MENA public debt. GCC US Treasuries holdings. UAE GDP, inflation. Saudi foreign trade.
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Weekly Insights 27 Sep 2024: Debt-to-GDP levels have risen in most MENA nations. GCC US debt holdings have risen
1. More than half the countries in MENA had higher than pre-pandemic debt-to-GDP levels in 2023
- Public debt in the Arab region surged to USD 1.6trn+ in 2023, almost half of the region’s GDP.
- Middle income countries – Algeria, Egypt, Jordan, Lebanon, Morocco & Tunisia – hold close to half the public debt (2023: USD 700bn+). Bahrain has one of the highest public debt as share of GDP (100%+); in comparison, it is 60%+ in Jordan & Egypt
- High debt levels imply costly interest payments: can crowd out government spending on health, infrastructure, education etc
- According to UNCTAD, external debt service in the Arab region was USD 33bn in 2021 (includes principal & interest payments). For half of these countries, external debt service amounted to at least 9.3% of exports and 9.4% of revenues in 2021, posing additional liquidity & fiscal challenges.
2. Saudi Arabia’s US Treasuries holdings jumped to the highest since Mar 2020 (USD 142.7bn)
- Foreign holdings of Treasuries jumped to a new record high of USD 8.34trn in Jul (Jun: USD 8.21trn).
- Japan, the largest foreign holder of US Treasuries, saw holdings shrink to USD 1.116trn (lowest since Oct).
- China, second on the list, also reduced its holdings to USD 776.5bn (Jun: USD 780.2bn; end-2023: USD 816.3bn).
- Saudi Arabia is the 17th largest investor in US Treasuries as of Jul (USD 142.7bn) – highest since Mar 2020 (USD 159.1bn).
- In Jul 2024, the 3 GCC nations – Kuwait, UAE and Saudi Arabia – increased their holdings in yoy terms. In mom terms, UAE posted a 1.6% drop in holdings.
- Compared to end-2023, Kuwait increased their holdings (by 2.7%) alongside Saudi Arabia and UAE whose holdings grew by 8.1% and 7.8% respectively. UAE’s holdings clocked in at USD 69.0bn in Jul, up by 6.2% yoy (but down by 1.64% mom).
3. UAE central bank forecasts GDP growth to slow in 2024 (4.0% from an estimated 3.6% in 2023); UAE inflation inched up to 2.4% as of Jun 2024 (May: 2.3%) 
- UAE central bank revised its GDP forecast for 2024 to 4.0%, with growth supported by the non-oil sector (5.2% in 2024, lower than 2023’s 6.2%). Oil sector is expected to recover in 2025 as production resumes. Reforms to attract businesses, human capital & FDI in the non-oil sector, CEPAs to boost trade, tax reforms to increase revenue diversification will support overall growth.
- Inflation in the UAE inched up to 2.4% in Jun 2024 (May: 2.3%), with upticks in housing and utilities (3.1% from 3.0%), recreation & culture (4.2% vs 1.2%) and insurance & financial sector (6.6% vs 4.3%). A breakdown by quarter shows a slight easing in Q2 in housing & utilities (3.1% from 3.2% in Q1) while transportation costs, with a weight of 12.7%, have been rising since Apr (Q2: 3.3% vs Q1: -0.7%).
- Comparing H1 2024 to H1 2023, insurance & financial services showed one of the largest upticks (5.1% vs 0.8%) along with medical care (2.0% from 0.5%) & education (2.6% from 0.9%).
4. Saudi exports & imports grew by 2.0% & 12.6% yoy in Jul; surplus narrows to SAR 19.3bn
- Saudi Arabia’s exports recovered in Jul, growing by 6.5% mom and 2.0% yoy to SAR 94.5bn –this was up from June’s reading which was the lowest since Jun 2021. Oil exports, which accounted for 73.1% of total exports in Jul, fell by 3.1% yoy to SAR 69.1bn.
- Both non-oil exports and re-exports rebounded in Jul, gaining by 13.5% and 11.5% to SAR 18.7bn and SAR 6.6bn respectively.
- Year-to-date, total exports are down by 2.5%, dragged down by oil exports (-4% ytd) and re-exports (-9.5%). Non-oil exports are up 6.4%.
- Imports grew by 8.8% mom and 12.6% yoy to SAR 75.2bn in Jul, thereby narrowing trade surplus to SAR 19.3bn (vs Jun: SAR 19.6bn; Jul 2023: SAR 25.9bn) – the lowest trade surplus since Nov 2020.
- Oil exports to top 5 destinations (China, South Korea, Japan, India & US) stood at 57.9% of total oil exports in Jun. Share of top 25 nations was 99.4% (UAE, Bahrain & Oman were among top 15 destinations).
- China was the top trade partner in Jun: accounting for 13.9% of overall exports and 25.4% of total imports.
- As always, Asian non-Arab non-Islamic nations received the largest share of exports. Not surprising considering this also includes oil exports. 3 of the top 5 oil export destinations are in Asia.
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