‘ECONOMIST’ TURNS FOCUS TO OIL REVENUES OF GULF
Kuwait’s projected real GDP growth (annual percent change) for 2023 is 0.9 and 2.7 in 2024; while the projected inflation rate or consumer prices (percent change) is 3.3 in 2023 and 2.6 in 2024, according to the World Economic Outlook of the International Monetary Fund (IMF) for April 2023. The country is classified as an emerging market and middle income economy with fuel as its main source of export earnings.
The outlook for the world economy this year has dimmed in the face of chronically high inflation, rising interest rates and uncertainties resulting from the collapse of two big American banks. That’s the view of the International Monetary Fund, which on Tuesday downgraded its outlook for global economic growth. The IMF now envisions growth this year of 2.8%, down from 3.4% in 2022 and from the 2.9% estimate for 2023 it made in its previous forecast in January.
Meanwhile, Dr. Obaid Al-Mutairi, a senior member of the Kuwaiti National Assembly, called on the developing countries to work together for reforming the international financial institutions, notably the World Bank and the International Monetary Fund. Al-Mutairi is taking part in the Annual Meeting 2023 of the Bretton Woods Committee (BWC), being held in-person at the IMF HQ in Washington D.C. on April 10-11. The meeting coincides with the IMF and WB spring meetings. Speaking to KUNA on the fringes of the BWC meeting, he said the global changes made the international financial institutions less effective than they used to be when they were founded. “Everybody is now convinced that it is inevitable to introduce a gradual change to these institutions. The developing countries need to act as one to define the nature and desired impact of such a change,” he pointed out.
Though the IMF and WB maintain their dominant role in the global financial and monetary decision-making, the accelerated developments in the recent years, including the financial crises, made it inevitable to review and reassess their efficacies, Dr. Al- Mutairi argued. The IMF and WB meetings provide an opportunity for gauging the efficacy of the international financial architecture as a prelude to moving from an era of induced response to one of inspired reform. The developing countries usually bear the brunt of global financial turmoil.
Therefore, these countries need to have a say in the future reforms in order to enhance governance, guard against financial fluctuations and protect their interests, he added. The BWC Annual Meeting explored the need for global governance reform and the ways in which the International Financial Institutions can evolve to meet the economic, geopolitical, and cross-border challenges of the new era. Founded in 1983, the Bretton Woods Committee is the preeminent non-profit organization dedicated to effective global economic and financial cooperation.
Towards this end, it demonstrates the value of multilateralism and improves the performance of the international financial institutions through public dialogue, advocacy, and policy analysis. The Committee members are leaders in business, finance, academic, and non-profit sectors, including many industry CEOs, as well as former presidents, cabinet-level officials, and lawmakers who share the belief that international economic cooperation is essential and best served through strong, effective international financial institutions. Through the Committee, they champion global efforts to spur economic growth, alleviate poverty, and improve financial stability.
In its latest issue, “The Economist” magazine focused on the huge wealth enjoyed by the Gulf countries from oil gains, reports Al-Rai daily. It explained that its estimates indicate the current account surplus of the Gulf countries may reach two-thirds of a trillion dollars in two years (2022 and 2023). However, much of this money is no longer going to external central banks. To determine exactly where the money goes, the Economist tracked the accounts of the authorities, international asset markets and deal rooms of companies tasked with investing the windfall gains of the Gulf economies. The West received little of this money. An increasing share of these earnings was used at home and abroad, making international finance an even more murky system.
During the previous booms, Gulf economies were recycling energy revenues into Western capital markets, and in snapping up super-liquid real estate through banks based mostly abroad. The Gulf countries are not the only ones enjoying windfall gains. In the past 12 months, Norway, which raised fuel exports to Europe while reducing Russian exports, succeeded in reaping USD 161 billion in taxes on exports of total oil sales, an increase of 150 percent compared to 2021. Even Russia, which is under sanctions, increased its revenues by 19 percent, to USD 210 billion. Nevertheless, the Gulf countries that benefit from lower manufacturing prices, spare capacity, and easy geography may be among the biggest winners of the jackpot. Rystad Energy Consulting believes that the gains of the Gulf states from taxes on energy exports in 2022 will reach ISD 600 billion.
However, not all Gulf countries are in a profitable position, such as Bahrain and Iraq, unlike Kuwait, Qatar, the Emirates and Saudi Arabia. According to estimates by Alex Etra of the “Exnet” agency, the total current account surplus of these countries in 2022 amounted to USD 350 billion. It should be noted that oil costs have decreased in the last 12 months when the average price of Brent crude was USD 100 per barrel. Assuming that the price of a barrel of oil remains close to USD 85 – a conservative guess – Itra believes that the four giants (Kuwait, UAE, Saudi Arabia and Qatar) may achieve a surplus of USD 300 billion in 2023, bringing the cumulative surplus in two years to USD 650 billion. In the past, the vast majority of these surpluses went directly to foreign exchange reserves in central banks.
Most members of the Gulf countries peg their currencies to the dollar. For this, a part must be allocated and invested in a time of boom, but not this time, as reserves in central banks have not grown significantly large because the intervention of banks in the foreign currency markets has become rare. The traditional guardians of the state’s wealth do not get the surplus. According to the magazine’s analysis, the surpluses this time were used in three new ways by a wide range of actors, including governments, central banks, and sovereign wealth funds. The first to pay foreign debts, the second to lend to friends, and the third to buy property and real estate abroad.
Source- Arab Times.