UAE trade surplus at all time high in 2011

Strong oil prices allied with higher output to boost the UAE’s trade surplus to an all time high of around $94 billion in 2011, a Qatari bank has said.

The UAE’s commercial balance was the second largest in the six-nation Gulf Cooperation Council (GCC), with Saudi Arabia’s surplus standing at $254 billion, nearly half the group’s combined trade surplus, Qatar National Bank (QNB) said in a study on the GCC trade balance released this week.

It gave no figures for previous years but IMF figures showed the UAE recorded a trade surplus of around $55 billion in 2010.

Last year’s surplus was the highest to be recorded by the UAE following the surge in crude prices to an average $105 a barrel and an increase in the country’s oil supplies to more than 2.5 million barrels per day.

Analysts said there was also a large increase in the UAE’s imports of goods last year but noted that growth in oil exports far exceeded the import rise.

The UAE is the second largest Arab economy after Saudi Arabia but it has emerged over the past two years as the largest market in terms of imports.

Oil exports and a steady rise in its crude production in the past years allowed the country to record massive trade and current account surpluses and this largely boosted its overseas financial assets.

According to QNB, the GCC’s combined trade surplus stood at around $520 billion in 2011, the largest in the world.

“This is twice the size of the country with the next largest surplus, China, and is also about two-thirds the size of the US’s trade deficit,” QNB said.

A breakdown showed Saudi Arabia accounted for almost half of the total surplus ($245 billion) followed by the UAE and Qatar ($79 billion).

The report, citing IMF data, showed that Japan has been the region’s main trade partner for decades, purchasing nearly16 per cent of its exports and supplying six per cent of GCC imports in 2010.

South Korea is also a long-standing leading trade partner, taking 10 per cent of the GCC exports and supplying four per cent of imports.

“These two countries are by far the main contributors to the GCC trade surplus as their exports from the GCC far exceed the imports they supply. Half the GCC trade surplus in 2010 was a result of trade with these two countries,” QNB said.

It showed that trade between the GCC and other Asian countries has risen rapidly over the past few years.

In 2001, barely two per cent of GCC trade was with India. By 2010 that had jumped to 11 per cent, only slightly behind Japan.

Similarly, China’s trade with the GCC expanded from just four per cent of the GCC’s total commercial exchange to 10 per cent in 2001-2010.

“As India and China are the first and second largest suppliers of exports to the GCC, this partly offsets their purchases of GCC hydrocarbon exports,” it said.

“The growing trade ties with Asia’s two giants are not surprising…… their demand for hydrocarbons has been growing rapidly and, with limited domestic reserves, they rely on supplies from the GCC. Similarly, China and India have pursued export-led growth strategies. They have been producing and competitively-pricing goods needed in the GCC such as electrical items, textiles and construction materials.”

The report noted that despite the growing share of trade with Asia, Western trade partners remain important for the GCC, with the European Union and US collectively representing about a fifth of GCC trade in 2010.

“The EU countries differ from the GCC’s other major trade partners in that they supply more goods than they purchase. This is because they mainly source their hydrocarbons from Russia and Africa, while the GCC imports large quantities of capital and luxury goods from the EU. As a result, trade with the EU reduces the overall GCC trade surplus by about 18 per cent.”

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