Middle East 2008 Forecast Good with Risks Attached

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Researched by Industrial Info Resources (Sugar Land, Texas). Relative to other regions in the global economy the Middle East is forecast by the IMF to have a positive 2008 growth scenario with the GDP growth forecast at 5.9% for both 2007 and 2008. In July, the forecast was 5.4% and 5.5 % respectively.

On the downside, countries in the region, while experiencing record bottom line incomes from high priced oil sales, are experiencing inflationary threats in their economies. The growing domestic consumption and 'globalization' of their middle class populations is expected to mop up loose capital in the system and to feed the development of non-resource based downstream industry. The drive for improved infrastructure, education and social services also belongs with the strategy of long-term development goals using windfall profits from finite resource wealth.

But the price of project and infrastructure development is soaring as the price of hydrocarbon resources feeds back down the loop, credit has suddenly become tougher and more discriminating in targeted markets and the region is competing for professional staff and increasingly rare project resources in a global market with identical problems. These pressures will see the formation of an increasing number of corporate and public-private alliances on an international basis as Middle Eastern investors look to add value to projects in which they are involved outside their domestic markets. The risk profile of investments will be shared among venturers and partners in a pragmatic and cost efficient way.

An indicator of the broadening of industrial activity in the region is the advance of steel mills and the metals and minerals industry which feed the needs of hydrocarbon based refinery and petrochemical projects with construction and high end products. The manufacture of consumer goods for the burgeoning retails sector is also a strong growth sector. Steel production is expected to double to 50 million tons per annum by 2010. The manufacturing sector will have a price edge when it comes to using the products of the domestic petrochemical industry in manufacturing complete products or feeding component products into the supply chains of European and Eastern manufacturers.

On the upside, the Middle East is where it is - strategically placed at the trading and energy crossroads between the East and the West and the North and the South. International trading and service centers such as Dubai have gained critical mass in the global economy and will continue to attract capital and skills and export development capital. As 'emerging economies' are the star turns and drivers of good news for 2008 forecasts, the Middle East is well positioned with growing commercial alliances and energy based (high oil price) trades across the Indian Ocean and with China and Southeast Asia.

The World Investment report for 2007,published by UNCTAD (United Nations Conference on Trade and Development), reported that the region had a record FDI (foreign direct investment) inflow of $60 billion in 2006, a annual increase of 44%. The International Finance Corporation's "Doing Business" report had some Middle Eastern countries scoring highly in their moves to ease restrictions, avoid corrupt interventions and generally make business practices transparent and reliable. Turkey received $20 billion in FDI, Saudi Arabia $18 billion and UAE $ 8 billion – annual increases of 50%, 51% and 23% respectively.

On the downside there is always the threat of armed conflict and nationalistic protectionism exceeding the parameters of the models of those reasonable men at the IMF. There is also the unpredictable oil price, like a loose hose in a pool, which is full of peril for forecasters. If these negative imponderables are taken into the mix with the uncertainties facing investors in 2008 the forecast for the Middle East might be tempered with some caution.

Industrial Info Resources (IIR) provides marketing communication services ranging from industrial database solutions to market forecasting, custom analytics, and specialty promotions that support high-level image campaigns.