Central Bankers, Finance Ministers
Discuss Crisis and Crude Oil Slump

“(The meeting) is about finding ways to stop the fallout of the crisis,” Kuwait Finance Minister Mustapha Al Shamali said in an opening address to attendees of the 22-member Arab League, which includes major oil exporter Saudi Arabia. “We are required to search appropriate tools to stop the impact (of the crisis) on economic development in Arab countries and to realise the continuation of economic growth at an appropriate pace.”

Oil prices have slumped to below $40 a barrel, virtually a quarter of the record peak above $147 they hit last July, because of a downturn in global energy demand. The global financial crisis, the worst since the 1930s, has pushed much of the industrialised world into recession, and also dimmed the economic outlook for the Arab world. EFG-Hermes said this week it expected Saudi Arabia’s economy to contract 0.9 per cent this year on sharp crude production cuts, while Standard Chartered Bank last week slashed its UAE growth forecast to 0.5 per cent.

Egypt has set an economic growth target of 5.5 per cent for the two years starting July 2008, down from 7.2 percent in the 2007-08 fiscal year, saying it expected exports, foreign investments, tourism and Suez Canal receipts to get hit by the global downturn.

“For each dollar the oil price declines, Arab oil revenues fall between $4 and $10 billion annually,” Organisation of Arab Petroleum Exporting Countries (OAPEC) said in a briefing report for discussion by policymakers on Wednesday. “This means rising pressure on governments’ budgets and the reduction of expenditures and average growth rates.” Saudi Arabia, Oman and Dubai are already projecting budget deficits this year after recording bumper surpluses during a six-year oil-fuelled economic boom.

The global credit crisis has led to a series of project cancellations and scores of job losses, especially in Dubai, the region’s financial hub. If oil demand continues to be weak, “a majority” of Arab investments into projects designed to boost capacity would likely be stopped, OAPEC said.

Policymakers were also due to discuss ways to boost coordination in banking supervision, monetary and fiscal policies and how they could work toward stabilising the oil market, Shamali said, without giving details.