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Middle East and
North Africa
financial systems
A comparative
approach
Union des Banques
Maghrébines Meeting
Tunis – July 2008
Koceila Maames
Fixed Income Markets Manager
Head of North Africa
+ 33 1 41 89 12 60
[email protected]
Middle East & North Africa financial systems
Overview
• Present situation
• How resilient can it be?
• The way forward and challenges ahead
2
MENA banking Systems, a worldwide perspective
3
• MENA banking systems play an overwhelming role in funding the economy
• However, the largest MENA bank (NCB in Saudi Arabia) ranks 216th worldwide
(total assets wise), while the aggregated Tier 1 capital of the 100 largest MENA
b k represents no more than
banks
h 1.3 times that
h off Bankk off America
Structure of financial markets
Total assets of commercial banks
(Sources : IMF)
(S
(Sources
: IMF )
USA
35%
E
Europe
52%
Latin
America
18%
21%
33%
35%
27%
United States
10 204
United Kingdom
9 212
France
7 637
Emerging Asia
7 487
Japan
32%
6 415
Germany
Asia
i
Euro Area
47%
38%
16%
MENA
20%
35%
36%
0%
Stock Markets
25%
42%
2%
Italy
50%
Debt Securities
2 295
Canada
1 917
Latin America
57%
75%
3 627
Spain
49%
7%
4 413
1 433
Middle East
100%
Banks Assets
873
Africa
USD bn
500
0
3 000
6 000
9 000
12 000
MENA banking systems exhibit major disparities
4
Total banks’ assets (USD bn)
Total banks’ assets (% of GDP)
(Source : IMF)
(Sources : IMF)
S.Arabia
UAE
Egypt
Kuwait
Lebanon
Maroc
Algérie
Jordan
Tunisie
Libya
Syria
277
210
137
108
74
70
56
28
26
26
21
0
50
USD bn
100
150
200
250
Lebanon
Jordan
UAE
Egypt
Maroc
Kuwait
Tunisie
S.Arabia
Syria
Libya
Algérie
300
Domestic credit (% of GDP)
0%
0%
102%
80%
71%
70%
69%
64%
63%
62%
53%
33%
11%
20%
40%
60%
80%
100% 120%
129%
127%
114%
106%
85%
79%
64%
51%
48%
100%
200%
300%
400%
Private sector credit (% of GDP)
(Sources : IMF)
(Sources : IMF)
Jordan
Lebanon
Maroc
Tunisie
Syria
UAE
Kuwait
Egypt
S.Arabia
Algérie
Libya
344%
200%
Jordan
Lebanon
UAE
Tunisie
Kuwait
Maroc
Egypt
S.Arabia
Libya
Syria
Algérie
0%
97%
80%
64%
64%
62%
61%
55%
36%
16%
15%
13%
20%
40%
60%
80%
100% 120%
MENA countries: haves and have-nots…
5
• MENA region includes
l d 18 countries, which
h h exhibit
h b significant
f
revenue and
d
development disparities
• The region possesses almost 70% of global oil reserves and 45% of Gas
reserves but
b the
h wealth
l h is
i very unevenly
l distributed
di ib d
GDP per capita
Oil reserves per capita
(Sources : National statistics and IMF)
(Sources : BP Amoco and World Bank)
Qatar
UAE
Kuwait
Bahrain
Israel
Saudi Arabia
Oman
Libya
Lebanon
Algeria
Iran
Tunisia
Jordan
Morocco
Egypt
S i
Syria
Iraq
Yemen
62,700
32,200
30,200
20,800
19,928
14,600
13,800
8,323
5,204
3 293
3,293
3,279
2,966
2,500
1,683
1,536
1 135
1,135
1,071
USD per head
762
0
25,000
50,000
75,000
Kuwait
UAE
Qatar
Saudi Arabia
Libya
Iraq
Oman
Iran
Bahrain
Algeria
Syria
Yemen
Tunisia
Egypt
Morocco*
L b
Lebanon*
*
Jordan*
Israel*
10,570
6,917
3,993
1,990
1,964
1,714
409
162
139
70
53
27,800
24,850
44,130
Million barrel
per head
0
15,000 30,000 45,000
((*):
): Net oil importers
… but all doing well
6
• With the past years’ sustained rise in crude prices, MENA hydrocarbon exporters
have done even better than during the previous oil shocks
p
went through
g rough
g times (inflation,
(
, higher
g
energy
gy import
p
• MENA oil importers
bill) but have proven resilient (tourism, remittances and privatisation receipts)
Current account surpluses, now
doing even better than China
(Source: IMF and Bloomberg)
300
USD/b
USD bn
250
200
80
(S
(Sources
: Offi
Office des
d Changes
Ch
and
d National
N ti
l Statistics)
St ti ti )
30
70
25
60
20
50
150
Morocco’s FX revenue and reserves
USD bn
15
40
100
30
50
20
0
10
-50
0
1990
1995
Gulf States
2000
China
2005
Oil price (rhs)
10
5
0
96 97 98 99 00 01 02 03 04 05 06 07 08
Tourism
Exports
Remittances
FX reserves
Tunisia’s special mention
7
• During the 80’s, volatile macroeconomic performance made Tunisia look like an
unstable environment
• Since the beginning of the ‘90s, improved macroeconomic management played
for lower current account deficits and a sustained GDP growth performance
The 80’s random walk
The 90’s/00’s virtuous trajectory
(Sources : IMF and Central Bank of Tunisia)
(Sources : IMF and Central Bank of Tunisia)
4%
Curren
nt account ba
alance (% off GDP)
4%
88
2%
2%
0%
0%
87
05
89
-2%
-2%
94
02
-4%
91
82
90
-4%
95
81
-6%
83
-8%
93
-12%
-2%
0%
2%
01
-8%
-10%
84
4%
00
96
92
80
86
97
-6%
85
-10%
04 99
07
98 03 06
6%
GDP Growth
8%
10%
-12%
-2%
0%
2%
4%
6%
8%
10%
The uneven FX liberalisation as a crisis mitigator
8
• Two main kinds of FX regimes: (i) USD pegs or USD centric regimes for oil exporters and
(ii) strictly managed floats (basket pegs) for the others (competitiveness issues).
• Most MENA currencies are closely regulated, with commercially driven flows and mainly
trading
d
on spot basis.
b
Some do
d not even have
h
active inter-bank
b k markets
k
MENA currencies at a glance
(Sources : National Central Banks, IMF and Calyon MENA FX Trading desk)
Markets
Currency
FX regime
Product maturity
Ticket limit
Liquidity
Calyon product range
-
USD10mn
Highly illiquid Spot
Up to 2 years
USD40mn
Sufficient
FX Spot, FX Swaps, Deposits
Algeria
DZD
Strictly managed float
Bahrain
BHD
USD peg (0.376 BHD per USD)
Egypt
EGP
USD-centric managed float
Up to 6 months
USD10mn
Illiquid
FX Spot, forwards and NDFs
Jordan
JOD
USD peg (0.7 JOD per USD)
Up to 1 year
USD10mns
Sufficient
FX Spot and Forward
Kuwait
KWD
Currency basket peg (May 07)
Up to 3 years
USD50mn
Sufficient
Spot, FX Swaps, Deposits, islamics, CRS
Lebanon
LBP
USD peg within a narrow band
-
USD20mn
Illiquid
FX spot
Libya
LYD
SDR peg (Officially)
-
-
Morocco
MAD
Trade weighted basket peg
Up to 2 years
USD20mn
Sufficient
FX Spot, FX Swap, Deposits, CRS
Oman
OMR
USD peg (0.384 OMR per USD)
Up to 2 years
USD25mn
Sufficient
FX Spot, FX Swaps, Deposits.
Qatar
QAR
USD peg (3.64 QAR per USD)
Up to 2 years
USD40mn
Sufficient
FX Spot, FX Swaps, Deposits.
Saudi Arabia SAR
USD peg (3.75 SAR per USD)
Up to 5 years
Tunisia
TND
Managed float against a basket
Up to 2 years
USD15mn
Sufficient
FX Spot, FX swaps, deposits.
UAE
AED
USD peg (3.6730 AED per USD)
Up to 5 years
USD250mn
Sufficient
FX Spot, FX swaps, Deposits, CRS.
Yemen
YER
USD-centric
USD
centric managed float
-
USD5mn
Highly illiquid FX spot
Not an issue Very liquid
Spot, FX-swaps, IRS, Deposits, Vanilla Options
Highly illiquid FX spot
Economic giants in the making
9
N
Nominal
i l GDP (2000/2007,
(2000/2007 USD b
bn))
St k M
Stock
Markets
k t capitalisations
it li ti
(USD bn)
b )
(Sources : National statistics)
(Sources : World Bank, AMF)
Saudi Arabia
382
241
Iran
+ 146% in average
since
i
2000
59
Qatar
38
Oman
16
Bahrain
0
2000
100
102
86
Egypt
103
Kuwait
133
Kuwait
126
Algeria
281
UAE
171
UAE
Saudi Arabia
200
2007
300
64
Qatar
Morocco
38
Jordan
32
9
Oman
400
+ 567% in average
since
i
2000
2000
0
100
200
300
Comparative GDP per capita
FX reserves per capita
(Sources : IMF and National Statistics)
(Sources : IMF)
Saudi Arabia
Bahrain
Kuwait
UAE
Qatar
USA
Canada
EMU
Latin America
Emerging Asia
Average Africa
14,600
14
600
20,800
30,200
32,200
3,300
1,550
750
0
62,700
43,500
,
34,500
32,000
25,000
USD per capita
50,000
75,000
Libya
UAE
Qatar
Kuwait
Bahrain
Algeria
Oman
Saudi
Iran
China
Egypt
3,888
2,959
2,333
1 906
1,906
1,222
958
813
305
0
2000
4000
5,619
5
619
5,549
6000
2007
9,338
USD per capita
8000 10000
Developing safely and resisting exuberance
• MENA region is well ahead of all emerging countries in terms of investment plans
• Temptation to recycle windfall domestic liquidity, preventing external funding is huge
• But such a strategy will prove risky for the regional banking systems (currency and
maturity mismatches, division risk ratios, lack of know-how for project finance etc)
Upcoming (or planned) investments in the GCC
(Source: MEED and Calyon Research)
800
USD bn
700
80% of total
600
500
47% of total
400
79% of total
300
200
100
0
UAE
Oil & Gas
Saudi
Arabia
Petrochemicals
Kuwait
Power
Qatar
Water
Oman
Industry
Bahrain
Construction
10