Discussions on global economic imbalances and adjustment have become highly valued and popular nowadays. The worldwide financial crisis, European crisis and China’s rise to an economic world ower have particularly brought these issues to light. China is thought to boost its exports through an artificial low exchange rate, Germany is accused of profiting from the common European currency and money policy through high competiveness and the USA is blamed for financing its excessive consumption through unsustainable foreign debt. Notable cases are also found in the Middle East. Above all, attention must be paid to the antagonism toward oil exporting and non-oil exporting countries. Their different economic structures are often the primary cause of current account imbalances. Hence, this paper focuses on the examination of two Middle Eastern countries: Lebanon and Saudi-
Arabia. Lebanon is a small oil-importing country with a diverse population that experienced a period of intense European influence and which has been regularly confronted with regional
conflicts. Saudi-Arabia is a major regional power and oil-exporting country, whose politics emerge from a strictly conservative Islamic ideology. Primary attention is paid to the current accounts of the two countries. The purpose of this paper is to examine the causes of the current account imbalances and to propose strategies to adjust these imbalances. Chapter 1 deals with Lebanon’s current account deficit and traces it back, on the one hand, to a negative trade balance, which derived from its historically weak industry sector, caused by low productivity. On the other hand, Lebanon experiences a high twin deficit that
further supports this imbalance. Chapter 2 analyzes Saudi-Arabia’s current account surplus, which is caused by enormous oil-exports and further revenues from temporary high oil prices. Subtracting the oil sector, negative structural effects of this rentier-system become apparent; they cause a theoretical current account deficit. Examples are the outflow of workers’ remittances and a blown-up public sector. Each of these two chapters concludes with a
proposed solution containing strategies to overcome these imbalances and to create sustainable economic development. Chapter 3 sums up the results.
Table of Contents
Introduction
1. Lebanon’s Trade Balance Deficit
1.1 Preliminary Overview of Lebanon’s Current Account
1.2 The Underdeveloped Industry Sector
1.3 The Twin Deficit
1.4 Proposed Solution: Saving, Targeted Investment and Political Support
2. Saudi-Arabia’s Dependences
2.1 Preliminary Overview of Saudi-Arabia’s Current Account
2.2 The Oil-Rentierism
2.3 The Curse of Rentierism
2.4 Proposed Solution: Privatization, Liberalism and Diversification
3. Summing up Conclusion
Objectives and Key Themes
The primary objective of this paper is to examine the causes of current account imbalances in Lebanon and Saudi-Arabia and to propose strategic solutions for economic adjustment and sustainable development. The study highlights the distinct economic structures—Lebanon as an oil-importing, service-oriented economy and Saudi-Arabia as an oil-exporting, rentier-based economy—to address their respective challenges.
- The impact of structural industry weaknesses on Lebanon's trade deficit.
- The role of the "Twin Deficit" and public sector spending in Lebanon.
- The dependency of Saudi-Arabia on oil-rentierism and its economic implications.
- Strategies for economic diversification and liberalization in the Middle East.
- The influence of political environments and investment patterns on economic stability.
Excerpt from the Book
1.1 Preliminary Overview of Lebanon’s Current Account
Traditionally, the current account in Lebanon is consistently negative. Though the service account (above all, travel services) and the current transfer account (especially workers’ remittances) are having surpluses, the enormous deficit of the goods account contributes to the negative share of the current account deficit. From 1990 to the present, the current account deficit has moved between a range of approx. US$ 400m and approx. US$ 5bn at its worst and showed great volatility. Beginning with a deficit of about US$ 1bn in 1990, a new high of approx. US$ 2.8bn was recorded in 1992, equaling a share of almost 30% of GDP. After a recovery, the deficit reached a new high in 1997 with approx. US$ 5bn, which equaled half of the GDP. Up to 2006 both figures rebounded to a deficit of slightly more than US$ 1bn, or approx. 3 % of the GDP. Since 2007, the deficit continuously increased to US$ 4bn, but its equal share of the GDP just rose slightly up to 10%.
The main reason for the Lebanon’s current account deficit is the trade balance’s deficit, which arises when the value of imported goods exceeds the value of exported goods. This is financed by high surpluses in Lebanon’s capital account, especially due to capital inflows in the banking sector through the financial account (inward direct investments).
Summary of Chapters
Introduction: Outlines the global context of current account imbalances and introduces the specific comparative focus on Lebanon and Saudi-Arabia.
1. Lebanon’s Trade Balance Deficit: Analyzes the structural roots of Lebanon's trade deficit, including its weak industrial base and the consequences of the twin deficit.
2. Saudi-Arabia’s Dependences: Examines how oil-rentierism shapes Saudi-Arabia’s current account and evaluates the structural challenges posed by this economic model.
3. Summing up Conclusion: Synthesizes the findings and suggests that regional cooperation and structural reforms are necessary to achieve sustainable economic balance.
Keywords
Current Account, Lebanon, Saudi-Arabia, Trade Balance, Oil-Rentierism, Twin Deficit, Economic Diversification, Privatization, Middle East, Foreign Direct Investment, Macroeconomics, Industrial Sector, Economic Reform.
Frequently Asked Questions
What is the core subject of this research paper?
The paper investigates the causes and potential solutions for current account imbalances in two specific Middle Eastern countries: Lebanon and Saudi-Arabia.
What are the central thematic fields addressed?
Key themes include trade balance deficits, oil-rentierism, industrial productivity, public sector spending, and the impact of capital flows on economic stability.
What is the primary research goal?
The goal is to analyze why these countries experience specific imbalances and to provide strategic, evidence-based recommendations for policy makers to foster sustainable growth.
Which scientific methodology is utilized?
The study employs a descriptive and analytical approach, utilizing macroeconomic data from the IMF, World Bank, and national statistical agencies to evaluate trends over the period 1990–2010.
What does the main body of the work cover?
The main body is divided into two parts: a detailed study of Lebanon's reliance on services and its twin deficit, followed by an analysis of Saudi-Arabia’s economic dependence on oil exports and rentier structures.
Which keywords define this work?
Key terms include Current Account, Oil-Rentierism, Twin Deficit, Industrialization, and Economic Diversification.
How does the Lebanese war influence current economic structures?
The war destroyed infrastructure and capital stocks, leading to a weak industrial base and a long-term reliance on imported goods and financial services.
Why is Saudi-Arabia considered a "rentier state"?
It is classified as a rentier state because its government relies primarily on oil revenues, which are redistributed to the population, rather than taxing productive domestic sectors.
What solution does the author propose for Saudi-Arabia?
The author advocates for privatization, the promotion of a competitive private non-oil sector, and an aggressive economic diversification strategy to break the "rentier curse."
- Arbeit zitieren
- Adrian Wille (Autor:in), 2011, Current Account Imbalances of Selected Middle Eastern Countries, München, GRIN Verlag, https://www.grin.com/document/184043
