Arab central bankers and finance ministers gathered in Kuwait to discuss ways of coping with a global financial crisis and the collapse in oil prices.
Crisis meeting kicks off in Kuwait
KUWAIT // Arab central bankers and finance ministers gathered in Kuwait on Wednesday to discuss ways of coping with a global financial crisis and the collapse in oil prices as they kick off a week-long economic summit. "(The meeting) is about finding ways to stop the fallout of the crisis," Kuwait Finance Minister Mustapha al Shamali said in an opening address to attendees of the 22-member Arab League, which includes major oil exporter Saudi Arabia.
"We are required to search appropriate tools to stop the impact (of the crisis) on economic development in Arab countries and to realise the continuation of economic growth at an appropriate pace." Oil prices have slumped to below $40 a barrel, virtually a quarter of the record peak above $147 they hit last July, because of a downturn in global energy demand. The global financial crisis, the worst since the 1930s, has pushed much of the industrialised world into recession, and also dimmed the economic outlook for the Arab world.
EFG-Hermes said this week it expected Saudi Arabia's economy to contract 0.9 percent this year on sharp crude production cuts, while Standard Chartered Bank last week slashed its UAE growth forecast to 0.5 percent. Egypt has set an economic growth target of 5.5 percent for the two years starting July 2008, down from 7.2 percent in the 2007-08 fiscal year, saying it expected exports, foreign investments, tourism and Suez Canal receipts to get hit by the global downturn.
"For each dollar the oil price declines, Arab oil revenues fall between US$4 and US$10 billion (Dh14-36bn) annually," the Organization of Arab Petroleum Exporting Countries (OAPEC) said in a briefing report for discussion by policymakers on Wednesday. "This means rising pressure on governments' budgets and the reduction of expenditures and average growth rates." Saudi Arabia, Oman and Dubai are already projecting budget deficits this year after recording bumper surpluses during a six-year oil-fuelled economic boom.
The global credit crisis has led to a series of project cancellations and scores of job losses, especially in Dubai, the region's financial hub. If oil demand continues to be weak, "a majority" of Arab investments into projects designed to boost capacity would likely be stopped, OAPEC said. Policymakers were also due to discuss ways to boost coordination in banking supervision, monetary and fiscal policies and how they could work toward stabilising the oil market, Shamali said, without giving details.
With the Palestinian death toll in Gaza nearing 1,000, Arab foreign ministers are due to hold an extraordinary meeting on Friday to discuss the Israeli offensive. The UN Secretary-General Ban Ki-Moon, on a regional tour aimed at clinching a ceasefire, is due to address a summit in Kuwait on Monday, where Arab leaders will discuss the situation in Gaza as well as the economic issues originally scheduled.