Saudi Arabia struggles as both locals and foreign investors pull out of the kingdom following a succession of shocking events.
The murder of Saudi journalist Jamal Khashoggi has led to more money flooding out of Saudi Arabia than ever before. Once seen as the powerhouse of the MENA region, Saudi Arabia has struggled over recent years to maintain its oil rich economy and to assert its dominance in the region. To this day the troubled kingdom continues to lose the support of both locals and foreign investors at a rapid rate.
Long before the shocking murder of Khashoggi, Saudi Arabia witnessed a decline in foreign investment following the imprisonment of a number of leading business figures, princes and those opposed to Crown Prince Mohammed bin Salman’s regime. Those detained were held under so-called corruption charges, where several billions of dollars were extorted from the likes of Prince Alwaleed bin Talal and his brother Khaled, both nephews of King Salman.
But the most shocking and damaging path Saudi Arabia chose to take was ordering a land, sea and air blockade of Qatar on June 5th, 2017. Worryingly they didn’t go it alone and dragged the UAE, Egypt and Bahrain along with them.
Despite hope that this unprecedented siege on Qatar would cause the Arab state to fall into financial ruin, quite the opposite effect has been witnessed over the past 18 months. Not only has Qatar become more self-sufficient and less reliant on its Arab neighbors, there is a bright future ahead which is more than what can be said about Saudi Arabia and the other blockading nations.
With an improving economy and a far better reputation, let’s take a look at Qatar’s economic outlook, compared to Saudi Arabia and other Arab states.
Qatar’s growth forecast at 2.9% in 2019
According to FocusEconomics, Qatar’s economy is likely to perform well in the third quarter of 2018, after annual growth accelerated in the second quarter.
Figures show that merchandise trade surplus grew nearly 26% in September, compared to the same month a year earlier. This was largely due to increased hydrocarbon shipments.
On November 14th, the IMF noted that the government’s fiscal position is improving and that the Central Bank’s FX reserves have increased. The following week, the cabinet approved the 2019 draft budget, which includes spending for the 2022 World Cup and is expected to result in the first fiscal surplus in five years.
FocusEconomics has predicted that in the coming years, Qatar’s economic growth will be driven by increased oil and gas production, and infrastructure projects related to the 2022 World Cup. Experts predict that Qatar will see forecast growth of 2.8% in 2019, which is unchanged from last month’s projection, and 2.7% in 2020.
This number is higher than the MENA average which is predicted to expand by 2.2% annually in the third quarter. Qatar also outperformed economic growth forecasts for Saudi Arabia next year and in 2020.
Saudi Arabia is currently benefiting from higher oil production after Iran was hit by US sanctions, but that won’t last forever. External risks include further oil price falls due to a global oil supply glut, as the world’s top three producers operate at record levels.
Saudi Arabia’s growth forecast at 2.4% in 2019
FocusEconomics state that trade protectionism and a synchronized slowdown in global growth could also reduce demand for oil, leading to a further fall in prices. Experts predict a growth of 2.4% in 2019, which is down 0.1 percentage points from last month’s projection. In 2020, growth is seen decreasing slightly to 2.3%. Both figures are significantly lower than those attributed to Qatar’s economic growth.
UAE’s growth forecast at 3.2% in 2019
Meanwhile, FocusEconomics panelists expect the UAE’s GDP to increase 3.2% in 2019, which is unchanged from last month’s forecast, and 3.3% in 2020.
Overall, crude prices have taken an almighty tumble in recent weeks, which threatens the growth momentum and fiscal positions of oil-exporting countries in the Middle East—particularly as several nations recently announced expansionary budgets for next year, on the assumption that the oil market would remain buoyant. In contrast, lower oil prices will reduce the import bill and price pressures in oil importing countries such as Egypt and Israel, which will be positive for growth.
The 2019 economic outlooks were also revised down this month for Bahrain, Kuwait, Morocco and Yemen. Forecasts for Iran and Iraq were revised up.