Key takeaways from the RGE Monitor’s recent coverage (5/14) of the Middle East:

“The IMF’s latest regional outlook for the Middle East – released on Monday – suggests that high oil prices will continue to fuel both government spending and private sector investment – making the Middle East the only region likely to maintain its 2007 growth rate (of about 6%).” [Emphasis added]

On the flip side is inflationary pressures and the negative implications of having a pegged currency. RGE notes that “GCC countries have ruled out exiting their pegs or revaluing for now, preferring instead to cushion their population from food inflation through price caps, rent controls and wage hikes.”

Nevertheless, while GCC countries are spending more domestically, “much of the windfall from oil is being saved abroad.” Most noticeable and controversial are Sovereign Wealth Funds (SWF). RGE’s Rachel Ziemba notes the pause in dollar diversification to exploit the dollar weakness and snapping up of distressed assets.

Meanwhile, as the debate over supply/demand of oil continues, the reality is that regional growth is sustainable and trade opportunities are abundant.

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