Business | Investment
Small talk on the big numbers
It's funny how the most extraordinary things can be wrapped in matter-of-fact packages.
- By Gaurav Ghose, Staff Reporter
- Published: 00:00 February 17, 2007
It's funny how the most extraordinary things can be wrapped in matter-of-fact packages.
Still at over $50 a barrel, oil has been one of the most amazing market movements of modern times. The fact that such a seismic shift (pun absolutely intended) in a key factor cost has had next to no impact on world economic growth is similarly remarkable.
Every research report that emerges during these times effectively has to take for granted, from an analytical perspective, this sea-change of events. The snappily-titled report Data Watch: Middle East and African Sovereigns in 2007 from Standard and Poor's is one such example. The press release alone drips with the implications of this realisation, yet is dry as a bone in the delivery.
That comes with the territory, of course - the dispassionate display of the results of dispassionate research. Anything else would compromise the professionalism and neutrality of the provider and its work. Indeed.
Oil prices will be marginally softer in 2007, but "public finances and external accounts will remain strong in oil-exporting countries", S&P says. That's a standard understatement.
The report notes that Saudi Arabia "has seen its domestic output almost double in nominal terms since 2000", a common feature in the Gulf. Largely it is the price effect overwhelming any change in real output, inflating the nominal value of national production.
The report singles out Qatar and Bahrain for their heavy investment in the non-oil sector, Qatar into liquefied natural gas (LNG) and Bahrain boosting its aluminium production capacity. Qatar's growth rate is expected to be a fraction away from 10 per cent in 2007, and that's being quoted in real terms.
The impact of LNG will take its current account surplus past Saudi Arabia's to $25 billion, though only half Kuwait's $52.6 billion, the second successive figure over the $50 billion mark, an astonishing balance for a relatively small country. Even so, Qatar's GDP per capita figure is expected to race onward to a truly extraordinary degree, due to be $65,450 in 2007, nearly six times the Saudi figure incidentally.
In terms of sheer size, however, Saudi Arabia still dominates, even if its nominal GDP total is projected to remain almost static at $321 billion.
As for domestic budgets, or general government surplus as it's routinely called, Kuwait leads by a considerable distance relative to national income, its ratio dipping slightly below the 40 per cent of the past two years.
The report carries no data for UAE. Regardless of the patchy coverage, relating to S&P's strict remit towards rated entities, the general picture of the Gulf's finances is unmistakeable.
The sort of money being generated in this region by historically expensive oil is mind-boggling, as you wouldn't expect a rating agency to say. The region might like to get used to it. Certainly, Opec favours the idea of trying to support prices at these levels, now that it knows the world can live with it.
It needs also to get used to the idea of managing those riches. It's the sort of problem some parts of the world could only envy.
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