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Middle-East : A Key Trading Partner for Italy, Beyond Risks Emanuele Baldacci

Middle-East : A Key Trading Partner for Italy, Beyond Risks Emanuele Baldacci Chief economist, SACE. Milano, 18 ottobre 2006. Is there more than risk?. Political risks, Islam radicalisms, conflicts, political violence, etc.:

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Middle-East : A Key Trading Partner for Italy, Beyond Risks Emanuele Baldacci

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  1. Middle-East : A Key Trading Partner for Italy, Beyond Risks Emanuele Baldacci Chief economist, SACE Milano, 18 ottobre 2006

  2. Is there more than risk? • Political risks, Islam radicalisms, conflicts, political violence, etc.: • GCC: Saudi Arabia, Kuwait, the UAE, Qatar, Bahrain and Oman (eg, terrorism); • Iran (eg, nuclear power); • Iraq (eg, violence, ethnic conflicts); • Syria (eg, ties with radical groups); • Jordan (eg, terrorism); • Lebanon and West Bank (eg, political violence).

  3. A land of opportunities • Two thirds of world’s oil, half of world’s gas reserves; • Booming economies; • Awash with fx liquidity; • Large infrastructure needs (ports, roads, IT); • Appetite for investment.

  4. The region is running fast…

  5. … as oil prices have risen…

  6. …leading to a large surplus.

  7. As a result, credit is booming…

  8. …sustaining investment… • Both oil and non-oil sectors; • GCC countries: US$ 1 trillion in projects for infrastructure and energy; • Iran: investment to GDP over 37%; • Equity boom in Jordan; • But, low ICOR due to low-viability projects.

  9. …and capital markets • Booming equity and real estate markets; • But also more M&A (55% of Turk Telecom bought by Saudi Oger; minority stakes in Ferrari, Time Warner, DaimlerChrysler); • Strong portfolio investment in dollars.

  10. Still, fx reserves are on the rise

  11. Going forward? More of the same…

  12. …but “oil curse” symptoms… • Non-oil export share declining in GCC by 4pps in 2002-4; Iran non-oil export slow; • Non-oil CAB shows heavy deficits; • Non-oil fiscal deficit 20% of GDP in Iran, non-oil revenue flat at 10% of GDP in Syria • Energy subsidies more at 15% GDP in Iran, Syria, lower but high in Jordan • But non-oil growth strong in GCC, Syria and Iran

  13. …and weak private markets, may be a drag

  14. A Key Partner for Italy Machinery (34,5%), electrical equipment (10%), metal products (9,6%)

  15. SACE business in the region in % of total Iran 20,6% Saudi Arabia 6,4% Qatar 2,1% UAE 2,1% Oman 1,5%

  16. How important are these risks? • Political use of natural resources; • Unfavorable business environment; • Major infrastructure weaknesses; • Limited implementation capacity; • Ethnic/religious conflicts.

  17. Tel.: +39 06.6736 264 E-mail: m.proietti@sace.it ufficio.studi@sace.it Tel.: +39 06 6736 535 fax: +39 06 6789 835 E-mail: e.baldacci@sace.it Contacts Thank you

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