Four Gulf States Sign Deal On Monetary Union

"The Gulf Cooperation Council (GCC) took a major step towards a single currency union on Sunday when four members signed a pact to create a joint monetary council after years of hesitation. Foreign ministers from Bahrain, Kuwait, Qatar and Saudi Arabia agreed at a Riyadh meeting to set up the council, a precursor to the ultimate goal of establishing a common currency.... Foreign ministers from Oman and the United Arab Emirates also attended the meeting but refused to sign on...." [Agence France Presse (6/7)/Factiva]

Arab News writes that "... 'The GCC Monetary Council will manage the transition toward monetary union, which is targeted to be operational in 2013,' said a GCC spokesman, Abdelaziz Al-Uwaisheg on Sunday. The original target date for minting a common currency was 2010, but that was later postponed so that member states could have more time to work out differences....The agreement will still have to be ratified by each of the four GCC governments of the remaining participants before it can be enacted...." [Arab News (Saudi Arabia, 6/8)/Factiva]

FT reports that "...the UAE withdrew from the proposed monetary union and plans for regional economic integration in May. It pulled out after Riyadh, the Saudi capital, was selected as the headquarters for the future regional central bank over Abu Dhabi, the capital of the UAE....Oman pulled out of plans for the monetary union in 2006...." [Financial Times (6/8)/Factiva]

Gulf Economies To Contract, Says IMF.

"The Gulf's largest economies are expected to contract this year as Opec-mandated cuts in oil production and declining petroleum revenue erode growth. The International Monetary Fund (IMF) said Sunday that real gross domestic product in Saudi Arabia, the United Arab Emirates and Kuwait would shrink after a slump in oil prices spurred the cartel to reduce output.... 'The bottom line is that nearly all countries in the region will be seriously affected by the global crisis in important but different ways,' the IMF said in its MENA Regional Economic Outlook...." [Financial Times (5/11)/Factiva]

However, AP adds that "...IMF Mideast and Central Asia Department Director Masood Ahmed said the region as a whole was likely to weather the financial crisis better than other parts of the world because of 'prudent financial and economic management' and the ability of oil-exporting countries to draw upon hefty cash stockpiles accumulated during boom times.... Non-exporting countries are at greater risk, particularly if the recession dragging on the economies of trading partners in the West and elsewhere proves lengthy. A drawn-out global downturn could lead to significantly higher levels of unemployment and poverty, Ahmed added...." [Associated Press (5/10)/Factiva]

Reuters reports that "...while Gulf banks are financially sound, indicators 'may not fully capture risks posed by high credit growth and concentration in real estate', the IMF said, adding any sharp deterioration in bank balance sheets could delay recovery...." [Reuters (5/10)/Factiva]