Oil 1 Peak Oil 21
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SAUDIS NOT OIL DEPENDENTECONOMY WILL SURVIVE PRICE DIP-- NON-OIL BASED ECONOMIC REVENUE NOW AME Info, 03/11/07 “Saudi economy becomes less dependent on oil” http://www.ameinfo.com/113150.html In just three years Saudi national income has almost doubled from $188 billion to $348 billion. Saudi GDP in 2006 was 4.2 per cent and even with reduced revenues is expected to be 3.5 per cent in 2007. Most observers say that even if there is a fall in oil output the country's economy will remain extremely robust. King Abdullah Economic City, a $26.6 billion project. King Abdullah Economic City, a $26.6 billion project. related stories Dedicated Saudi Arabia Focus RSS feed Saudi Arabia Non-oil private sector growth is expected to grow by around 6 per cent this year and be the Kingdom's main engine of economic expansion along with government spending. Since joining the World Trade Organisation Saudi non-oil exports, mainly petrochemicals, have risen 13 per cent to a value of $20 billion. Significantly foreign direct investment in the Kingdom has more than doubled to $5.6 billion There have been no sudden dramatic adverse effects on agency agreements and the trading sector as a result of membership of the World Trade Organisation. This is helping to underpin Saudi Arabia's economic reform programme. Free trade Fawaz al-Alamy, who led negotiations for Saudi Arabia's accession to the WTO treaty states: 'We have always believed in free trade but we need to open up further. We found out after the previous boom and last decline that oil is a volatile commodity and we cannot keep a country hostage to it.' Saudi Commerce and Industry Minister Hashim Yamani says that the Kingdom is focusing on development of an attractive investment environment pointing out that corporate tax on foreign-owned firms has been reduced from 45 per cent to 20 per cent. The Kingdom is also encouraging consolidation of smaller domestic establishments and creating economic alliances within these to enhance efficiency and foster new industries. At the recent Jeddah Economic Forum the minister stated that the objective is to place the Kingdom within the first and foremost 10 competitive nations worldwide by the end of 2010. This ambition is based on the Kingdom's comparative advantage in energy and potential for new industries. The Saudi investment body SAGIA points out that the Kingdom possesses 25 per cent of the world's oil reserves but only has 2 per cent of its energy-intensive industries such as aluminium. Saudi production of the metal could account for 15 per cent of global supplies by 2020 predicts Fahd al-Rashid SAGIA's deputy governor. New cities New cities built specifically to meet the needs of industry and the business community are also expected to attract investment, develop a much broader economy and not least provide the job opportunities the Kingdom's young population requires. Initial works are already underway on King Abdullah Economic City on the Red Sea. The $26.7 billion development is one of six such city developments so far unveiled. When the new cities are up and running in the next 15 years they could have a total population of 4.5 million and generate income of $150 billion. Brad Bourland chief economist of Saudi American Bank Financial Group believes that they will be quite viable commenting 'there will not be any white elephants built in the desert. Decisions will be driven by businessmen.' GLOBAL ECON LOW NOWGLOBAL ECONOMIC DECLINE NOW BECAUSE OF US RECESSION Brad Bourland, Chief Economist & Head of Research Jadwa Investment, “Impact of the Weak Global Economy” 4/3/08 http://www.saudi-us-relations.org/articles/2008/ioi/080403-bourland-economy.html Global economic conditions have deteriorated significantly. It appears that the US, the world’s largest economy, has stopped growing. Other leading global economies are faltering, banks are being forced into huge write-offs and financial markets are exceptionally volatile. The outlook is uncertain, although it is clear that global growth will slow from the robust levels of recent years. Saudi Arabia has felt some impacts from the global downturn, although these have been more through financial channels than trade linkages. In contrast to the usual behavior of oil prices during periods of global downturn, this time they have continued to rise. We expect oil prices to go down, but not to levels that would threaten the economic outlook. Indeed, the internal momentum within the economy is sufficient that global economic conditions may affect the pace of growth, but will certainly not derail it. Movements in Saudi share prices will maintain their closer relationship with global stock markets and the performance of Saudi companies that earn the majority of their revenue from abroad is likely to be affected. US ECON LOW NOWUS ECONOMY HAS DECLINED IN ALL AREAS Brad Bourland, Chief Economist & Head of Research Jadwa Investment, “Impact of the Weak Global Economy” 4/3/08 http://www.saudi-us-relations.org/articles/2008/ioi/080403-bourland-economy.html Global Economic Problems When we first looked at the problems in the US sub-prime mortgage market and their impact on Saudi Arabia, we did not think that the US economy was heading for recession (see our September 2007 Monthly Bulletin). Things have changed. Back in the third quarter of last year the housing market had already been struggling for some time; house prices were falling and the residential investment component of was GDP declining. This was primarily because the end of a period of very low interest rates in late-2004 coincided with a large number of new housing units coming on-stream. In order to maintain demand, lending standards were relaxed so that mortgage finance become available to borrowers with weak credit and little regular income (loans to this category of borrower were known as “sub-prime”) often in deals that involved an initial period of low interest rates. These loans were bundled together and carved up in various ways to create debt instruments that were traded widely between banks. As interest rates rose and the introductory period of low rates lapsed, an increasing number of borrowers defaulted on their mortgage repayments, raising concerns about the creditworthiness of associated debt products. These worries were compounded by the broad dispersion and complexity of the debt instruments, making banks unclear about their own and their counterparties’ exposure to affected debt. Faced with this uncertainty, banks became reluctant to lend to each other and keen to dispose of their holdings of other asset-backed securities, whose value declined sharply. With the credit strains spreading and new exposures coming to light, bank write-offs have mounted. By mid-March global banks had written off in excess of $175 billion of sub-prime related exposures. US bank earnings collapsed to $5.8 billion in the fourth quarter of 2007 (their lowest level since 2001) from $36.7 billion in the second quarter owing to the effect of defaults and higher provisioning for further losses. The fragility of the financial sector is illustrated by the fate of US investment bank Bear Stearns, which was bought out by JP Morgan on March 16 amid fears it would collapse. Only four days earlier that bank had said that its liquidity position was strong, nonetheless, other banks lost confidence in it and cut credit lines. JP Morgan initially offered $2 per share for Bear Stearns, one-fifteenth of its value the last day it was traded; this offer was subsequently revised up to $10 per share, still only a small fraction of the all-time high it hit last year of $173 per share. The US central bank (the Federal Reserve, “Fed”) has tried to offset the impact of worsening credit conditions by reducing interest rates and providing additional liquidity (often in co-ordination with other leading central banks). The 75 basis points (0.75 percentage points) cut in the Fed funds rate on March 18 brought it to 2.25 percent, down from 5.25 percent in mid-September. However, these actions have not had the desired effect. Many corporations now face higher borrowing costs than prior to the recent Fed cuts as the premium they have to pay over the government to borrow has risen by greater than the reduction in the Fed funds rate. Troubles in the housing sector have also spilled into the rest of the economy. According to estimates by the American Enterprise Institute, a 10 percent fall in house prices lowers wealth in the US by $2.25 trillion (15 percent of GDP); the benchmark Case-Shiller index of US house prices was down by 10.7 percent in annual terms in January. The decline in the value of housing wealth has contributed to retail sales falling in two of the last three months and consumer confidence dropping to a 16-year low. With employment declining for the first time since mid-2003, industrial production and service sector output dropping and defaults on commercial and industrial borrowing growing at their fastest pace since 2001 the signs are that the US economy is in recession. What Is A Recession? Although it is one of the most commonly used economic terms, there is not a clear definition of what constitutes a recession. Most economists consider a recession as two consecutive quarters over which the economy shrinks. However, this measure does not take into account periods where economic growth fluctuates around zero but does not stay below it for two quarters in a row. The National Bureau of Economic Research, the body officially responsible for determining the timing of US recessions, examines incomes, employment, industrial production and wholesale and retail sales when making its judgment. Ascertaining when an economy has entered and exited a recession is also not simple. This is because economic data is regularly revised. The timing of the last US recession was not finally determined until almost two years after it ended. It is therefore not possible to accurately say whether the US economy is currently in recession, but even if it is not there has clearly been a significantly slowdown in economic activity that will reverberate throughout the world. Directory: file -> view view -> Western Europe after wwii view -> Author study: paul fleischman view -> Qpa1 7ela study Guide view -> Arctic Oil/Gas Neg view -> November 1970 Approximately 150,000-500,000 deaths Bhola Cyclone Bangladesh view -> Grade Level: 6 Unit of Study: Caribbean glce view -> Citation: Duffield, Katy view -> Table of Contents Lesson # view -> Chinese Wind Energy Disad Download 9.54 Mb. Share with your friends:
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