BEIRUT (Reuters) – Lebanon has taken a sound path with reforms in its 2019 draft budget and power sector but it will have to keep going, World Bank MENA vice president Ferid Belhaj said on Friday in Beirut.
The bank and other donors helped arrange pledges of $11 billion in soft loans and aid at a Paris conference last year to build new infrastructure. But the money depends on the Lebanese government launching reforms it has put off for years and tackling its huge debt burden.
“In general … we are optimistic, but at the same time our optimism is cautious because of the economic situation in the region,” Belhaj was cited as saying in a statement from Lebanese Prime Minister Saad al-Hariri’s office after the two met.
Parliament is debating the 2019 draft budget approved by the cabinet last month, a critical test of Lebanon’s will to enact reforms. Leaders have warned of a financial crisis if there are no changes.
The budget aims to cut the deficit to 7.6% of gross domestic product from 11.5% last year. Lebanon has one of the world’s largest public debt burdens at 150% of GDP.
Hariri plans to use the funds from the Paris donor meeting for a 10-year capital investment program that would boost low growth. The country also has plans for about 250 projects which include transport, water and power sectors.
International Monetary Fund officials, who also met Hariri on Friday, urged Lebanon to speed up the process of implementing the projects and program, the premier’s office said.
“Lebanon is going down a sound path when it comes to the reforms at the level of the budget and electricity … but the reforms do not end. They are continuous,” Belhaj said.
The government approved an electricity plan in April that aims to boost generation capacity and bring down subsidies straining state finances.
Reporting by Ellen Francis; Editing by Catherine Evans and Raissa Kasolowsky
The Middle East is plagued with some of the highest unemployment rates among the up-and-coming generation. One reason behind this could be that most education systems in the region do not link what students learn with the knowledge they actually need in the future.
However, it seems that’s about to change thanks to the efforts of individuals and organizations who are tirelessly working to bridge the gap between learning and earning. This specific issue is at the center of the region’s third annual “No Lost Generation Tech Summit,” which is set to be held in Jordan’s capital Amman on Tuesday and Wednesday.
The two-day event is primarily organized by UNICEF’s regional office for the MENA region and NetHope – an NGO “eager to make a difference in this world through technological innovation.” It is also “supported by the steering committee for youth from the region, and representatives from the International Labor Organization, the International Rescue Committee, Mercy Corps, the Norwegian Refugee Council, UNESCO, UNHCR and World Vision.”
The summit focuses on presenting tech-enabled solutions attemped to link learning and earning among youth from vulnerable communities across the region.
The event’s packed agenda is “almost entirely developed and managed by young people who have all pioneered ways to bridge the gap between young people’s schooling and employment.” (These juniors were selected by involved committees after applying for various roles.)
Speaking to StepFeed, a few of these bright young participants told us more about the ambitious initiative and what it means for youth across the Arab world.
“What makes this summit special is its impact on youth”
Balqees Shahin Al Turk, a 22-year-old Jordanian, has been participating in youth engagement programs and events with UNICEF and other NGOs since 2016. When she learned about this year’s Tech Summit, she immediately applied for a leading role.
“What makes this summit special is its impact on youth, since youth engagement is very high pre, during and post-summit,” Shahin explained.
There are 75 youngsters from across the MENA region working on this summit, she says. The fact that people her age are organizing such an event and have their voices heard among adults is a boost of self-confidence and energy to work harder.
“The rate of unemployment in the MENA region is about 30% although most of the MENA populations is composed of youth,” which Shahin finds disappointing. A main problem, according to her, is the gap between what young people learn and what real work environment requires.
“Young people are graduating with no clue on how to implement what they have learned so its quite important to work on minimizing this gap first by figuring out that there is a problem and second by talking about it and trying to find solutions for this and that’s what the summit is about,” she explained.
“I think the impact on adolescents and youth after the NLG Tech Summit will be wonderful”
For Syrian teens – and those a bit older – it’s not easy to cope with all that’s been lost. “This summit is very important for me as a young person because I have lost a lot of important things like education and my country Syria because of the war,” Saber Al-Khateeb, a 22-year-old Syrian and one of the representatives of youth at the NLG Tech Summit, said.
The summit will bring together “youth, private sector companies, development and humanitarian experts, academic institutions and donors to leverage technology and cross-sector collaboration to connect learning to earning for young people in the region, particularly those affected by the crises in Syria and Iraq,” he explained.
Al-Khateeb remains hopeful when it comes to learning-to-earning solutions, as he believes proper implementation will lead to a decrease in unemployment rates.
NLG’s young participants are here to inspire future generations
Speaking to StepFeed, 24-year-old Palestinian Shahenaz Monia, another young participant in the summit, said the gap between learning and earning should be reduced before unemployment rates skyrocket.
“Never underestimate the power of any opportunities to get more experience,” as these, in her belief, will allow anyone to enhance and hone their skills.
The two-day event will be packed with people from different backgrounds, and with divergent experiences and success stories, which should be interesting and educational to young people.
“Passing through a hard and long way doesn’t mean you are wrong,” Monia said. “If you believe in something work hard to make it true. It’s okay to feel nervous, it only means you are stretching out of your comfort zone,” she continued.
Governments in the Middle East are becoming more
receptive to growing private sector involvement in their economies because
public sector debt in many markets is ballooning, an official from the World
Bank’s International Finance Corporation (IFC) has said.
Speaking on an investors’ panel debate at the
Global Financial Forum in Dubai on Monday, the IFC’s Middle East and North
Africa (MENA) director, Mouayed Makhlouf, said: “For the first time,
because of the massive rise in public debt across the region, we see a
difference. Our narrative with these governments has changed. Now, they are coming to us and they are saying
‘can you help us with the reforms?'”
Makhlouf said that the MENA region needs to create
300 million new jobs – “basically, double the population” by 2050 due
to the burgeoning youth population in the region, and that Egypt alone needs to
create around 700,000 jobs per year, although he said it is MENA’s fastest
growing economy currently, with GDP growth of 5.3 percent, compared with a
regional average of around 2-3 percent.
“The social contract in MENA is as such where
most of the services (are) provided by the public sector. But what you have ended up with… is a huge
public debt that has been rising for the past few years,” he said, adding
that debt-to-GDP ratios stand at around 96 percent in Egypt, 97-98 percent in
Jordan and 150 percent in Lebanon.
“For us, the main thing we need to find in
this region are… growth and jobs. And
I really believe both of these things can only come through a larger private
sector participation,” Makhlouf said.
In a separate panel on the outlook for the region’s
banking sector, JP Morgan‘s Asif Raza said that the decline in oil prices
that began in 2014 had created opportunities for
international banks to advise governments that are looking to
diversify on how to embark on “monetisation and privatisation” of
Kamal, MENA head of corporate banking at Citi, said that governments had run up deficits as oil
revenues fell, and had financed these through “various instruments where
banks have been involved”.
“And we expect to see that continue over the
next 2-3 years.”
Although total GCC fixed income issuance declined
by 16 percent year-on-year to $145.3 billion in 2018 as oil prices rallied,
according to Kamco Research, JP Morgan’s Raza said the current pipeline is
A faster flow
Raza said that at this stage last year, “over
$15.4 billion worth of issuance was done in the MENA region – this year, it’s
He added that in 2018, “the loan market
was (at an) all-time high in this region”. Figures published earlier this month from
Acuris showed that syndicated loan activity in the MENA region last year
outstripped bond issuance – with $133 billion of syndicated loans issued,
compared to $89.5 billion in bonds.
Raza said that at the top end of the corporate
banking market, “there’s lots of activity still happening”.
“There’s still quite a decent pipeline of
financing and refinancing,” he said.
However, Citi’s Kamal argued that the market has
been much tougher for SMEs in recent years.
“I believe that there is room for improvement
for all countries in the region as far as creating the right balance for SMEs
(is concerned),” he said.
He said that “time and again” in tougher
economic times large corporates, government-related entities and even government
departments have delayed payments to SMEs, which causes cashflow problems and
affects their ability to repay creditors.
“And some of the legal framework that
surrounds the corporate sector – we all know about bounced cheques and the
consequences of that. In summary, what
happens is SMEs can’t stay back in a number of cases (to) fight through these
cycles. So, we see skips, people leave
and that does not leave a very strong impact as far as consumer confidence is
Yet funding shortages for private sector firms can
also create opportunities – not least for the region’s private equity sector,
according to Karim El-Solh.
Speaking on the investment panel, El-Solh said that
his firm’s pipeline “has increased dramatically as a result of a lack of
availability of funding for businesses elsewhere.
“The IPO market is not open; the bank
liquidity has dried up so for us it’s an opportunity to come and be a provider
of growth capital. We are seeing more
companies, better quality companies, we’re acquiring controlling stakes at
lower valuations,” he said.
Makhlouf said more opportunities need to be created
for the private sector, stating that levels of private sector involvement in
the economy in the region lag behind other emerging markets.
“MENA region is only one-fifth in terms of
private sector participation compared to Latin America,” he said.
The number of millionaires in the UAE increased
last year and this trend will continue over the next five years as growing
investment opportunities will generate more millionaires locally as well as
political and economic stability will also woo rich individuals and families
from foreign countries, say researchers and analysts.
According to the latest report released by global
consultancy Knight Frank, the number of millionaires, or high net worth
individuals, in the UAE expanded 3 per cent to 53,798 last year from 52,344 in
the previous year. The numbers are projected to grow 14 per cent to 61,292 by
2023. Similarly, the number of ultra-high net worth individuals (UHNWIs) – who
own more than $30-million wealth – in the UAE grew from 672 in 2017 to 693 last
year and will reach 799 by 2023.
The study predicted that the number of UHNWIs in
Dubai and Abu Dhabi will increase from 440 last year to 511 in 2023 and from
192 to 223, respectively.
Issam Kassabieh, senior financial analyst at
Menacorp, believes that the ultra-rich will continue to flock to the UAE in
“At the moment, Dubai is attractive for
foreigners. Now, it is a place not just for good investments returns but also
to stay for long term. Government is focusing on key sector so that the cash
comes in and stays in the country through different measures such as longer
visas and ease of doing business initiatives,” Kassabieh said.
“The UAE is an attractive place for foreign
investors – financial markets are at an early stage and have a long way to go.
Real estate was the first to anchor the economy and that brought foreign
investors here. Going forward, the focus will be on more diverse sectors. Also,
the ease of doing business chart shows the UAE is first in the region and also
competitive globally,” he added.
“Dubai offers a full package – good quality of
life, healthcare, education and investment opportunities. All these complement
each other and attracts high net worth individuals to this country. In addition
to that, diversity of population plays a big role in this,” said
Knight Frank data revealed that Dubai and Abu Dhabi
will witness higher growth in UNHWIs as compared to Manama and Riyadh.
Raju Menon, chairman and managing partner, Kreston
Menon, said the number of millionaires will undoubtedly continue growing in the
UAE in coming years.
“Whatever the business challenges or revenue
decline the companies are facing today, it is temporary. We need to look at
long-term of 5 to 10 years. Millionaires should grow here in the UAE because
money is available here so the investment avenues will be opened. The UAE’s
economy offer big opportunities,” he said.
Menon believes that most of the new millionaires
will be homegrown mainly in retail, trading, healthcare, real estate, services
and shipping sectors.
Iyad Abu Hweij, Managing Director of Allied
Investment Partners, said the UAE, home to over 9.4 million residents, remains
an attractive destination for HNWIs in the region.
With investor and business friendly policies, world
class infrastructure and a stable outlook, HNWIs are expected to continue to
grow in numbers in the country over the next coming years. Such policies and
initiatives have played an important role in bolstering the confidence of
investors and attracting Foreign Direct Investments in the UAE, which in turn
creates jobs for a highly talented workforce,” Abu Hweij said
Additionally, the UAE, viewed as a regional startup
hub and a digital leader, continues to boast more startups than any other
country in the region. Naturally, such startups attract more venture capital
and private equity investments locally than anywhere else regionally, he added.
“The UAE continues to provide solid investment
opportunities for investors locally and globally, which, along with a rapidly
developing financial services sector, has played a catalyst like role for the
growth of HNWIs in the country.”
The number of millionaires in the Middle East with
wealth below $30 million grew three per cent from 446,384 in 2017 to 459,937
last year. The number is projected to grow 18 per cent to 541,311 by 2023.
Similarly, the ultra-high net worth individuals with more than $30m assets grew
four per cent year-on-year to 8,301 last year. It’s estimated that the number
will grow 20 per cent over the next five years to 9,997.
According to Knight Frank forecast, the number of
billionaires in the region will grow from 89 last year to 99 by 2023.
Globally, the number of millionaires with less than
$30 million assets are projected to expand from 19.6 million in 2018 to 23.4
million by 2023, an increase of 19 per cent. While ultra rich will increase 22
per cent during 2018 to 2023 from 198,342 to 241,053.
Arab Bank’s Radwan Shaban said oil exporting nations provide 80 percent of region’s GDP
The Middle East and North Africa region is unlikely to escape the impact of a trade war, with the biggest potential impact coming from a decline in oil prices, according to the chief economist of Jordan’s Arab Bank.
Speaking on a panel debate on the global outlook for the MENA region, Arab Bank’s chief economist Radwan Shaban said that falling oil demand from China and other nations, as the result of a prolonged trade dispute, would be “a negative for the region”.
“This is a region in which, yes, we have oil exporting and oil importing countries, but in terms of numbers, oil exporting countries account for 80 percent of GDP of this region in 2018,” Shaban said. “Even the welfare of oil-importing countries is closely tied to oil-exporting countries through trade, tourism, FDI, foreign assistance – a whole bunch of factors.”
He said that oil importing countries such as Jordan witness lower trade, lower investment levels and lower assistance with Gulf neighbours if oil prices decline, which “translates into lower economic growth”.
Monica Malik, chief economist with Abu Dhabi Commercial Bank (ADCB), said that with oil prices maintaining a level above $70 per barrel since the second quarter of this year, “we are more optimistic” of the region’s prospects for growth.
She anticipates that higher revenues from oil will mean the government will enjoy a fiscal surplus in 2018, while Saudi Arabia will “substantially reduce” its deficit to under 5 percent of gross domestic product (GDP), although other nations such as Bahrain, Kuwait and Oman had been less progressive with their reforms.
“But I think with the GCC [Gulf Cooperation Council] support packages to Bahrain, we expect the pace of reforms there to accelerate. We’ve already had parliament approve their VAT law,” Malik said.
Both the United Arab Emirates and Saudi Arabia have shifted fiscal policy from consolidation towards growth, Malik said, and had given indications that they intend to continue doing so throughout next year.
In the UAE, she said the country has benefited from “a number of stimulus packages and support measures which aren’t just for short-term growth support but also to improve the business environment, to bring capital inflight, to bring foreign direct investment.”
“I think the critical driver of economic activity, non-oil activity, in the Gulf is government activity still. So, I think focused growth, supported by investments that will really improve the medium-term environment, will be positive for the private sector, though at this point it’s still weak and tightening monetary policy is one of the key headwinds.”
James McCormack, global head of sovereign and supranational ratings at Fitch Ratings, was less positive about Saudi Arabia’s fortunes.
“If you dig around the numbers a little bit, you see a big increase in oil revenues, which has been matched largely by increases in spending. And the concern there is the increases in spending are in current spending, not capital, so (it’s) a little bit more difficult to bring those back down when oil prices maybe come down,” he argued.
A widening gap
He said that the balance of the non-oil economy as a proportion of GDP was worsening.
“The deficit is getting bigger. So, this is really an oil story in terms of the fiscal recovery that we’re seeing in Saudi Arabia,” McCormack argued.
McCormack also said that he feared the trade dispute between the United States and China could be a prolonged one.
“I think it (dispute) is going to last longer, in part because of the fact that the U.S. has moved the goalposts – in fact, widened the goalposts a couple of times,” McCormack said.
He argued that some of the demands being made by the U.S. are considered to be “non-negotiable” by the Chinese government.
“I don’t see how we’re going to have a discussion that’s going to satisfy both sides. This has the potential to turn into something meaningful from a global macro sense,” McCormack argued.
Shaban said that a slowdown in global trade would hit the region in other ways. For instance, he said that Morocco is a significant supplier to Europe’s automotive sector, while in Egypt revenues from ships passing through the Suez Canal provide the country with an important source of foreign currency revenues.
“As global trade slows, that will affect the Suez Canal activity,” Shaban said.
(Reporting by Michael Fahy; Editing by Shane McGinley)
The most recent economic results in Morocco show a deceleration from last year. The north African country grew by 2.4% in the second quarter of 2018, down from 4.5% in the same period last year, according to the High Commission for Planning. The agriculture sector has been cited as the main reason for the decline; its output slowed from just over 18% last year to around 3%.
Oxford Business Group published this article dated October 29th, 2018, written by Jaime Perez-Seoane de Zunzunegui, Regional Editor for North Africa and The Americas.
The bigger picture looks fairly stable, though. The central bank expects the country to end 2018 with growth of 3.5%, a substantial figure despite having registered 4.1% in 2017. Figures remain strong enough to keep up optimism, as indicated by the local business community in Oxford Business Group’s latest Business Barometer: Morocco CEO Survey.
Of the 106 CEOs surveyed between November 2017 and September 2018, almost three-quarters say they have positive or very positive expectations of local business conditions in the coming 12 months.
This sentiment is further strengthened by the number of business leaders indicating the likelihood of future investments: 77% say it is likely or very likely that their company will make a significant capital investment within the next 12 months.
Obstacles to becoming a regional hub
Of course, challenges to economic expansion remain. In fact, they are inevitable when a country is working to maintain considerable growth levels. There are a number of responses to the question of Morocco’s economic slowdown. Undoubtedly, diversification of productive sectors and partnering markets will be key, and government efforts to transform Morocco into a regional hub have long been under way.
In order to consolidate its position as a regional power, one area Morocco could enhance is its tax environment. With individual income tax capped at 38% and corporate tax at a maximum of 31%, coupled with a relatively complex local and national tax system, Morocco ranks 109th out of 137 countries in the total tax rate competitiveness category of the World Economic Forum’s Global Competitiveness Index 2017-18. Accordingly, 55% of survey respondents say that Morocco’s current tax environment (business and personal) is uncompetitive or very uncompetitive on a global scale.
In addition, access to credit remains challenging, at least for some companies. While 40% of business leaders characterise the ease of access to credit as easy or very easy, 38% find it difficult or very difficult. Opinions on financing are always difficult to capture in surveys, as each firm’s profile – including its size, expertise, access to market and needs – influences its response.
A third challenge worth mentioning – and one that is largely acknowledged by CEOs in our survey – is the lack of leadership. Leadership is identified by 47% of respondents as the type of skill in greatest need in Morocco. I’ve met with many business leaders during my visits to the country, and the absence of soft skills among the country’s institutions seems to be affecting the public and private sectors; nobody knows that better than the men and women running companies on a daily basis.
Estimates for 2019 forecast Morocco will grow less than in 2018, which is a reasonable prediction given the country’s recent performance. However, if trade with old and new partners continues to develop, opportunities are expected to be generated for local investors and companies. Determination from Morocco’s business leaders is there, and the challenges have been identified, which is an important first step to tackling them.