Arab economies' BOP in surplus

Lower oil prices and the September bombings in the U.S. depressed Arab economies in 2001, but their balance of payments remained in surplus and overseas financial reserves recorded a sharp growth, according to official figures.

After a mammoth growth of 12.6 per cent in 2000, the GDP of the Arab countries slipped by 1.9 per cent from $725.7 billion in 2000 to around $712 billion in 2001, showed the figures published in the 2002 Arab economic report.

The decline was caused by a sharp fall in oil revenues from around $193 billion to $152 billion due to lower prices and production in addition to a contraction in total Arab trade because of a slowdown in global economies following the September 11 bombings.

"The Arab economies were affected in the last quarter of 2001 by the September 11 events in the U.S., which had an adverse impact on international economic activity and commercial exchange as well as the ensuing turmoil in global stock markets and the decline in capital flows into the Arab states and other countries," said the report, published by the Abu Dhabi-based Arab Monetary Fund and two other Arab League institutions.

The report gave no breakdown but the UAE and other Gulf states suffered from a slowdown in their economies last year after recording one of the highest growth rates in 2000.

In other members, the GDP recorded modest real growth last year as they press ahead with reform programmes involving attracting investment and expanding the private sector.

Experts said the contraction in the combined Arab GDP last year was nominal as it was caused mainly by a decline of around $4 in crude prices. They noted that some non-oil member states recorded positive growth rates in 2001 while there was real growth in most non-oil sectors in the UAE and other Gulf oil producers.

The report showed total Arab exports plunged to around $236.1 billion in 2001 from nearly $257 billion in 2000 while imports recorded a lower growth as they increased to around $163.8 billion from $156.3 billion in the same period.

This cut their combined trade surplus from around $100.7 billion in 2000 to $72.3 billion in 2001 but it remained the second highest trade surplus since the 1981 oil boom.

"This achievement reflects Opec's success in preventing a collapse in oil prices by controlling crude supplies... it was also a result of an increase in gas and petrochemical exports, growth in other exports by some members and a generally modest growth in imports in the Arab region because of economic restructuring programmes," the report said.

It said the small increase in imports combined with relatively high non-oil exports and a decline in the services and income balance as well as in transfers to keep the surplus in the current account, which recorded around $46.8 billion in 2001.

This compares with nearly $64 billion in 2000, the highest current account surplus in 20 years.

It said such a surplus allowed the Arab countries to achieve a surplus in the balance of payments of around $17.9 billion and to boost their financial reserves by 14.4 per cent to around $117.1 billion at the end of 2001.

Such developments also had a positive effect on the Arab debt situation as it slipped to around $142.2 billion at the end of 2001 from $143.8 billion at the end of 2000. The decline pushed the ratio of debt servicing to exports to 14.5 per cent from 15 per cent.