The Middle East and North Africa (MENA) region is heavily dependent on exports (particularly energy) for overall growth, and suffered severely from the global economic crisis of 2008-2009.
In 2010 export markets rebounded strongly thanks to higher oil prices and increased demand for exports from Asian Pacific economies. This upturn in the export market will help push overall growth of economies in the MENA region in 2010-2011.
• The global economic crisis of 2008-2009 severely affected the export market in MENA with total exports falling by 30.5% (in US$ terms) in 2009 to US$1.1 trillion.
• Exports play an important role in economies within the MENA region and averaged 45.5% of GDP between 2004 and 2008. However, it fell to 38.6% of GDP in 2009 owing to the decline in global demand for exports and lower crude oil prices.
• MENA has an estimated 60.0% of global oil reserves and over 40.0% of world's natural gas reserves. As a result, exports of mineral fuels account for the largest share in total exports in the region and averaged over 70.0% of total exports between 2004 and 2008 before dropping to 53.6% of total exports in 2009 owing to reduced global demand for oil and natural gas.
• In the first half of 2010 exports from MENA rebounded by 35.0% year-on-year owing to the increase in crude oil prices and growing demand for commodities from Asia. Together this will result in a strong recovery of the export sector, aiding overall growth in the region.
• The growing importance of Asia Pacific as a destination for the Middle East's exports has been a major factor in easing the pain of a decline in exports to the U.S. and Europe during the global economic crisis of 2008-2009 and will help the rebound in exports in 2010.
Energy Export-Dependent Region
The export market is one of the main sources of revenues for economies in MENA with energy playing a major role:
• Exports have shown robust growth at an average rate of 25.7% between 2004 and 2008. However, with the global economic crisis of 2008-2009, export growth declined by 30.7% in 2009 owing to falling demand for oil and gas. Within MENA, Algeria and Kuwait witnessed the highest annual decrease in 2009 while most other countries recorded a double-digit decline. Export growth in these two countries fell by 44.8% and 42.5% respectively.
• In terms of export dependence, in 2009, the UAE and Oman had the highest exports to GDP ratios of 78.6% and 60.8% respectively. Countries like Bahrain, Libya, Iraq, and Saudi Arabia also had high exports to GDP ratio (above 50.0%). On the other hand, economies like those of Egypt and Morocco are less dependent on exports for overall growth, and exports accounted for 12.3% and 15.1% of total GDP in 2009 respectively. Although Egypt relies heavily on its mineral fuels exports, the economy is diversified and generates sizeable revenues from tourism.
• Within MENA, Saudi Arabia had the world's largest proven oil reserves at the end of 2009, and accounts for the largest share of MENA exports at 23.1% in 2009 totaling $189 billion.
• In terms of export base, MENA depends heavily on revenues from oil exports. Exports of mineral fuels accounted for 53.6% of total exports in 2009. During the year, exports of mineral fuels within the region declined by 47.9% over a year ago owing to the 36.3% annual drop in crude oil prices in 2009. This resulted in significantly lower export revenues from oil-exporting countries in the MENA region. Within the region, Iran has the highest share of mineral fuels exports to total exports at 86.2%.
• The trade balance in the MENA region is split between the Gulf countries with a high trade surplus and the nonoil exporting countries like Morocco which has a trade deficit.
Overall the MENA region had a trade surplus but it was affected by the downturn in 2008-2009 and the trade surplus dropped by 57.4% in 2009 to $186 billion.
Growing Role Of Economies In Asia Pacific For Middle East Exports
The role of export markets in Asia has grown in importance since the global economic crisis of 2008-2009 and economies in the Middle East are increasing their exposure to big importing countries like China and India:
• In 2009, Asia Pacific accounted for the highest proportion of MENA exports at 35.8%, followed by Europe at 20.5%. Intra-regional trade is also high and accounted for 12.8% of total exports in 2009. Export demand from countries in Asia-Pacific plays a key role for the MENA region and MENA exports sent to this region saw a period growth of 117% between 2004 and 2009, reaching $292 billion in 2009;
• As the world's largest liquefied natural gas (LNG) importer, Japan accounted for the largest share of MENA exports in 2009 at 32.0%. Japan's economy will remain an important destination for MENA exports as it has no proven oil reserves and was the third largest consumer of oil (after USA and China) in 2009;
• China’s and India's importance as a destination for MENA exports is also growing each year and recorded an annual average growth rate of 24.6% in China and 44.4% in India between 2004 and 2009. In 2009, China accounted for 21.0% of MENA exports to Asia, up from a 4.3% in 2004, while India accounted for 7.1% of MENA exports to Asia, up from 2.0% in 2004.
Export growth is expected to rebound in 2010-2011 positively impacting government revenues and investment opportunities.
Source: BusinessIntelligence Middle East. Changes were made in keeping with the editorial policy of www.memrieconomicblog.