UAE and Egypt could benefit most from global trade shift

• Citigroup: Oil producers to struggle
• Diversification key to growth
• Mena GDP predicted to grow 2.5%

The UAE and Egypt may benefit the most among Mena countries from the US-led reordering of the global trade framework, Citigroup Mena CEO Ebru Pakcan has said.

By contrast, oil producers from Iraq to Kuwait and Oman to Bahrain could struggle, Pakcan said, on the back of the lowest international prices in four years. 

Resource-poor Jordan, initially targeted with a 20 percent US tariff rate – later reduced to 10 percent – will also be challenged.

“The UAE is probably going to be one of the beneficiaries of what we are experiencing in terms of how trade flows; supply chains, logistics are going to potentially be reforming,” Pakcan said in a virtual conversation hosted by the Atlantic Council think-tank.

Compared with other Gulf oil producers, the UAE is in “a different category” because of the degree to which it has diversified its economy away from oil, Pakcan said.

The New York-based global financial institution expects GDP in the Mena region to grow by about 2.5 percent this year, and the oil-producing six-member Gulf Cooperation Council by 3.7 percent. 

Both rates are lower than forecast before President Trump raised tariffs on US imports earlier this month to their highest in more than a century but still above global trends, Pakcan said.

The region is not especially exposed to bilateral trade with the US and lower oil prices may help Mena countries which are net importers of hydrocarbons.

“We are bearish actually around the oil prices for the rest of this year,” Pakcan said. “Although there is clearly a lot of uncertainty and there are risks up or down in the pricing, we are expecting early $60s or around $60.” 

The Brent crude benchmark is trading at about $62 per barrel today.

Less diversified oil economies, such as Iraq, Kuwait and Oman may struggle with fiscal challenges, Pakcan said. By contrast, Saudi Arabia, the world’s second largest oil producer, should manage.

• Trumponomics, tariffs and the global flight from the US
• Remittances to Egypt rise as reforms instill confidence
• UAE foreign trade surges but surplus falls

“Saudi has made progress in terms of that diversification agenda, and I think it is going to be able to weather some of these challenges pretty well,” Pakcan said.

Egypt, meanwhile, could attract more foreign direct investment amid the global reordering in trading relations, Pakcan said.

“The trigger of tariffs and the impact that some global companies are probably going to have to deal with might be a great opportunity for Egypt,” Pakcan said. “We actually think, and are watching closely, whether there’s going to be an upside for the Egyptian economy in the next several quarters.”