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Regional Views - Newly Industrialized Asia: A good precedent for the GCC
Arabia Monitor, September 2012, Pages: 2
The Regional Views series are thematic papers aimed at identifying and analyzing factors behind medium to long-term economic trends shaping the region. Our analysis draws conclusions that help businesses and investors get ahead of the curve. As a firm staffed by Middle Easterners, we focus on insight rather than standard analysis.
With growing economic interconnection affecting global operations by geo-political and macroeconomic changes in MENA, even executives with no direct presence in the region can no longer afford not to keep abreast with the developments in this dynamic market.
Arabia Monitor's executive-friendly, independent coverage is conducted by Arabic speaking analysts with native expertise, benefitting from a local understanding of one of the world's most complex regions to present insights and projections on MENA economies and their implications on markets and investment prospects.
By adopting a forward looking perspective the report places recent developments within a broader context and a long-term view, to help investors make informed decisions on how best to hedge risks and capitalize on opportunities in the MENA region.
HIGHLIGHTS FROM THE REPORT
Looking beyond the short term "noise" we carry out a comparison between the GCC and Newly Industrialised Asian countries (NIA), applying a 20 year lag where relevant. We find opportunities and challenges, but an encouraging picture overall.
- Despite a lower investment rate, the emerging GCC's output has kept pace with that of the NIA, especially given that the Great Recession starting in 2008 involved the largest economic drawdown globally since the Great Depression, whereas in the comparable period NIA went into an economic drawdown during the Asian Crisis (1997-98) during a less fragile global outlook.
- The lower need for external finance also puts the GCC, and should put oil importers given appropriate intra-regional financial mechanisms, ahead of other transition regions of the world, such as the NIA, Eastern Europe and Latin America during their respective transitions.
- But challenges, apart from the quality of regional public investment, remain numerous: The GCC faces continued output volatility as diversification strategies strive to accomplish their targets, given the region's high reliance on crude exports.
- The MENA region (and GCC) will have to navigate, economically and politically, much more choppy waters over the next decade than other transition regions did in the past, not just for region-specific reasons, but more globally due to the volatility in global growth exacerbated by post-Great Recession leveraging of sovereign balance sheets in the industrialized regions, two of which (the US & EU) continue to account for almost 50% of global GDP.
Saudi Arabia, United Arab Emirates, Qatar, Bahrain, Kuwait, Oman, Taiwan, Hong Kong, Korea, Singapore, Brazil, Turkey, Japan
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1. Recency Bias
2. Connecting the dots
3. Input-led growth in the GCC stacks up well vs. emerging markets like Turkey & Brazil
4. The appropriate historical precedent for the establishment of a new bloc's economic supremacy is the post-World War I period
5. New kids on the block – BRICs, non-Japan Asia & the GCC
6. In a tough environment, the GCC's sovereign balance sheet strength will be a key differentiator from NIA's transformation period
7. Key risks include technological innovations in shale gas extraction & terms of trade shocks
Arabia Monitor is an independent research firm specialized in macroeconomic and geopolitical studies on the MENA region, the new emerging market. The analysis is based on the macroeconomic and financial balance sheet of Arab countries delivering unique strategy insights and forecasts to businesses across a wide range of sectors.
The team is led by Dr Florence Eid, formerly VP & Senior Economist for MENA at JP Morgan, and has worked with the World Bank on Latin American and North Africa. Dr. Eid sits on the Board of Directors for the Arab Banking Corporation International Bank in London and on the Advisory Board of QFinance. She is a Patron of the Contemporary Arts Society in London and holds a Ph.D. in Organization Economics from the Massachusetts Institute of Technology (MIT).