening of the intra-regional economic integration: –Establish a Stabilization Fund to cope with exogenous shocks –Increase intra-regional investments, notably in agriculture, agro-business, clothing and footwear –Reorient some of the SWFs’ investments into the region

Thank you