Qatar's budget surplus sank to QAR 13.6bn (USD 3.7bn) in FY11, which ended in March, comprising 2.9% of estimated GDP, from QAR 54.1bn the year before, the central bank said late Tues. The surplus remained above the initial forecast of QAR 9.7bn. Total spending rose 24% y/y to QAR 142.4bn, going 21% above the initial forecast, and revenue fell 8% to QAR 156bn, coming 22% above government projections.

The new FY12 state budget envisages a 19% y/y increase in spending to QAR 140bn (USD 39bn) as the government sustains its expansionary policy to keep double-digit economic growth. Revenue will increase 27% y/y to QAR 163bn based on a conservative oil price of USD 55 per barrel, the same as a year earlier. The new budget sees QAR 55bn (41% of total) of spending on infrastructure projects. Qatar envisages USD 125bn of infrastructure spending over the next five years as it benefits from high hydrocarbon prices, according to the new national development strategy. The strategy forecasts 15.7% real GDP growth in 2011 before a slowdown to 4.7% in 2014.

Oman will hike spending by 9% y/y to OMR 8.9bn (USD 23.0bn) in 2012 to help meet rising social needs and finance new infrastructure projects, a senior Finance Ministry official was cited saying by Reuters late Tues. The budget deficit will, however, remain at OMR 850mn, the same as in 2011, due to higher oil output and prices, the official added. Oman initially forecast an OMR 8.13bn state budget in 2011 but was forced to increase social spending to quell recent social unrest. The GCC also pledged a USD 10bn ten-year aid package to help Oman meet budget needs and cover higher subsidies. The 2011 state budget assumed a USD 50 per barrel oil price but higher hydrocarbon prices might help the non-OPEC member achieve a budget surplus.

Dubai World property developer Nakheel will issue its long-anticipated AED 4.8bn (USD 1.3bn) Islamic bond this week after getting 100% creditor approval for its USD 13bn debt restructuring program, company chairman Ali Rashid Lootah was cited saying by local media Wed. The five-year debt restructuring plan will be launched Wed., he added. The sukuk will be issued in one stage but the distribution process might take up to three months, Lootah said. The issue has been delayed several times. Nahkeel initially planned to do the issuance by end-June. Deutsche Bank will manage the sukuk. The debt restructuring deal stipulates a 40% cash pay-back and 60% in the form of a sukuk. The Dubai government will take over Nakheel after the debt restructuring process is finished.

Saudi Arabia's real GDP growth should quicken to 6.5% y/y in a "favourable" move in 2011, though authorities should focus on maintaining fiscal sustainability, securing broad-based growth and enhancing job creation in the medium term, the IMF said in an Article IV report published Tues. The fund expects GDP growth to pick up from 4.1% in 2010, which itself was well up from 0.1% the previous year. GDP growth is to be supported by the oil and non-oil sectors, higher public spending and a global demand recovery.

The IMF applauded the kingdom's "stabilising role in the oil markets," underscoring positive spill-over effects of Saudi policies on regional and global economies. The fund likewise backed Saudi's decision to use oil income to help tackle social issues, mainly in housing and unemployment, and enlarging the social safety net. The IMF, however, urged the government to carefully monitor potential inflationary pressures. The fund also warned that recent public spending initiatives increased vulnerability to a sustained decline in the oil price. The fund called for further private sector activity to enhance the impact of higher spending. The establishment of a formal medium-term expenditure framework, backed by a macro-fiscal unit, would help strengthen the implementation of fiscal policy over time, the IMF noted.

The IMF did welcome Saudi efforts to boost budget revenue, including modernising tax administration and further progress towards a GCC-wide VAT. The fund also highlighted the importance of gradually reforming domestic energy pricing. The IMF praised the central bank's "effective" supervision and regulation of the financial system. Such policies helped boost the banking system's resilience to recent shocks, the fund said. It applauded authorities' "strong efforts in combating money laundering and the financing of terrorism."

On the currency peg to the USD, the IMF said such a policy provided a credible nominal anchor while facilitating investment and financial sector development. The fund welcomed the government's new strategy to stimulate job creation in the private sector, which it said would allow reducing reliance on the public sector to absorb domestic labour. The fund also called for final approval of a new mortgage law to enhance access to housing finance.

IMF's macro forecasts

2010 2011F GDP 4.1% 6.5% GDP (oil) 2.2% 9.4% GDP (non-oil) 4.9% 5.4% CPI 5.4% 6.0% Budget surplus 5.2% 9.3% CA surplus 14.9% 20.1%

Source: IMF

Bank of Israel has warned the commercial banks of inadequate loan-loss provisions which do not reflect real risk, the business daily Globes reported on Wednesday. The provisions for credit losses included in the financial reports for Q1 2011 do not meet the Banking Supervision Department's expectations, and they do not reflect the latent risk in the banks' credit portfolios, the head of the banking sector monitor Zaken has reportedly said. Loan-loss provisions amounted to 0.03% of the aggregate credit portfolio in Q1, compared with 0.4% in 2010. Such remarks by BoI officials are extremely rare, and they are usually made obliquely, not bluntly. The Bank of Israel is apparently worried about the sharp increase in real estate and housing credit which could quickly slide in to the bad loans category, if incomes decline due to a slowdown of economic activity.

FinMin Steinitz said on Tuesday to Reshet Bet radio the budget framework must not be breached, in response to the demands by the social protesters. He said that the Western world was undergoing a second economic crisis that is liable to affect Israel. Steinitz outlined as major challenges to authorities encouraging exports, investment, and jobs, and preventing mass unemployment. Steinitz spoke about the need to stimulate economic growth and preserve existing growth engines in order to overcome the second wave of the crisis. Steinitz avoided any direct reference to the demands for social justice and a different distribution of resources made by protesters. Social protests maintain a low profile due to the ongoing rocket attacks from the Gaza on South of Israel. Nevertheless, the demonstrators are still calling for a million-person march in 50 cities across the country on Sept 3. 

Some 74% of Israeli exporters expect a recession in the US and Europe, in the wake of the US credit downgrade and the debt crisis in Europe, according to a survey conducted by the Israel Export and International Cooperation Institute. 69% expect a serious drop in exports, and 60% expect a drop in export profit margins. 64% of exporters say that the debt crisis in Europe poses a greater danger to Israeli exports than the US credit downgrade by S&P, while 19% of exports believe the opposite. In response to questions about how they plan to deal with the crisis, 16% of exporters said that they plan to freeze or cut employees' salaries, 12% will change their work plans or cut their budgets, and 10% will fire employees. 50% of exporters described their moods as ‘anxious’ and 11% 'frustration'. 30% are worried that the government will cut its budget for encouraging exports in favor of financing socioeconomic reforms.

The slide of exports will further worsen Israel’s trade balance which is currently suffering from rapidly growing imports due to the currency appreciation in the previous months and easing global demand. Israel’s high-tech exports are most vulnerable to fluctuations in demand and will be most significantly affected by a slowdown or recessions of the US and EU economies. Manufacturing exports growth slowed down to 5.7% y/y in July from 6.9% y/y June and 16.2% y/y in May falling behind imports growth rates.

The person-night at Israeli recovered in July to 4% y/y in July up from 0.1% y/y decline in June, according to preliminary figures released by the Central Bureau of Statistics (CBS). Foreign tourist visits were up moderately by 0.8% y/y in July improving from 3.3% y/y average decline in Apr-July. The number of tourist night spend by domestic visitors increased by 5.6% y/y. The seasonally adjusted data, also shows recovery as foreign tourist nights have risen by 4.8% y/y boosting overall growth to 2.9% y/y. The growth of tourist nights in July was largely expected due to the waning high-base effects which dampened growth in the previous months. We expect that positive effect to remain in August but the outbreak of violence at end of the month and the rocket barrage from Gaza on South of Israel will likely reduce foreign tourist visits. Still, domestic tourism remains relative resilient to security threats.

Jordan's trade deficit expanded 27% y/y to JOD 3.53bn in January-June from JOD 2.78bn a year earlier, the stats office DoS said Wed. The deficit will likely widen further in H2 given rising food, oil and electricity imports. Retreating Egyptian natural gas imports, on which Jordan relies to generate 80% of its electricity needs, also boosted imports in H1. Jordan imports nearly 96% of its energy needs at a cost of one-fifth of GDP, according to official estimates.

Exports (including re-exports) increased 16% y/y to JOD 2.84bn, boosted by rising sales of crude potassium, phosphates, apparel, fresh produce and pharmaceuticals. Seasonal factors, rising commodity prices and external demand drove exports in the period. Apparel exports, mainly to the US, ranked first at JOD 326mn, followed by potassium (JOD 271mn), vegetables (Iraq and GCC -- JOD 225mn) and phosphates (JOD 206mn). Iraq remained the main export market, buying JOD 413mn worth of goods in the period. The US came second with JOD 336mn, Saudi Arabia was third (JOD 220mn) and India took fourth (JOD 218mn).

Imports climbed 21% y/y to JOD 6.37bn, fuelled by rising energy, iron and grain imports as commodity prices increased and private consumption strengthened. Demand for durable and intermediate goods also rose. Crude oil purchases accounted for JOD 976mn, followed by machinery and electrical appliances at JOD 552mn. Transport items came third at JOD 375mn and steel purchases took fourth at JOD 340mn. In H1, total fuel imports (crude oil and derivatives) climbed 73% y/y to JOD 1.79bn. Electricity imports jumped a record 650% y/y to JOD 105mn due to periodic interruptions of cheaper Egyptian gas supplies. Saudi Arabia continued to be the main import market, forwarding JOD 1.49bn of products, mainly hydrocarbons and plastics. China followed with JOD 637mn, Italy was third on JOD 383mn and the US came fourth with JOD 356mn. Jordan imported JOD 1.8bn (28% of total purchases) worth of goods from the GCC and exported JOD 346mn.

Jordan's cabinet approved a JOD 584mn (USD 824mn) budget supplement to help cover rising food and energy subsidies and recently introduced social incentives, according to a late Tues. statement. The new expenditure will be covered through external grants and financial aid and will not impact the forecast budget deficit, Finance Minister Mohammad Abu Hammour said. The government also plans to sell Islamic bonds in H2 to meet budget needs. The 2011 state budget forecasts a JOD 1.16bn deficit, comprising 5.5% of GDP. The revised budget includes the recently approved JOD 460mn budget supplement for food subsidies and wages and cuts of the sales tax on fuel derivatives. Jordan has received JOD 1.03bn (USD 1.45bn) in grants and financial assistance so far in 2011, Abu Hammour said. It expects USD 2.9bn in regional and foreign aid, he added. The funds will help Jordan cope with retreating tourism income and remittances.

The new budget supplement includes JOD 80mn in grants to public employees on the occasion of Eid El-Fitr (end of Ramadan), which starts next Tues. Another JOD 25mn was approved to help launch King Abdullah's JOD 150mn development fund to help finance infrastructure and social projects across the kingdom. Some JOD 384mn will be spent on food, livestock and energy subsidies.

Tunisia's army has stepped up its presence along the border with Libya as precaution, the Defence Ministry said. Major Colonel Mokhtar Ben Nasr told media that two border crossings had been closed for security reasons amid fighting between Libyan rebels and Muammar Gaddafi's forces. The official also commented on weekend clashes between security forces and an armed Libyan group that infiltrated Tunisian territory. He said a search operation for the gunmen was launched but failed to produce any result. The official suggested the group could have fled to Algeria. Tunisia dropped its neutrality this past weekend and decided to recognise Libya's rebel National Transitional Council as the sole legitimate representative of the Libyan people.

The EU approved Tues. two new programmes worth EUR 110mn to help economic recovery in Tunisia. The first programme amounting to EUR 90mn will support the government's measures to restore economic growth and is aimed at the most vulnerable social groups and underdeveloped regions. These measures will also be funded by loans from the World Bank, the African Development Bank and the French Development Agency. The remaining EUR 20mn will be destined to increasing the competitiveness of the Tunisian economy and modernisation of the service sector.