Economic Power in the Middle East: Measuring the Rise of the Gulf and the Continuing Importance of the non-Arab Periphery

When the American naval officer Alfred Mahan coined the term “Middle East” in 1902, he referred to an area in which economic activity was concentrated in Turkey, Egypt, the Levant and Persia.

The economic importance of Arabia was negligible and was based in the small settled communities on the Gulf littoral and in the Hejaz.

For the first half of the twentieth century, this pattern of economic activity changed little. Turkey and Egypt remained dominant economic powers, and Iran and Iraq grew in importance as they began exporting oil. Political developments in Arabia were significant, but economically the region remained a backwater.

The gathering pace of oil exports during the 1950s began to shift the weight of economic activity towards the Arabian peninsular, but it was not until the mid-1970s, and the quadrupling of the oil prices which followed the 1973 Arab-Israeli war, that the Arabian Gulf states emerged as major players in the economic system of the Middle East.

That process of economic realignment has continued over the last 40 years. In 1970, the six GGC states accounted for about a quarter of the Arab world’s GDP — less than that of the Maghreb. Egypt was by far the largest single economy, accounting for about one sixth of the Arab world’s total, and the GDP of Lebanon and of the UAE was about the same.

Ten years later, the GCC accounted for about half of Arab world GDP and Egypt’s share had halved. According to World Bank figures, the GCC now accounts for nearly 60% of Arab world GDP.

Of course there is more to the Middle East than the Arab states. The biggest economy in the region is Turkey’s, and Iran’s is steadily catching up with that of Saudi Arabia. The Israeli economy is the fifth largest in the region, after Turkey, Saudi Arabia, Iran, and the UAE.

Tracking these long-term shifts in economic weight is difficult – one needs not only a data series which uses a consistent methodology over several decades but also a series which is complete. The World Bank has consistently-compiled data on GDP going back to 1960, but, quite understandably, the data is incomplete for earlier dates. (For example, the World Bank does not cite 1960 GDP data for Yemen.) Without complete data, the calculation of market shares impossible.

The late Yusif Sayigh, a highly respected Palestinian economist, cited Arab countries’ GDP data for 1970 and 1979 in his book “The Arab Economy.” Since his numbers are based on a single source — the Arab Fund for Economic and Social Development – they enable us to track the shift in economic weights in the Arab world between those dates.

GDP data for developing countries have to be treated with care, especially for earlier periods when many governments used unrealistic exchange rates. Nonetheless, given a far enough horizon, broad historical movements do become visible despite compromised data.

Would Alfred Mahan recognize the economic make-up of the region which he named, over a hundred years ago? Within the Arab Middle East, not much would be familiar – the rise of oil and gas exports has completely re-orientated the economic weight of the region; and Israel has sprung up as an economic power, albeit one which is isolated from its Arab neighbours. But the Admiral would see that much of the region’s economic activity continues to be conducted on its periphery, in Turkey and Iran.


Table 1: Share of Arab World GDP (%)*


2007

2000

1990

1979

1970

GCC

57.9

51.3

46.4

51.7

24.4

Saudi Arabia

26.5

28.2

28.2

33.8

10.6

UAE

14.3

10.6

8.1

6.9

4.1

Kuwait

7.9

5.6

4.4

7.9

7.5


Maghreb

22.0

21.7

31.2

24.0

37.6

Algeria

9.4

8.2

15.0

9.5

13.4

Morocco

5.2

5.5

6.2

5.0

9.9


Other Middle East

20.1

27.0

22.4

24.2

38.0

Egypt

9.0

15.0

10.4

8.0

17.3

Iraq

3.9

3.9

6.2

10.4

9.3


Total

100.0

100.0

100.0

100.0

100.0

 
* Figures for 2007, 2000 and 1990 are taken from the World Bank’s Development Indicators. Figures for 1979 and 1970 are taken from Yusif Sayigh, “The Arab Economy,” Oxford 1982. The World Bank does not give a figure for Iraqi GDP for 1990 so I have used its figure for 2000 – a far from perfect solution but one which is probably no less bad than trying to estimate the relative size of Iraqi GDP in those two years. Both the World Bank and Dr. Sayigh cite GDP at current US$.


Table 2: Share of Total Middle East GDP (%)*


2007

2000

1990

Arab Middle East, of which

56.8

57.5

56.5

GCC

32.9

29.5

26.2

Saudi Arabia

15.1

16.2

15.9

UAE

8.1

6.1

4.6

Kuwait

4.5

3.3

2.5


Maghreb

12.5

12.5

17.6

Algeria

5.3

4.7

8.5

Morocco

3.0

3.2

3.5


Other Arab Middle East

11.4

15.5

12.7

Egypt

5.1

8.6

5.9

Iraq

2.2

2.2

3.5


Non-Arab Middle East

43.2

42.5

43.5

Turkey

25.4

23.0

20.5

Iran

11.2

8.7

15.8

Israel

6.6

10.8

7.2


Total

100.0

100.0

100.0


* Source: World Bank Development Indicators. The GDP figures are at current US$. See note in Table 1 on the 1990 figure for Iraq.