Higher growth for Saudi economy
Saudi Arabia expects economic growth in 2005 to clearly beat last year’s 5.2 per cent with particular strength coming from the private sector, central bank chief Hamad Al Sayyari said.

He also said officials were closely watching for signs that surging prices on the Saudi stock market have created an “asset bubble”.
“I’m confident that (growth) will be noticeably better than last year,” Al Sayyari, governor of the Saudi Arabian Monetary Agency (Sama), said.
“The indicators we observe of all sectors point to very strong growth, which makes me expect a stronger rate — at least in the private sector definitely,” he said. Record oil prices have boosted the economy of the world’s biggest crude exporter, which last year boasted a budget surplus of SR107 billion ($28.5 billion), its second consecutive surplus after two decades of almost continuous deficit. But Saudi officials and economists say the kingdom’s gradual economic liberalisation is also helping fuel growth outside the oil sector.
Samba Financial Group forecast in July real GDP growth would hit 6.5 per cent this year — 7.1 percent in the oil sector and 7.4 per cent in the non-oil private sector.
“The momentum is in investment, and it’s across the sectors,” Al Sayyari said.
Sama has used some of its surplus cash to cut Saudi Arabia’s government debt as a proportion of GDP to around 66 per cent from 119 per cent five years ago.
Al Sayyari said there was no specific target for the debt level, but said Sama will continue to cut while it can. “The objective is to bring down the debt as low as the revenue will allow,” he said.
Saudi Arabia’s record oil revenues have also helped drive prices on the kingdom’s stock market to record highs.
Prices have risen five-fold in the last three years, raising total capitalisation to $576 billion and making it one of the world’s biggest emerging markets. Several traders predict a correction is coming, at least in some sectors.
Al Sayyari said there were solid fundamental reasons behind the gains, but Sama was prepared to tackle any fallout from a sharp drop if it should happen.
“There is concern that there is an asset bubble. It is driven by profits, by optimism, by investment, by oil prices. All these are positive but we got concerned about the asset prices,” he said.
Al Sayyari said Saudi banks remain in a strong position and have no “risky exposure” to the stock market or asset valuations. “They are liquid and they have a high level of provisions.

Bahrain tops in FDI
Bahrain has been ranked best among all Arab countries for its foreign direct investment (FDI) performance by a UN report. The kingdom is placed third among all Arab countries for its potential FDI performance.
Bahrain’s ranking was announced in the World Investment Report 2005 released by the UN Conference on Trade and Development (Unctad). Bahrain was chosen to be the regional source for the announcement of the influential publication, following its exemplary performance in the FDI world rankings in the 2004 report.
The annual report delves into the recent trends in FDI flows and explores the emerging internationalisation of research and development by trans-national corporations, highlighting the driving forces and implications, especially in and for developing countries.
Bahrain was ranked 27th in this year’s world FDI rankings, performing better than expectations for its previous FDI flow. The ranking position is an indicator of a country’s attractiveness as a potential investment opportunity.
Last year saw $10 billion go to the West Asia region, which includes the GCC. Of this almost $900 million flowed into Bahrain, which is considered to be extremely healthy for a country of its size.

Big surplus for Kuwait
Kuwait may register a record budget surplus of up to KD7.6 billion ($26 billion) in the fiscal year to March 2006 if high oil prices hold, the country’s leading bank said in a report.
The latest projection from the National Bank of Kuwait (NBK) outpaces earlier estimates it made mid-year that it expected the surplus to be about $18 billion.
“With respect to Kuwait’s current fiscal year ending March 2006, NBK expects the KEC (Kuwait Export Crude) average to range between $51.2 and $54,” NBK said in its latest report, adding it was based on three different scenarios.
“As a result, NBK expects government revenues to come in between KD13.6 billion and KD14.4 billion.”
Assuming that actual expenditures cover between 94 per cent and 97 per cent of budget projections, “Kuwait could reap a surplus between KD6.6 billion and KD7.6 billion,” before the allocation of 10 per cent of revenues to the Reserve Fund for Future Generations, a rainy day fund,” NBK added.
NBK’s base-case scenario, where KEC averages $53.4 during the period, yields a KD7.3 billion surplus, the bank said.
According to government statistics published in August, Kuwait recorded a budget surplus of KD2.64 billion for the fiscal year that ended in March 2005, thanks to high petroleum prices.
Oil sales account for 85 per cent to 90 per cent of Kuwait’s revenues and about half of GDP in the Opec nation, which controls just about 10 per cent of global petroleum reserves. Kuwait is believed to be producing crude at a maximum capacity of about 2.7 million barrels per day currently.

GCC salaries up 7pc
Salaries in GCC countries rose an average of seven per cent in the year to August, adding to the cost of doing business in the region, a survey showed.
If the trend continues businesses may relocate or outsource some of their operations to cheaper parts of the world, said GulfTalent.com, the online recruiting agency that conducted the study.
The survey attributed the pay hikes to rapidly growing economies, rising inflation and a limited supply of skilled employees.
“Salaries will continue to rise over the next year, (and) higher salaries may in turn lead to further inflation as employees with bigger pay checks spend more money,” said GulfTalent.com.
“If the trend continues in the long term, the growing costs of operating in the Gulf may force some businesses to relocate elsewhere, or to outsource their non-customer-facing operations to other cheaper parts of the world.”
The report showed Qatar led the way with a 7.9 per cent rise in pay, while Oman had the lowest increase of 5.9 per cent.