The impact of the global financial crisis 2008 on the economies of Arab countries

The global financial crisis of 2008 is, from a financial point of view, the most dangerous financial threat to the global economy since the Great Depression of 1929. Today the global financial crisis has turned into a global economic crisis, expressed in a sharp decline in consumption, reduced production, increased corporate bankruptcy, and declining revenues State taxes, a sharp rise in unemployment, an increase in poverty, and so on. Crises of this force affect the ability of countries to achieve their national goals in various fields, especially in the economic and development fields, and may pose a threat to their internal stability.
Robert Zoellick, President of the World Bank, had warned that the effects of the global economic crisis may continue for many years to come, and said that about 64 million people will fall into poverty by the end of this year 2010. Zoellick added that the world will continue to suffer from negative repercussions of the economic crisis for years, calling on the private sector to play a larger role as the government s stimulus plans decline.
Zoellick believed that the situation for poor countries is a matter of finding jobs for the unemployed and raising the rate of economic growth, pointing to the suffering of poor countries with hunger and disease that will affect a generation of children for many years. Zoellick stressed that the interest of the developed countries lies in helping the emerging economies to get out of the crisis because it may be a source of growth, calling on those countries to help the developing world in these difficult times.
The global crisis has opposite effects on the economies of Arab countries. On the one hand, inflation is expected to decline due to the decline in commodity and real estate prices, and on the other hand, the decline in investments and economic activity negatively affects growth rates and may lead to an increase in unemployment rates. The global financial crisis changed the type of challenges faced by the economies of some Arab countries. In mid-2008, inflation was the main threat to economic stability in it, but in mid-2009 it became the biggest challenge in attempts to stop the decline in economic growth rates. The economies of the Arab oil-exporting countries were affected as a result of the global economic crisis, especially in the following areas:
• Decreased revenues from oil exports-;-
• The depreciation of the property invested abroad.
• The growth rate of its economies in 2009 was 1.5 percent, according to the estimates of the International Monetary Fund.
• The rise in oil prices until the second half of 2008 increased oil export revenues
• The fiscal surplus in the last five years in the current account of these countries amounted to more than 900 billion dollars.
• Large amounts of these surpluses were allocated to the purchase of various properties around the world. Most of this activity was carried out by government financial funds.
• According to the most moderate estimates, the amount of foreign assets of the sovereign investment funds of these countries at the end of 2008 was about -$-1.2 trillion.
• The estimated erosion of the general value of the funds foreign assets since September 2008 is estimated at 15 to 25 percent,
• The drop-in oil prices and the losses that were achieved due to the financial crisis led to the emergence of some collapses and dangers in the financial markets of these countries.
• The decline´-or-fluctuation of oil revenues in the Arab oil-exporting countries in-dir-ectly affects the economies of non-oil Arab countries (such as Jordan, Lebanon, Yemen and Sudan),´-or-oil-producing countries, but in smaller quantities (Tunisia, Egypt and Syria), which depend on the remittances of workers in oil countries to their countries. It has also declined to the extent that the Arab oil countries contribute to the economies of other Arab countries, especially the financing of investment projects due to the economic crisis.
A survey of companies operating in the Middle East showed that the Emirate of Dubai in the United Arab Emirates, Egypt and Jordan will be the most affected in the region by the repercussions of the financial crisis. The Emirate of Dubai will be most affected by the slowdown in global economic growth, as the tourism industry in the emirate, which boasts the most luxurious hotels in the world, will suffer greatly as a result of the shrinking number of tourists. While Saudi Arabia, Oman, Bahrain and Qatar will be less affected by the crisis.
First - The impact of the global financial crisis on the economies of the oil-producing Arab countries:
1 - The impact of the crisis on the economy of the United Arab Emirates:
The impact of the global financial crisis was severe and rapid on Dubai, including the rest of the economic indicators of the United Arab Emirates, which depend on oil revenues for 39.5% of its GDP in 2008. Huge losses occurred in the Abu Dhabi sovereign fund and some real estate companies lost. Since the outbreak of the crisis, most banks have refrained from providing loans, and this has led companies to lay off large numbers of workers. The main obstacle in Dubai s economy is that growth is not linked to real economic sectors, but rather to the services sector, including financial services linked to global stock exchanges and real estate. At the same time, a media report said that the UAE government will inject liquidity into the new Emirates Development Bank, which in turn will acquire the two troubled Islamic lending companies, Amlak and Tamweel.
(A member of Dubai’s ruling council had announced that Dubai’s sovereign debt amounts to -$-10 billion, while the debts of companies linked to the emirate’s government amount to -$-70 billion, and that the government is able to meet these obligations. Mohammed Alabbar, who also heads Emaar Properties, said Dubai is working to rationalize Spending and integrating activities in the face of the global crisis, Al-Abbar stressed that the government is able to fulfill all obligations and is ready to intervene with the help of companies in which the government owns stakes if necessary, noting that the Emirate of Dubai has government assets worth -$-90 billion and assets belonging to companies in which the emirate owns stakes. It amounts to 260 billion dollars.
2 - The impact of the crisis on the economy of the State of Kuwait:
In Kuwait, Al-Qabas newspaper reported that the General Investment Authority, which manages state assets, withdrew about one billion dinars,´-or--$-3.66 billion, from abroad to boost investment at home. The newspaper said in a report that it did not attribute to a source that the authority is returning part of its assets to the homeland as part of its efforts to form a government portfolio to invest in the local stock exchange, which was damaged by the global financial crisis.)
Kuwait and the UAE are among the Gulf countries most affected by the global financial crisis, due to their financial openness to the global financial markets, and the losses of Kuwaiti banks continued. Gulf Bank, the fourth largest Kuwaiti bank, announced losses amounting to 1.29 billion dollars at the end of 2008, and the Central Bank of Kuwait suspended the trading of Gulf Bank shares on the stock exchange. Since October 2008, the second bank in Kuwait has also announced losses of -$-883.4 million in 2008, and Salhia Real Estate Company announced losses of -$-122 million. The Kuwaiti government has developed a plan to rescue the financial sector, which suffers from debts amounting to five billion Kuwaiti dinars. While the Kuwaiti economy achieved an economic growth rate of 5% in 2008, and it is estimated that it will not exceed 1% in 2009.
3 - The impact of the crisis on the economy of the Kingdom of Saudi Arabia:
Since the outbreak of the global financial crisis, the Saudi Arabian Monetary Agency has taken practical steps to increase liquidity in banks by 1100%, starting from November 2008. The banks have followed a prudent policy in granting credit and avoided risks. The Saudi government is seeking to expand capital spending through the Public Investment Fund in its capacity as a governmental development authority, after it was granted broader powers to increase the lending ceiling granted to 40% of the value of any project and raise the value of the loan financed by the Fund to five billion Saudi riyals and increase the repayment period to 20 year and pay 30% in advance to contractors for the executed projects. The Kingdom of Saudi Arabia seeks to inject liquidity into the national economy by investing in infrastructure projects and real and basic activities as a primary -dir-ection to treat the financial crisis and the real problem of the Saudi economy is its total dependence on oil exports and petrochemical industries. The Saudi economy depends on oil exports and its chemical derivatives - the petrochemical industry, which provides 95% of the general national income, and the private sector produces 5%. The Saudi economy achieved a growth rate of 4.2% in 2008.
4 - The impact of the crisis on the economy of the State of Qatar:
We can say that Qatar has not been affected much by the global financial crisis´-or-the decline in its oil revenues, because it compensates for this by pumping liquefied gas abroad. The Qatari economy has achieved economic growth for seven consecutive years at high rates, with the economic growth rate reaching 16% in 2008, the highest in the Arab world. While the inflation rate reached 15% in 2008, and the budget achieved a surplus in 2008/2009 of more than -$-2 billion.
5 - The impact of the crisis on the economy of the Algerian Republic:
The impact of the global financial crisis on the Algerian economy and the Algerian stock market was weak and almost non-existent because the Algerian financial authorities did not pay much attention to the stock market. The Algerian economy achieved an economic growth rate of 6% in 2008. The Algerian economy also witnessed growth in the non-oil sectors.
6 - The impact of the crisis on the economy of the Libyan Jamahiriya:
Libyan banks were not affected by the financial crisis for several reasons, the most important of which is that between the ages of 60% and 80% of Libyan investments abroad are placed in the form of liquidity and deposits that were not affected by the financial crisis and the stock market is still modern in Libya. While the Libyan economy achieved a growth rate of 8% in 2008 and the inflation rate rose clearly, Libya was affected by the in oil prices because it secures 98% of the national income.
7 - The impact of the crisis on the economy of the Syrian Arab Republic:
The Syrian economy was not -dir-ectly affected by the global financial crisis, as it is an economy with-limit-ed integration into the global market. But it was affected by the crisis through foreign trade, investments, expatriates remittances and fluctuations in the prices of major currencies, which led to a shrinking of the volume of liquidity, a decrease in the demand for goods and a decrease in the volume of exports. Knowing that the Syrian economy achieved an economic growth rate of 6% during 2008, the public budget deficit reached 3% during 2008 and the inflation rate reached 15%.
The financial crisis has a-limit-ed impact on the Syrian financial system because it is small and central and the degree of its integration into the global economy is weak. The main problem of the Syrian economy is not related to the global crisis in particular, but rather lies in the dwindling of oil reserves and the decline in oil production and export.
Second - The impact of the global financial crisis on the economies of Arab non-oil countries:
1 - The impact of the crisis on the economy of the Hashemite Kingdom of Jordan:
The Jordanian economy was rapidly affected during the last quarter of 2008 by the decline in the Jordanian stock index, which witnessed a sharp decline, as well as a decline in tourism and wholesale and retail trade revenues. Remittances from Jordanians, especially in the Gulf, witnessed a significant decline with the expectation of losing a number of workers abroad, especially in the Gulf. for their jobs. The inflation rate in the Hashemite Kingdom of Jordan rose by 14.9% in 2008, which is the highest inflation rate that Jordan has witnessed in eighteen years. The Jordanian government took several measures to ensure the provision of liquidity, including reducing interest rates by one flat point to attract more investments. The Jordanian economy is a service economy, and the Jordanian economy has achieved a growth rate of 5.6% in 2008.
2 - The impact of the crisis on the economy of the Lebanese Republic:
Contrary to what was expected, foreign exchange reserves in Lebanon rose to more than 25 billion dollars at the end of August 2008, and bank deposits increased by 15.6 billion dollars during the first seven months of 2009. In most regions, with a slight decrease in remittances of workers in the Arab Gulf countries.
3 - The impact of the crisis on the economy of the Kingdom of Morocco:
Affected by the global economic crisis, the Moroccan economy lost more than 70,000 jobs in the textile sector, and phosphate exports recorded a significant decline, which led to an increase in the trade balance deficit, which amounted to more than 109.8 billion -dir-hams during the first 9 months of 2009, and the problem of unemployment worsened, which reached more than from 10.2%, foreign investments fell by 20%. Remittances from workers abroad also declined by 2.4% in 2008, and Morocco s hard currency reserves declined. While Morocco achieved an economic growth rate of 6% in 2009.
4 - The impact of the crisis on the economy of the Republic of Tunisia:
With the aim of confronting the global economic crisis, the Tunisian authorities took a number of measures in the last quarter of 2008, including not resorting to foreign markets for borrowing and encouraging Tunisian institutions to provide financial resources within the framework of bilateral and multilateral credit, in addition to developing a stimulus plan amounting to 570 million dollars to help companies affected by the crisis. The financial crisis. The Tunisian economy achieved a growth rate of 3% in 2009.
(The current global financial crisis is foreseeable and predictable, and it is just an aspect of a broader crisis in all existing development systems. There are several crises associated with it that appear to the surface quickly, namely, crises of energy, water, food, population, climate change and environmental destruction. Doesn t the current crisis divert the media s attention to the issue of climate change, and the idea of unlimited growth has been proven to be illusory, because the earth s resources are-limit-ed and are about to run out).
The World Bank confirmed in a report issued in 2009 that despite the slow recovery that will follow the recession, the global economic activity will suffer from high unemployment rates this year due to the global recession.
The global economy and the economies of Arab countries today are going through economic paths, the development of which is difficult to predict, as well as their social and political impacts. Even if the height of the current financial crisis has passed, it is doubtful that the height of the real economic crisis has passed, as various indicators such as unemployment, poverty and malnutrition in developing countries and Arab countries may worsen again.
Prof. Dr. Moustafa El-Abdallah Al-Kafry
Faculty of Economics - Damascus University

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