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The US Foreign Account Tax Compliance Act (Fatca), which is intended to prevent tax evasion by Americans living abroad, will be applied to all financial institutions operating in the Gulf Co-operation Council (GCC) region from July 2014, obliging banks to provide details and personal data on the accounts of all US citizens, Green Card holders and entities controlled by US citizens as signatory authorities. Some smaller institutions have already seen it as a burden too many, and have started to refuse business from potential Fatca targets.

Deputy prime minister and finance minister Sheikh Salem Abdulaziz Al-Sabah criticised Kuwait’s bloated bureaucracy and inefficient labour market on 7 October, repeating views he expressed before resigning as governor of the central bank.
Interestingly, his comments were carried by state news agency Kuna, although the headline, ‘Kuwaiti economy “strong and stable”’, highlighted a different aspect of what was his first extensive public policy statement since taking charge at the ministry in August (GSN 953/8). 
Sheikh Salem did, indeed, say Kuwait’s economic situation was predominantly strong and stable, pointing to a KD12.7bn ($44.8bn) surplus for the 2012-13 financial year ending in March, representing 24.7% of nominal GDP for 2012.

It is still far too soon to talk about a peace dividend in Iran, but there are signs the political optimism sparked by renewed efforts to resolve the nuclear problem has begun to spill into the economy. The stock market has been hitting record levels and the currency is stabilising as people sense that the latest round of international negotiations might add up to more than just idle talk (see page 5). Allied to that, President Hassan Rouhani’s new cabinet has been taking a far more professional approach to managing the country’s domestic problems.

New projections from the International Monetary Fund (IMF) confirm that the Gulf economies are experiencing something of a buffeting in 2013, with reduced momentum in the oil sector sapping headline growth. The IMF projects real economic growth in the Gulf Co-operation Council (GCC) of 3.7% in 2013, substantially below the 6.4% average in 2010-12, though with 2014 shaping up as a better year, there is certainly no cause for panic.
The narrative is familiar to long-term observers of the fluctuating fortunes of the oil-dependent Gulf economies.

Qatar has experienced a remarkable growth trajectory over the last decade. Surging revenue, from high oil prices and a dramatic expansion in gas production, has generated the world’s highest per capita GDP, funded vast building projects, and enabled an international spending spree by the Qatar Investment Authority (QIA) that has become a symbol of the country’s global ambitions. But the years of dizzying economic expansion must come to an end. Qatar faces numerous economic challenges: flat or falling revenues, concerns about inflation, rapid population growth and massive construction commitments for the 2022 World Cup must all be carefully negotiated by the new government of Emir Sheikh Tamim Bin Hamad Al-Thani, who will not want to see the economic boom overseen by his father fade away.

Dubai is working hard to demonstrate it has regained its pre-crisis verve. In 2012, it unveiled a series of mega-projects, including Mohammed Bin Rashid city (to include 100 hotels and the world’s largest mall), a modern art museum and a replica of the Taj Mahal. The latest to be announced is a Dh1bn expansion of the Mall of the Emirates, which houses an indoor ski slope, by Majid Al Futtaim. There have been some questions over the wisdom of such grand development.

In the coming months, Lebanon’s Blom Bank will open its first branches in Iraq. According to the bank’s chairman, Saad Azhari, it has approval for branches in Baghdad and Erbil and expects to start business in both cities before the end of the year. Iraq may be a new market for the Lebanese bank, but it will find plenty of familiar faces when it gets there. At least six other Lebanese banks are already active in the country, vying for business alongside dozens of other home-grown and foreign-owned institutions, and more are coming all the time. According to recent media reports, the UK’s Standard Chartered has also gained approval to open branches in Baghdad, Basra and Erbil.

Saudi CPI inflation rose to 3.7% year on year in July, from 3.5% in June, according to the Central Department of Statistics. According to Saudi-based Jadwa Investment, the rise was driven by food and rent prices, with food prices reaching a four-year high. Core inflation – excluding food, rent and housing-related services – maintained its downward trend for the fifth consecutive month, falling to 2% year on year in July from 2.25% in June, in part due to a 12.5% fall in jewellery prices, driven by the price of gold.

The International Monetary Fund (IMF) has told Oman it needs to spend less and diversify more, in a report following annual consultations. The recently published Article IV consultation said that fiscal sustainability was becoming a significant challenge and that, in the medium term, fiscal balances needed an adjustment of around 10% of GDP (23% of non-oil GDP). “The mission recommends an initial adjustment of 1% of GDP in 2013 by rationalising the planned increase in workforce, and restraining goods and services spending,” the IMF said.

When Mohammed Bin Abdulmalik Al Al-Sheikh was appointed chairman of the Capital Market Authority (CMA)’s board of governors in February, it came as something of a surprise. Just a few months earlier, in September 2012, he had taken up a job in Washington DC as an executive director of the World Bank, where he was expected to stay for a few years at least. Instead, he was back in Riyadh, and in charge of the stock market regulator.


Saudi Arabia’s deportation of thousands of Yemeni workers – and the potential expulsion of tens of thousands more – are a significant blow to an economy which relies heavily on remittances from Yemenis abroad. Riyadh is cracking down on migrant workers whose paperwork is not in order, part of efforts to get companies to comply with strict new quotas on how many Saudis they employ. Yemen – which has around a million workers in Saudi Arabia – will be badly affected: officials say more than 200,000 Yemenis could be sent home. 


After much political scrambling, Iraq’s parliament passed the 2013 budget by a narrow margin on 7 March. Two key features stand out. One is the budget’s centralist bent: passed in the face of a Kurdish boycott, it makes no concession to autonomy, offers no separate funding for the Kurdish Peshmerga, and gives Baghdad the right to deduct from the Kurds’ 17% share for any oil not traded through the federal system. Oil currently bartered to Turkey or smuggled to Iran will likely be an issue.

Muscat will be hoping for another strong year for oil prices in 2013, after setting itself big spending targets, and budgeting for a deficit of OR1.7bn ($4.4bn). Revenues for 2013 are estimated at OR11.2bn ($29bn), up 27% from the previous year (although actual revenues in 2012 were around OR14bn). Oil and gas accounts for 84% of that, based on an average of $85/bbl and production of 930,000 b/d.

On 31 December, Dubai ruler Sheikh Mohammed Bin Rashid Al-Maktoum approved Dubai’s 2013 budget, which will see a budget deficit of less than 0.5% of GDP. The budget includes public spending of Dh34.1bn ($9.3bn), and a 7.8% year-on-year increase in public revenues to Dh32.62bn.

Saudi Arabia has put together another expansionary budget for 2013, with spending rising by almost 20% year on year to a record level of SR820bn ($218.6 bn). Projected revenues are up by 18% to SR829bn, leaving the government with a surplus of SR9bn – one that could certainly rise if oil prices are anywhere near the $100/bbl price that many economists expect.