AACCI’s Chairman, Mohamed Hage OAM, says MENA trade growth to continue | Kanebridge News
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AACCI’s Chairman, Mohamed Hage OAM, says MENA trade growth to continue

Australia’s two-way trade with MENA exceeds $25 billion

Thu, Jun 20, 2024 12:05pmGrey Clock 4 min

Australia’s trade with the MENA region from 2020 to 2023 showed consistent and significant growth. The trade volume increased from A$16.2 billion in 2020-21 to A$26.3 billion in 2022-23, highlighting a robust and expanding trade relationship (Refer to Figure 1). According to Mohamed Hage OAM, this thriving trade relationship is a testament to the mutual economic benefits and opportunities arising from enhanced collaboration between Australia and the MENA countries in recent years. Hage predicts that trade will continue to grow with this region as organizations become more familiar with the diverse business landscapes and uncover new opportunities for collaboration.
In 2022-23, trade with the MENA region comprised 74.7% of Australia’s total trade with Middle Eastern and African countries. This dominant share is depicted in Figure 2, emphasising the MENA region’s crucial role in Australia’s trade strategy with Middle Eastern and African countries. This substantial percentage underscores the strategic importance of MENA in Australia’s broader trade landscape, suggesting focused efforts to further strengthen these ties.

Source DFAT, Australia’s direction of goods & services trade – financial years from 1989–90 to present.

The four most significant two-way trade relationships between Australia and the MENA region are with the United Arab Emirates (UAE), Saudi Arabia, Qatar, and Bahrain. Figure 3 below demonstrates a robust and consistent increase in trade volumes with these countries from 2020 to 2023, highlighting the strengthening economic relationships between Australia and these strategically important nations. Each country exhibits unique growth patterns, reflecting varying degrees of economic engagement and potential for future trade expansion.

Source DFAT, Australia’s direction of goods & services trade – financial years from 1989–90 to present.

 

United Arab Emirates

The UAE stands out with the most significant growth in trade volume among the analysed countries. Australia’s trade with the UAE increased from A$5.7 billion in 2020-21 to A$9.4 billion in 2022-23, representing a remarkable 64.7% growth over three years (refer to Figure 3). This substantial increase underscores the UAE’s pivotal role as a trade hub and a key partner for Australia in the MENA region. The growth trajectory suggests a deepening of economic ties, likely driven by diversified trade in goods and services, strategic investments, and robust bilateral agreements, such as the Comprehensive Economic Partnership Agreement (CEPA) announced in December 2023.

Saudi Arabia

Saudi Arabia is another critical trade partner for Australia, with trade volumes showing consistent growth from A$2.8 billion in 2020-21 to A$3.6 billion in 2022-23, a 26.3% increase (refer to Figure 3). This steady rise reflects the solidifying trade relationship between the two countries. The trade growth is likely fuelled by Saudi Arabia‘s economic reforms under Vision 2030, which aim to diversify its economy and enhance international trade partnerships. Australia’s exports to Saudi Arabia include beef, sheep meat, barley, wheat, dairy products, cosmetics, pharmaceuticals, vehicle parts, and accessories.3

Qatar

Trade with Qatar also demonstrated significant growth, rising from A$2.1 billion in 2020-21 to A$3.3 billion in 2022-23, marking a 61.8% increase (Refer to Figure 3). This rapid expansion highlights Qatar‘s growing importance as a trade partner. The strong bilateral trade relationship is driven by Qatar’s strategic investments in infrastructure, energy, and real estate, coupled with Australia’s expertise in these sectors, as well as Australian exports including Australian exports of alumina, meat, and engineering services. The data indicates a robust economic partnership, with potential for further growth as Qatar continues to develop its non-oil economy.

Bahrain

Bahrain’s trade with Australia experienced a robust increase from A$1.2 billion in 2020-21 to A$1.8 billion in 2021-22, followed by a further rise to A$1.9 billion in 2022-23 (refer to Figure 3). This 55.6% growth over three years highlights the deepening economic ties between the two nations. In fact, Australia is Bahrain’s third-largest import source, with Australian exports mainly comprising alumina, meat, dairy products, and wheat.4

Conclusion
Australia’s trade with the MENA region, while only 2.1% of its total global trade in 2023, has shown significant growth, highlighting the potential for expanding economic ties with these countries.5

The MENA region’s abundant natural resources and strategic location offer numerous opportunities for Australian businesses to diversify and strengthen their trade portfolio. AACCI Chairman Mohamed Hage OAM stated that “some of the fastest growing economies are located in the MENA region, which is providing an increasing number of opportunities for Australian businesses. Hence, Australia’s two-way trade with the region has recently exceeded $25 billion”. By capitalising on this growth, Australia can enhance its economic resilience, reduce dependency on traditional markets, and foster stronger geopolitical and diplomatic ties.

 

  1. https://www.dfat.gov.au/sites/default/files/australias-direction-of-goods-services-trade-financial-years.xlsx
  2. https://www.dfat.gov.au/sites/default/files/australias-direction-of-goods-services-trade-financial-years.xlsx
  3. Saudi Arabia country brief | Australian Government Department of Foreign Affairs and Trade (dfat.gov.au)
  4. Bahrain country brief | Australian Government Department of Foreign Affairs and Trade (dfat.gov.au)
  5. https://www.dfat.gov.au/sites/default/files/australias-direction-of-goods-services-trade-financial-years.xlsx


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Kuwait’s Economy Faces Continued Challenges Amid Oil Production Cuts and Non-Oil Sector Decline

The oil sector remained constrained by Opec-mandated crude oil production cuts, while the non-oil sector recorded a steeper decline than in the previous quarter

Fri, Jul 12, 2024 4 min

The Preliminary estimates from National Bank of Kuwait (NBK) Economic Research reveal a 4.4% year-on-year decline in Kuwait’s GDP for Q4 2023, slightly improving from Q3’s -5.8% outcome.

The oil sector remained constrained by OPEC-mandated crude oil production cuts, while the non-oil sector recorded a steeper decline than in the previous quarter.

For 2023 as a whole, the non-oil economy contracted for the second consecutive year. Parallel data on the expenditure side of the national accounts showed that investment’s share of GDP stood at a modest 17% of GDP in 2022 (the latest year available). This figure could rise significantly as the new government pursues its diversification and development goals.

Oil GDP Contraction

The figures indicated a 6.4% year-on-year decline in oil GDP in Q4, a slight improvement over Q3. Kuwait maintained crude oil production at 2.55 mbpd, in line with its OPEC+ production cut obligations. For the full year, oil GDP contracted by 4.3%, a marked turnaround from the robust expansion witnessed in 2022, when a tighter oil market prompted Kuwait and its OPEC counterparts to raise production.

However, oil’s positive performance in 2022 largely defied the trend, as oil GDP growth has been negative in seven of the last ten years, fluctuating with OPEC supply policy adjustments in response to the post-US shale landscape of ample supply and downward oil price pressures. Kuwait’s crude oil production in 2023 (2.59 mbpd) is about 10% lower than in 2014 (2.87 mbpd).

Looking ahead, oil GDP growth is expected to rise from Q4 2024 after OPEC+ announced in June that members’ 2024 voluntary production cuts, including Kuwait’s 135 kbpd, will be gradually unwound over the course of a year starting in October. “We estimate Kuwait’s oil GDP will rise by 0.9% q/q in Q4 and by 4.0% y/y in 2025 if this production is restored fully as planned, though Opec has left open the possibility that it could pause and even reverse these supply gains if market conditions dictate,” NBK said.

Non-Oil Sector

Meanwhile, GDP in the non-oil sector remained in contraction territory at -2.3% year-on-year in Q4 2023, extending a sequence that has lasted for five consecutive quarters. For 2023 as a whole, non-oil activity fell by 2.9%, marking a second consecutive annual decline following 2022’s fall of 0.1% (downwardly revised from +0.3%). This is the weakest reading in the available series and well below the 2011-2019 average of +3.3% per year.

Performance at the sectoral level in 2023 was led by transportation & storage (+20%), hotels & restaurants (+17.4%), and household employment (+13.1%). The latter pointed to burgeoning demand for domestic labor, while the increase in hospitality sector output, for the second consecutive year, signifies strong consumption and efforts to develop and expand local dining and tourism capacity.

However, larger sectors such as manufacturing (-17% year-on-year), trade (-2.8%), and other services & real estate (-2%) performed markedly worse in 2023 compared to 2022.

The Central Statistical Bureau (CSB) also published GDP data characterized by expenditure up until 2022, offering a different perspective on Kuwait’s economy. In 2020, amidst the pandemic, private consumption (-11%) and total investment (-36%) fell sharply, contributing to that year’s near-5% decline in real GDP.

Private and government consumption led the recovery in 2021, while investment saw little change (+1.8%). Exports drove the continued recovery in 2022, a year when Kuwait’s oil output and exports recorded double-digit increases amid a tight market impacted by Russia’s invasion of Ukraine.

Cuts to Capex

Investment surged 44% in 2022 from a low, Covid-affected base, but in real terms, it remained below pre-Covid levels. This trend was reflected in successive government budget cuts to capex, which fell from a peak of KD3.8 billion ($12.43 billion) in FY19/20 to KD2.5 billion in FY23/24.

This trend reinforces what other figures suggest about Kuwait’s post-Covid economic recovery, largely driven by consumer spending and oil exports. Gross investment (public and private), at 17% of GDP in 2022, will need to increase substantially if the government is to succeed in its reform and economic diversification goals.

The release confirms previous indications that Kuwait’s economy recovered to its pre-pandemic size more quickly than originally thought. Nominal GDP reached KD42.9 billion ($143 billion) in 2021 from KD33.6 billion in 2020, increasing by 28% year-on-year, largely due to surging oil prices which propelled oil GDP up by more than 67%. However, GDP declined to KD50.3 billion (-9.8%) in 2023, reflecting changes in oil GDP. Consequently, per capita income dropped to $33.7k in 2023, partly due to this fall and an increase in population (+2.3% year-on-year according to PACI data).

External Shocks

The modest growth in the non-oil economy since the Covid-19 pandemic, averaging +0.8% per year compared to a pre-pandemic average of 3.3% (2010-2019), highlights a sector performing well below its potential in recent years. This underperformance reflects a succession of challenging external shocks, including the pandemic, oil price volatility, and aggressive global central bank monetary tightening. Despite traditionally high levels of government spending, non-oil performance in Kuwait has lagged behind some of its GCC peers.

To close the performance gap with neighboring Gulf economies, changes in the composition of public spending, emphasizing capital investment, will be necessary. The private sector‘s role must be significantly enhanced, with the government providing regulatory tools, incentives, and initial capital to help businesses expand and deepen the non-oil base, driving long-term productivity gains. The new government has stated its intention to prioritize structural fiscal and economic reforms and accelerate the implementation of development plan projects.

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