The “Arab World” includes 22 countries in the Middle East and North Africa that form the Arab League and have a population of over 350 million. (File photo)
Poking at the Beast: How much is the Arab world worth?
EMAN EL-SHENAWI, Al Arabiya
Published: 05 May 2011
Behind the numbers and economic jargon used to understand Middle East economies, a giant money beast lives and breathes. In some countries, the beast surges with strength to power through financial turbulence. But in other quieter Arab economies, they tell a more sluggish and less beast-like financial story.

With a mix of poverty and affluence, the Middle East is peppered with economic complexities; one might question how much the beast is actually worth?
The “Arab World” includes 22 countries in the Middle East and North Africa that form the Arab League and have a population of over 350 million, according to United Nations estimates.

As a breakdown of their value, the World Bank classifies Arab countries into income brackets. These brackets are low, lower middle, upper middle and high-income countries.

In the classification, the high-income Arab countries are Bahrain, Kuwait, Qatar, Saudi Arabia, and the United Arab Emirates. They are wealthy oil exporters that individually export up to 8.5 million barrels per day, which is the case for Saudi’s current oil exports.
The Arab World’s foreign assets are expected rise to a burgeoning $2.2 trillion this year, according to the Institute of International Finance (IIF), with the Gulf amassing $1.7 trillion of that amount. The figure reflects the substantial indebtedness of the region as it measures the value of the assets owned abroad, minus the value of the domestic assets owned by foreigners.

But the region is also a key trillion-dollar sovereign wealth fund player. More than one-third of the region’s gross foreign assets are held by sovereign wealth funds; state-owned investment funds that use financial assets such as stocks property, precious metals.

The biggest economies in the region are Saudi Arabia and Egypt respectively, measured by Gross Domestic Product (GDP) in real terms.

GDP is a measure of total national economic activity. It sets out the market value of all goods and services produced within a country in a given period. It is most commonly considered an indicator of a country’s standard of living.

The largest economy, Saudi Arabia, with an estimated population of 25 million, has an annual GDP of $622 billion. Meanwhile Egypt, with a population of about 82 million, has an annual GDP of $500 billion. But neither Saudi nor Egypt has harnessed the highest growth rates in the region; a big economy does not mean highest growth. Qatar is the highest growing economy with a GDP per capita of $145,300.

GDP per capita (per person) is the total GDP divided by the resident population. It is widely used as an indicator to measure economic growth.

Despite having a smaller economy, Qatar has been able to boost its growth to surpass the top industry players, such as Kuwait, partly because of its smaller population. With a population of 1.5 million its GDP reaches only $122.2 billion. But because of its spiraling GDP per capita, Qatar tells a powerful growth story.

By grouping all the latest GDP figures, the Arab world is estimated to be worth at least $2.8 trillion in 2011, a beast indeed. The World Bank through the years, spotting important trends, tracked the total Middle East and North Africa GDP.

From 1980 to 2004 the Arab world told a sluggish economic story. Real GDP per capita in the Arab countries rose by a mere 6.4 per cent over the entire 24-year period (i.e. by less than 0.5 per cent annually).

But this picked up in 2003 to 2006. The Middle East and North Africa region averaged economic growth at 6.2 per cent a year, its strongest growth in 30 years, reflecting an extraordinary jump in oil revenues at the time.

When crisis hit in 2007 (the global financial crisis had flowed from the subprime mortgage crisis in the United States) GDP growth for the whole region slipped to 4.9 percent from external shocks from the global recession affecting exposed Arab countries.

But the future looks bright for the richest Arab economy. In 2011, Qatar is expected to soar by 19 percent, according to John Sfakianakis, chief economist at Banque Saudi Franci.

“The economy is still small compared to Saudi but its economic growth is high and will remain high,” he said.

Mr. Sfakianakis’ estimates put Saudi Arabia’s growth at 5.5 percent in 2011, meanwhile the politically crisis-swept Egypt, will experience slower growth at 1.9 percent.

He added that Qatar’s natural gas reserves, infrastructure expansions and government investments, including investments leading up to the World Cup in 2022, would drive the economy further.

Moving down the scale, the Arab world’s upper middle-income group includes Lebanon, Libya, and Oman.

Meanwhile, the remaining states are low-middle income countries—namely, Algeria, Djibouti, Egypt, Jordan, Morocco, Syria and Tunisia.

Despite having the second largest economy, Egypt is still placed at low-income due to poverty and high unemployment rates. Estimates in 2005 suggested that 20 percent of the country’s population was below the poverty line, although this is believed to have significantly increased since.

At the end of the spectrum, low-income countries include Mauritania, Sudan, and Yemen.

Turning his attention toward the troubled hotspots in the Middle East, Mr. Sfakianakis gave a bleak outlook for the economies hit by the ongoing civil unrest and their geopolitical aftershocks.

“I expect zero or near-zero growth in Tunisia and Libya,” he said.

Ultimately, the vivacious Arab economies show great diversity between the rich oil states and the poorer countries. The GDP per capita of the Qatar is 73 times higher than that of Mauritania, for instance. While Saudi’s economy accounts for nearly 25 per cent of the total Arab GDP. Yet they are all bound together in the same band: the Arab League.

However, the total worth of Arab economies at $2.8 trillion does not mean much when compared to countries in the rest of the world. Germany for example, with a much smaller population than the Arab world (81 million), has a GDP of $2.9 trillion.

Still, the Middle East beast remains wide awake, as oil and natural gas-rich states continue to boom. But smaller countries in the Arab world form the beast’s weaker limbs. They serve as a reminder that the world of economics is a colorful collection of data that can tell several stories all at once.

(Eman El-Shenawi of Al Arabiya can be contacted at eman.shenawi@mbc.net)
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