DUBAI (Reuters) – Economic growth in the Gulf will pick up this year and next, helped by Saudi Arabia’s investment program and Expo 2020 in Dubai, although the region will continue to feel the impact of oil output cuts, a Reuters poll showed on Wednesday.
The above picture is a FILE PHOTO: A car drives past a construction site of Riyadh Metro and the King Abdullah Financial District in Riyadh, Saudi Arabia, November 12, 2017. REUTERS/Faisal Al Nasser
OPEC and non-OPEC allies agreed in December to deepen output cuts, coming in addition to previously agreed curbs of 1.2 million bpd, and will represent about 1.7% of global oil output.
Saudi Arabia’s economy grew 0.3% in 2019, and is expected to grow 2.0% in 2020 and 2.2% in 2021, the poll of 26 economists, conducted Jan. 7-21, projected. A similar poll three months ago gave the same forecasts for 2020 and 2021 but estimated 0.7% growth in 2019.
“Saudi Arabia’s third-quarter GDP data, showing a fall of 0.5% year-on-year, was broadly as expected, with OPEC+ cuts constraining the contribution of the oil sector to economic growth,” Oxford Economics wrote in a research note. But diversification efforts “show signs of feedthrough”, it said.
Monica Malik, chief economist at Abu Dhabi Commercial Bank, said a stronger non-oil sector would help Saudi Arabia.
“Real GDP growth in Saudi should benefit from stronger non-oil activity as the investment program gains momentum. The drag from the oil sector should moderate in 2020 following a sharp reduction in oil output in 2019,” she said.
Median forecasts for growth in Oman, a relatively small Gulf crude producer, were significantly slashed. Analysts saw 1.0% growth in 2019, 1.7% in 2020 and 2.3% in 2021. Three months ago, Oman’s GDP was seen growing 1.3% in 2019, 3.2% in 2020 and 3.0% in 2021.
Oman’s ruler of 50 years, Sultan Qaboos bin Said, died earlier this month.
Maya Senussi, senior economist at Oxford Economics, said deeper oil production cuts agreed by OPEC and allies in December, and prospects for non-oil activity remaining weak, have weighed on Oman’s outlook.
Analysts forecast growth of 1.7% in 2019 for the United Arab Emirates, down from 2.2% in the poll three months ago. Its 2020 and 2021 estimates were unchanged.
The governments of Dubai and Abu Dhabi, the country’s two main emirates, have boosted spending to provide stimulus to their economies.
Dubai, which will host Expo 2020 this year, announced a record budget of around $18 billion this year, a 17% increase year on year, while Abu Dhabi announced in 2018 a three-year package of $13.6 billion.
Kuwait, which said last week it expects a budget deficit of 9.2 billion dinars ($30.3 billion) in the fiscal year starting on April 1, was forecast to see 0.5% economic growth in 2019, down from the 1% expected three months ago.
Kuwait’s GDP growth was revised down to 1.9% in 2020 from 2.2% three months earlier. Expectations for its 2021 growth, however, have risen to 2.6% from 2.3%.
GDP growth for Qatar, the world’s largest exporter of liquefied natural gas, was revised down to 0.9% in 2019 from 2.0% three months ago. Its 2020 forecast was cut to 2.1% from 2.4%, while its 2021 estimate was lifted to 2.5% from 2.3%.
Polling by Md Manzer Hussain; Writing by Yousef Saba and Nafisa Eltahir; Editing by Susan FentonOur Standards:
Adelle Geronimo informs that despite all the hoo-hah in the Middle East, the UAE to accelerate space tech startups is no extraordinary youth employment programme. This follows the UAE launching in October 2018, its first satellite built entirely by Emirati engineers in the UAE and after sending an Emirati astronaut to the International Space Station. The UAE plans also to establish a self-sustaining habitable settlement on Mars by 2117.
The UAE Space Agency has announced its collaboration with the Abu Dhabi-based global innovation hub, Krypto Labs, to launch the UAE NewSpace Innovation Programme, which aims to maximise the growth of space technology start-ups with NewSpace, the rising private spaceflight industry.
The programme falls under the purview of the National Space Investment Promotion Plan, which aims to heighten the role of the space industry in contributing to the economy of the UAE.
It is also in line with an MoU signed between the UAE Space Agency and Krypto Labs, which aims to increase innovation and investment in the space sector, drive a diversified UAE economy, and promote awareness through specialised initiatives that support space technology entrepreneurship.
Dr. Mohammed Nasser Al Ahbabi, Director-General of the UAE Space Agency, said, “The UAE NewSpace Innovation Programme invites students, entrepreneurs and start-ups to share their ground-breaking ideas and transform them into viable commercial products. This supports developing space technology as part of the UAE’s private spaceflight NewSpace sector, which aims to make space more accessible, affordable and commercial.”
Selected applicants will take part in a three-month incubation programme at the headquarters of Krypto Labs in Abu Dhabi, with access to the hub’s facilities. They will also have access to the innovation hub’s local and global network of investors, be mentored by global space experts, and develop their skills in business creation, marketing, and sales, among others.
Applicants will also have the opportunity to secure funds to ensure their start-ups are prepared to enter the market.
Eligible applicants must present an innovative and original idea with a clear technical approach, which generates a feasible and scalable product. The teams must have at least one Emirati team member.
Dr. Saleh Al Hashemi, Managing Director of Krypto Labs, noted, “By supporting innovators and young entrepreneurs, we aim to foster a spirit of originality and zest within start-ups to solve global challenges that keep the UAE on the frontier of the innovation map and elevate its position as a leader for innovation-focused businesses.”
This Moody’s negative rating outlook for the 2020 GCC sovereigns was published after it issued a little earlier, a similar downgrade for GCC corporates. But before we start wondering how relevant and whether, in this day and age, it applies to the MENA region and particularly to the Gulf sub-region, let us see who and what is behind Moody’s. It has by the way in 2018, citing as always, the still on-going and potentially worsening geopolitical event risks that play a crucial role in defining sovereign credit quality, come up with a particular set of ratings. Moody’s Corporation is the holding company that owns both Moody’s Investor Services, which rates fixed-income debt securities, and Moody’s Analytics, which provides software and research for economic analysis and risk management. Moody’s assigns ratings based on assessed risk and the borrower’s ability to make interest payments, and many investors closely watch its ratings.
ZAWYA GCC on January 9, 2020, posted the following articles.
The image above is used for illustrative purpose. A screen displays Moody’s ticker information as traders work on the floor of the New York Stock Exchange January 20, 2015. REUTERS/Brendan McDermid
GCC sovereigns’ 2020 outlook is negative, says Moody’s
Negative outlook reflects slow progress on fiscal reforms, weak growth and higher geopolitical risks.
Moody’s Investors Service said in a report that the outlook for sovereign creditworthiness in the Gulf Cooperation Council (GCC) in 2020 is negative.
The negative outlook reflects slow progress on fiscal reforms at a time of moderate oil prices, weak growth and higher geopolitical risk, the ratings agency said.
“The pace of fiscal consolidation will remain slow in the GCC in 2020 and fiscal strength will continue to erode in the absence of significant new fiscal measures and reforms,” said Alexander Perjessy, a Moody’s Vice President – Senior Analyst.
“This will be exacerbated by existing commitments to limit oil production, which will reduce government revenue,” Perjessy added.
The ratings agency expects a further gradual erosion in GCC credit metrics as oil prices remain moderate over the medium-term. It also pointed that lower oil revenue available to fund government spending will constrain growth in the non-oil sector which will, in turn, discourage governments from undertaking more fiscal tightening.
Moody’s sees the region’s geopolitical risk as higher and broader in nature than in the past, amid ongoing tensions between the United States and Iran.
Moody’s: 3 factors behind GCC sovereigns’ 2020 negative outlook
GCC’s geopolitical risk is higher in nature than in the past.
By Staff Writer, Mubasher
Moody’s Investors Service explained the factors which led to the negative outlook for sovereign creditworthiness in the Gulf area for the year 2020.
A recent report by Moody’s showed that the slowdown in the development of fiscal reforms at a time of reasonable oil prices contributed to the outlook, along with weak growth and higher geopolitical risk.
Further gradual erosion in GCC credit metrics is expected by Moody’s which relied in their outlook on the moderate oil prices over the medium-term.
Moody’s vice president – senior analyst, Alexander Perjessy, highlighted: “The pace of fiscal consolidation will remain slow in the GCC in 2020 and fiscal strength will continue to erode in the absence of significant new fiscal measures and reforms.”
Perjessy added, “This will be exacerbated by existing commitments to limit oil production, which will reduce government revenue.”
Growth in the non-oil sector will be constrained by lower oil revenue available to fund government spending; this will discourage governments from undertaking additional fiscal tightening.
Moody’s noted that “the region’s geopolitical risk is higher and broader in nature than in the past amid ongoing tensions between the US and Iran.”
The New York Times Ted Widmer’s Opinion is that A Century Ago, the Modern Middle East Was Born. Lots could object to that statement but reading his Christmas Day article republished here with our thanks, could be as enlightening as perhaps the Messiah’s birth anniversary.
At the end of 1919, Woodrow Wilson still wanted the region to decide its future. Britain and France had other ideas.
As 1919 came to a close, people around the world were celebrating the holidays, grateful for the return of peace on earth after the convulsions of the Great War. “Peace on earth” was a relative concept; there was still fighting in Russia. But for the most part, the soldiers were home, and their families were looking forward to a new decade, free of conflict.
In Paris, there were long lines outside of restaurants, as the French celebrated the holiday with gastronomic exuberance. In Berlin, Vienna and Budapest there was less Christmas cheer, thanks to food shortages and inflation, but the people flocked to cafes and did their best to revive the old holiday traditions. In Washington, there was no snow, but Woodrow Wilson issued a flurry of proclamations, including one on Christmas Eve that relinquished federal control of the railroads, a wartime measure that was no longer necessary.
But for all the Christmas cheer, there was a general restlessness as the long year 1919 drew to a close, without the clarity that so many hoped would follow the war’s end. An elaborate treaty was signed at Versailles on June 28, ending hostilities between the principal powers, but creating a host of new problems. Germans were furious when they realized the scale of the reparations imposed on them. New and dangerous political actors were quick to seize upon the public’s hunger to find scapegoats as the political mood turned dark.
Wilson’s thoughts must have been conflicted this Christmas season. As the son of a Southern Presbyterian minister, he had many reasons to rejoice at the arrival of Christmas, including the fact that he was sometimes compared to Jesus, with his “sermonettes” about the new era that was approaching. As a young man, he had written an essay on “Christ’s Army,” and it must have felt at times that he was in charge of this organization, with all of his schemes for human betterment. But as the year progressed, the comparisons to Jesus began to turn sardonic, as Wilson’s perfectionism grated on his allies.
Mistakes were plentiful as the world’s leaders contemplated missed opportunities in the great reshuffling of 1919.
A year earlier, Wilson strode the world like a colossus. On Christmas Eve 1918, he was in Paris, enjoying the last night of his first visit to France, where he received a tumultuous welcome as the embodiment of the people’s hopes. A year later, he was significantly diminished, by the flawed treaty, by the Senate’s refusal to approve the League of Nations, and by the stroke that had crippled him in October, as he brought his case to the American people.
He never lost his religiosity, and for that reason, the arrival of another Christmas may have felt reassuring. But the year had taken a severe toll. He said, “If I were not a Christian I think I should go mad, but my faith in God holds me to the belief that he is in some way working out his own plans through human perversities and mistakes.”
Mistakes were plentiful as the world’s leaders contemplated missed opportunities in the great reshuffling of 1919. Three enormous empires — the Russian, German and Austro-Hungarian — had folded within the last two years, sweeping away centuries of dynastic privilege, but leaving a gaping void.
Then there was the Ottoman Empire, reeling from a series of catastrophes, but not quite defunct. From their palaces in Constantinople, sultans had once exercised sway over huge stretches of the lands stretching in all directions from Asia Minor. Even further afield, they commanded the loyalties of hundreds of millions of Muslims around the world as the caliphs of Islam.
But in recent years, sultans were struggling to maintain control of their own administrators. The Ottomans had backed the losing side in the war, then horrified the world with a genocidal campaign against the Armenian people. They were also losing credibility in other ways. In the years before the war, European powers had gobbled up nearly half a million square miles of former Ottoman territory. Then, during the war, an Arab revolt stoked by the British had removed large portions of what we would now call the Middle East.
Wilson even contemplated an American mandate over Armenia, the Dardanelles and the Bosporus.
With Christmas approaching, the English and French were negotiating over the fate of what remained. Earlier in the year, they had dutifully nodded as Wilson articulated his idea of a new diplomacy that would show respect to small countries, and affirm the rights of all peoples to something called “self-determination.” There would be fewer colonies, although some “mandates” would be allowed to exist, in which Western powers would act as benevolent caretakers for peoples who were “not yet ready” for self-determination. So idealistic did the word sound that Wilson even contemplated an American mandate over Armenia, the Dardanelles and the Bosporus.
But there had been a number of shocks to his idealistic vision. One came on March 20, 1919, when Wilson learned that his French and English allies had secretly agreed to carve up the Ottoman Empire as soon as the war ended, and were continuing to scheme both with and against each other. That seemed very much like the old diplomacy. A 1916 understanding, the Sykes-Picot Agreement, promised to give each side what it wanted in the region, with little regard for anyone’s right to self-determination.
For the British, that meant Palestine and a region that they were calling “Mesopotamia,” including the Ottoman provinces of Baghdad, Mosul and Basra. For the French, it was a generous slice of the eastern Mediterranean, around the city of Beirut, and an internal corridor stretching to Damascus, Aleppo and beyond.
Neither of these zones were natural countries. The Ottomans had considered Mosul a different region from Baghdad, but the British coveted the oil that was beginning to spurt out of the earth. Eventually, this awkward assemblage of provinces would receive a new name, Iraq, when the British succeeded in placing an Arab ally on its throne. In Arabic, the word means “deeply rooted,” but the new country was anything but that. The French went along, in return for some of the oil, and an agreement from the British to let them pursue their own intrigues in Lebanon and Syria.
Wilson responded by piously expressing his belief in “the consent of the governed,” and his hope that the wishes of local peoples would be taken into consideration as the European powers prepared to carve up the Middle East. He also proposed that a commission be created for that purpose, to earnestly inquire what form of government the locals wanted.
The French and British immediately shelved his quaint idea, but Wilson stuck with it, and appointed two commissioners, Henry Churchill King, the former president of Oberlin College, and Charles R. Crane, the scion of a family that had made a fortune from plumbing parts. They worked quickly and made a tour of the region, spending 42 days in what would later be Lebanon, Israel, the West Bank, Jordan and Syria. On Aug. 28, they submitted a report that confirmed Wilson’s sense that no one in the region wanted European powers to come in and colonize them. It may have been the first time anyone asked local Arabs what they wanted.
But events were happening quickly on the ground, and the old diplomacy refused to give up the ghost. Throughout the spring and summer, the French and British continued to divide up the Middle East as if they were shopping at a spice bazaar.
In his Fourteen Points, Wilson had tried to assure the peoples of the region that they would be free to pursue “autonomous development.” But that was a confusing concept as the victors made overlapping promises to Greeks, Italians, Armenians, Lebanese Christians, Arabs, Kurds and an increasingly vocal group of Zionists, mostly from Eastern Europe. As they clamored for their pieces of the Ottoman Empire, these disparate populations remembered a great deal of history. The Crusades, Constantine and the Roman Empire, the Greek wars against Persia, the Babylonian Captivity — all of it could be summoned in an instant to justify a historic claim to an attractive parcel of land. That didn’t sound like new diplomacy at all.
In the Ottoman lands, a curious version of self-determination was beginning to take place, without permission from Wilson.
Wilson might have done more to push back against the land grab, but he was having problems of his own. After he returned to the United States, he received a hard lesson in self-determination when the Senate killed his vision in November. In a sense, his defeat was shared by the peoples of the Middle East, still looking for a champion.
But in the Ottoman lands, a curious version of self-determination was beginning to take place, without permission from Wilson, the allied leaders, or even the Ottomans. As the sultan, Mehmed VI, conceded point after point to the Allies, an angry Turkish soldier began to take matters into his own hands. Mustafa Kemal Pasha had already shown a great military aptitude during the war, particularly during the Turkish victory at Gallipoli. Throughout 1919, Kemal (later to be known as Ataturk) traveled across Anatolia, organizing Turkish resistance to the dismemberment of his country. Increasingly, it became clear that he was creating a new country — Turkey — that would no longer be headed by the sultans.
In other ways, as well, the victors discovered that the lines on the map were not as easy to redraw as they had first thought. In some places, like Palestine and Israel, a state of near-constant violence has persisted among peoples who wish to exercise self-determination at the same time, in the same place. In other places, too, we see how much we still live with the decisions made at the negotiating table in 1919. Russia continues to seethe against its limits and its neighbors, and is pressing up close against the old Ottoman borderlands. Certain boundaries in the Middle East appear to be in flux again — most recently, the southern border of Turkey. Self-appointed “Caliphs” continue to appear and disappear, suggesting that a void remains unfilled since the last sultan occupied that role. In retrospect, the new maps of 1919 were something of a palimpsest.
But at least it was quiet in one place as night descended on Christmas Eve a century ago. Bethlehem was a small town in what had been the Ottoman province of Palestine, but its future was uncertain as the armies of different powers ranged closer, and the cartographers kept redrawing the maps in Paris. Still, it had endured a very long time by showing the right level of respect to the old diplomacy, even as the new diplomacy was coming in. Chapter Two of the Book of Luke records that Jesus was born there because of a census, ordered by the Roman Empire, requiring heads of families to return to their native villages. Diligent administrators, the Romans believed that “all the world should be registered.” As Woodrow Wilson learned, that was harder than it looked.
Sources: Ray Stannard Baker, “Woodrow Wilson and World Settlement”; Harry N. Howard, “Turkey, the Straits and U.S. Policy”; Margaret Macmillan, “Paris 1919: Six Months that Changed the World.”
Ted Widmer is a distinguished lecturer at the Macaulay Honors College of the City University of New York and a fellow of the Carnegie Council for Ethics in International Affairs.
The MENA region has $100 billion worth of clean energy projects currently in the pipeline, according to a report by Energy & Utilities.
The report estimates total investment in clean energy to exceed $300 bn by 2050 if the region’s utilities are to meet their ambitious targets.
Middle East Energy said that the sharp drop in the cost of solar and wind power technologies is driving clean energy, with the cost of installing photovoltaic (PV) solar and wind having fallen by 73 percent and 80 per cent respectively since 2010.
The commissioning of the world’s largest single-site photovoltaic (PV) solar plant in 2019, the 1.17GW Sweihan independent power project (IPP) in Abu Dhabi, is one of the milestones reached this year in the push for clean energy, the report noted.
Dubai also reached financial close for a $4.3 billion concentrated solar power (CSP) project, Noor Energy 1, which is the largest single-site power investment project in the world.
The report estimates that installed power generation capacity will be required to increase 35 percent by 2025 just to meet rising demand in the Middle East. Rapid population growth combined with ambitious industrial and economic expansion programmes is resulting in the growing need for power, as demand for electricity is expected to triple by 2050.
“Driven by well-designed auctions, favourable financing conditions and declining technology costs, renewables are being brought into the mainstream. Based on the renewables targets already in place, the region, led by the UAE, could save 354 million barrels of oil which is equivalent to a 23 per cent reduction, cut the power sector’s carbon dioxide emissions by 22 percent, and slash water withdrawal in the power sector by 17 percent by 2030,” Gareth Rapley, Group Director, Industrial, at Informa Markets said.
The report was published as a preview to an event in Dubai, The Middle East Energy 2020, which will be organised by Informa Markets in March 2020.
China is manoeuvring to avoid being sucked into the Middle East’s numerous disputes amid mounting debate in Beijing on whether the People’s Republic will be able to remain aloof yet ensure the safety and security of its mushrooming interests and sizeable Diaspora community.
China’s challenge is starkest in the Gulf. It was compounded when US President Donald J. Trump effectively put China on the spot by implicitly opening the door to China sharing the burden of guaranteeing the security of the free flow of energy from the region.
It’s a challenge that has sparked debate in Beijing amid fears that US efforts to isolate Iran internationally and cripple it economically could lead to the collapse of the 2015 international agreement that curbed Iran’s nuclear program, accelerate Iran’s gradual breaching of the agreement in way that would significantly increase its ability to build a nuclear weapon, and potentially spark an unwanted military confrontation.
All of which are nightmare scenarios for China. However, Chinese efforts so far to reduce its exposure to risk are at best temporary band-aid solutions. They do little to address the underlying dilemma: it is only a matter of time before China will have no choice but to engage politically and militarily at the risk of surrendering its ability to remain neutral in regional conflicts.
That is precisely the assessment that Iran hopes will persuade China alongside Russia and the European Union to put their money where their mouth is in countering US sanctions and make it worth Iran’s while to remain committed to the nuclear accord.
The problem is that controversy over the agreement is only one of the multiple regional problems. Those problems require a far more comprehensive approach for which China is currently ill-equipped even if it is gradually abandoning its belief that economics alone offers solutions as well as its principle of no foreign military bases.
China’s effort to reduce its exposure to the Gulf’s energy supply risks by increasing imports from Russia and Central Asia doesn’t eliminate the risk. The Gulf will for the foreseeable future remain a major energy supplier to China, the region’s foremost trading partner and foreign investor.
Initially delivering approximately 500 million cubic feet of gas per day or about 1.6 percent of China’s total estimated gas requirement in 2019, the project is expected to account with an increased daily flow of 3.6 billion cubic feet for 9.5 percent of China’s supply needs by 2022.
China is likely hoping that United Arab Emirates efforts to stimulate regional talks with Iran and signs that Saudi Arabia is softening its hard-line rejection of an unconditional negotiation with the Islamic republic will either help it significantly delay engagement or create an environment in which the risk of being sucked into the Saudi-Iranian rivalry is substantially reduced.
Presumably aware that Gulf states were unlikely to engage with Iran without involvement of external powers, Iran appeared to keep its options open by also endorsing the Russian proposal.
The various manoeuvres to reduce tension and break the stalemate in the Gulf put Mr. Trump’s little noticed assertion in June that energy buyers should protect their own ships rather than rely on US protection in a perspective that goes beyond the president’s repeated rant that US allies were taking advantage of the United States and failing to shoulder their share of the burden.
Potentially, Mr Trump opened the door to an arrangement in which the United States would share with others the responsibility for ensuring the region’s free flow of energy even if he has given no indication of what that would mean in practice beyond demanding that the United States be paid for its services.
Dr James M. Dorsey is a senior fellow at Nanyang Technological University’s S. Rajaratnam School of International Studies, an adjunct senior research fellow at the National University of Singapore’s Middle East Institute and co-director of the University of Wuerzburg’s Institute of Fan Culture
DUBAI/RIYADH (Reuters) – Saudi Aramco aims to announce the start of its initial public offering (IPO) on Nov. 3, three people with direct knowledge of the matter told Reuters, after delaying the deal earlier this month to give advisers time to secure cornerstone investors.
The people also said Aramco’s chief executive officer, Amin Nasser, was not present at the conference on Tuesday as he was meeting investors abroad ahead of the offering.
Aramco is looking to float a 1% to 2% stake on the kingdom’s Tadawul market, in what would be one of the largest ever public offerings, worth upwards of $20 billion.
Aramco, in response to queries by Reuters, said on Tuesday the oil company “does not comment on rumour or speculation. The company continues to engage with the shareholders on IPO readiness activities. The company is ready and timing will depend on market conditions and be at a time of the shareholders’ choosing.”
The people declined to be identified due to commercial sensitivities.
The company will soon have more shareholders from institutions, the head of the kingdom’s sovereign wealth fund, Yassir al-Rumayyan, said.
Al-Rumayyan, governor of the Public Investment Fund (PIF) and chairman of Aramco’s board of directors, was speaking at a panel at the conference in Riyadh.
Aramco will start subscription for investors in its initial public offering on Dec. 4, Saudi-owned news channel Al-Arabiya said in a news flash on Tuesday citing sources.
The oil giant plans to announce the transaction’s price on Nov. 17, it added. The company will begin trading on the local stock market, the Tadawul, on Dec. 11, the broadcaster reported.
The prospect of Aramco selling a piece of itself has had Wall Street on tenterhooks since Crown Prince Mohammed bin Salman first flagged it three years ago.
However, his desired $2 trillion valuation has always been questioned by some financiers and industry experts, who note that countries have been accelerating efforts to shift away from fossil fuels to curb global warming, putting oil prices under pressure and undermining producers’ equity value.
Russia’s sovereign wealth fund, the Russian Direct Investment Fund (RDIF), is working on a consortium of investors for Aramco’s IPO, its chief executive said.
“There are several Russian pensions funds who are interested to invest in the Aramco IPO and we have also received indications from our Russia-China fund of some Chinese major institutions also interested in Aramco IPO,” Russian Direct Investment Fund (RDIF) head Kirill Dmitriev told reporters on Tuesday.
Separately, Aramco has not approached the Kuwait Investment Authority (KIA) to invest in the IPO, the sovereign wealth fund’s managing director Farouk Bastaki said on Tuesday.
“KIA has not been approached by Aramco or its advisers for the IPO, and KIA will look at the IPO like any other investment,” Bastaki told reporters on the sidelines of an investment conference in Riyadh.
Reporting by Hadeel Al Sayegh in Dubai, Davide Barbuscia and Saeed Azhar in Riyadh; Additional reporting by Rania El Gamal and Marwa Rashad in Riyadh, and Asma AlSharif in Dubai; editing by Giles Elgood and Jason Neely
The unrest is, in turn, contributing to slower growth in the Middle East and North Africa region, alongside global trade tensions, oil price volatility and a disorderly Brexit process.
DUBAI: Unemployment and sluggish economic growth are fuelling social tension and popular protests in several Arab countries, the International Monetary Fund said Monday.
The unrest is, in turn, contributing to slower growth in the Middle East and North Africa (MENA) region, alongside global trade tensions, oil price volatility and a disorderly Brexit process, the IMF said in a report on the regional economic outlook.
Earlier this month it lowered the 2019 forecast for the region — taking in the Arab nations and Iran — to a meagre 0.1 per cent from 1.1 per cent last year.
The IMF slashed its outlook for the region’s three largest economies — Saudi Arabia, Iran and the United Arab Emirates.
The risks around the forecast of earlier this month “are skewed to the downside and are highly dependent on global factors,” the IMF said in its report on Monday.
“The level of growth that countries in the region are having is below what is needed to address unemployment,” said Jihad Azour, the IMF’s director for the Middle East and Central Asia.
“We are in a region where the rate of unemployment at the youth level exceeds 25-30 per cent and this requires growth to be higher by 1-2 per cent” in order to make a dent in joblessness, Azour told AFP in an interview.
The IMF report said that high unemployment was worsening social tensions in Arab countries.
“Unemployment averages 11 per cent throughout the region versus seven per cent across other emerging market and developing economies,” it said.
“Women and young people are particularly likely to be out of work, with more than 18 per cent of women…without jobs in 2018.” Violent protests have broken out in several Arab countries since early 2010 and turned into bloody civil wars in Syria, Yemen and Libya.
A new wave of demonstrations erupted over the last year in Algeria, Sudan, Iraq and Lebanon, typically demanding economic reforms and action against corruption.
In Lebanon, where protesters have brought the country to a standstill with demands for a full overhaul of the political system, the economy grew at a very slow pace over the past few years, Azour noted.
“The government has to act firmly and swiftly in order to address those imbalances, bring confidence back by addressing the fiscal situation, and lower expenditure,” he said.
The IMF also said that public debt levels were very high in many Arab countries — exceeding 85 per cent of gross domestic product (GDP) on average, with rates of more than 150 per cent in Lebanon and Sudan.
“Having built over many years, the cost of public debt burdens has become sizeable, preventing investments critical to the region’s long-term economic future,” it said.
The IMF said that Iran, which is subject to crippling US sanctions, has entered a steep economic recession and faces a battle against spiralling inflationary pressures.
The Islamic republic’s economy is projected to contract by 9.5 per cent this year after posting negative growth of 4.8 per cent in 2018.
Iranian authorities must align “the exchange rate close to the market rate and also reform the financial sector…and try to address some of the implications of the high level of inflation,” Azour said.
As a result of the sanctions, Tehran is believed to be exporting only around 500,000 barrels per day of crude, down from over two million bpd before the sanctions.
The IMF said that oil-rich Gulf Cooperation Council (GCC) states, led by Saudi Arabia, are expected to grow by just 0.7 per cent this year from 2.0 per cent in 2018 due to lower oil prices and output.
“GCC economies need to diversify and grow out of oil and this requires them to accelerate the reforms that have been started in the last four to five years,” Azour said. Stay up to date on all the latest World news with The New Indian Express App. Download now (Get the news that matters from New Indian Express on WhatsApp. Click this link and hit ‘Click to Subscribe’. Follow the instructions after that.)
The political impasse in which Algeria has been mired for more than seven months would result in a sharp economic slowdown in the short term. This Algeria’s Political deadlock and economic breakdown that the World Bank forecasters have reached is by any means comprehensive but could be read as some sort of alert.
The institution expects non-hydrocarbon sectors, as well as all oil and gas-related activity, to run through an air hole this year; which should have some unavoidable consequences on the country’s GDP growth. In effect, in similar way to other developing countries, it is expected to come down to 1.3% in 2019 from 1.5% the previous year.
“Uncertainty policy is expected to lead to a slowdown in the non-hydrocarbon sector in 2019,” reads a World Bank report released last Thursday. The Bretton Woods institution has not failed to highlight the impact of the arrests of business leaders on investment morality grounds or lack of these, and more generally, on the economy. “Business leaders from various sectors were arrested in connection with corruption investigations, which has disrupted the economy due to sudden changes in the direction and supervision of these companies, as well as uncertainty over investment,” the same report said. Since the beginning of the crisis, a wave of arrests affected the business community, public institutions, banks and social bodies alike. This blocking situation had worsened over the weeks; appropriation sets did not meet, officials at the level of economic administration were careful not to take the slightest risk. That is to say how violent the shock wave was. The impact on the economy could be disastrous as the situation continues to worsen by the day. As such, the World Bank (WB) estimates that “the pre-election period also risks further delaying the fiscal consolidation process scheduled for 2019, increasing the budget deficit to 12.1% of GDP and increasing the risk of a more abrupt adjustment in the future.” For the WB, widening budget and current account deficits is almost inevitable. While the fiscal deficit would be unlikely to be reduced internally, “on the external front, the current account deficit is expected to widen to 8.1% of GDP, mainly due to a significantly larger trade deficit.”
Investment is being impacted
“As the course of political events is expected to have an impact on economic activity, it is also expected that more resources will be allocated to social measures, to the detriment of public investment spending,” the Bank predicts. The report, stating that “private sector activity and investment will be affected by political disruptions and an unfavourable business climate, as well as disruptions caused by delays in payment of workers in several industries.” This is the case, since the draft Finance Bill 2020 foresees a sharp decline in capital expenditure, to the tune of 20.1%, while operating expenses and social transfers are maintained as they are. WB experts are merely saying out loud what Algerian economists and operators are thinking, warning of a situation that could go along if solutions to the political impasse run out. “The delays at the end of the political impasse and political uncertainty could further damage the country’s economy, leading to increased imports and further dwindling foreign exchange reserves,” concludes the WB report. Moreover, macroeconomic indicators are unlikely to improve at any time under current political conditions.
Economic growth to only 1.9% in 2020
Moreover, against a background of falling capital spending and low morale among investors, the growth of the Algerian economy would be only 1.9% in the year 2020. A stagnation is due in particular to the “slow” growth of the hydrocarbons sector, combined with the contraction in economic activity, which has limited growth in non-hydrocarbon sectors, according to the WB’s economic monitoring report released on Thursday. “Growth in the hydrocarbon sector has been slow, with economic activity contracting by 6.5% and 7.7% in 2018 and the first quarter of 2019, respectively, partially off-sparing the effects of the slight increase in non-core growth 3.4% and 3.9% in 2018 and the first quarter of 2019, respectively,” the WB noted. The tiny increase in investment in the first half of the year (4.9%) was driven by public investment in construction, public works and hydraulics, as a result of the expansion of social housing programmes, the WB said. Furthermore, the institution believes that “the recent discovery of a new gas field suggests a rebound in gas production and exports, but only in the medium term, and if and only if the framework for investment in hydrocarbons lends it to it.” The World Bank is merely bringing water to the government’s mill, which has called the enactment of the new hydrocarbon law urgent.
According to the world banking institutions, it would require some $5.47 bn in investments for MENA economies’ advancement as elaborated on the ESI of July 23, 2019. There are related Economic and Governance Risks as everybody knows but it remains as solvable as anywhere else in the world.
The World Bank responded to strong demand from the Middle East and North Africa Region (MENA) during the financial year that ended on 30 June 2019, with $5.47 billion in new commitments to invest in people, expand the private sector, and set a course for digital transformation.
Along with the financial commitments, the Bank delivered a wide range of analytical products in support of development goals of MENA countries.
In addition, there were $67 million in new committed grants for the West Bank and Gaza during the past financial year.
The World Bank’s knowledge services included support for the region’s high-income countries through its Reimbursable Advisory Services. The programme, which reached $56 million during the past financial year, supported efforts to diversify economies and promote private sector development, along with supporting the Kingdom of Saudi Arabia in anticipation of their upcoming G20 chairmanship.
“While the region has stabilised following the dual economic and social shocks caused by collapsing global commodity prices and a wave of social unrest, many countries have yet to enact the deep structural reforms necessary to achieve economic transformation that yields sustainable, inclusive growth,” said Ferid Belhaj, World Bank Vice-President for MENA.
Belhaj added: “These reforms are ever more urgent if the region is to seize the opportunity that its rapidly growing, highly educated and tech savvy young population represents. We have been working with governments to unlock this immense potential, channelling our support towards efforts to transform the region’s economies and embrace digital technology as a path to growth and opportunities.”
New strategy for the MENA region
In March of this year, the World Bank Group launched an enlarged strategy for the MENA region.
It provides a new and positive vision for the future of MENA with a focus on investments in human capital, leveraging the benefits of digital technology, and mobilising private financing for development while remaining committed to addressing the root causes of instability and responding to immediate needs.
All eyes will be on the region as Saudi Arabia takes over the presidency of the G20, Egypt chairs the African Union, and Morocco hosts the Annual Meetings in Marrakech in 2021.
Over the past financial year, the Bank worked with countries in the region to seize this momentum, turn these new priorities into reality, and project the region on to the global development stage, with a set of concrete goals to be achieved by 2021, in time for the Annual Meetings.
These efforts included a number of major financing programmes. In Jordan, a $1.45 billion financing package was launched to support the country’s plans to improve its business and investment environment and improve fiscal sustainability.
In Egypt, a $1 billion programme was launched to help sustain the momentum of Egypt’s reform program and capitalise on improvements to macroeconomic stability.
The programme helped launch the next generation of reforms focused on creating opportunities for Egyptians and raising living standards by promoting the private sector and improving government performance.
In Morocco, a $700 million programme was launched in support of the government’s efforts to leverage digital technologies to transform the country’s economy into a more inclusive and innovative driver of growth.
In Yemen, the Bank launched a new country engagement strategy and committed $540 million during the financial year to maintain the provision of services and support economic opportunities, bringing the Bank’s active portfolio to over $1.7 billion.
The World Bank also continued its support to Syrian refugees and the communities hosting them in Jordan and Lebanon through projects with the Global Concessional Financing Facility, a multi-donor vehicle which has leveraged over $2.5 billion in MDB financing to date.
The Bank also delivered a range of analytical products to support evidence-based policies and hosted regional knowledge-sharing events to promote coordinated approaches to the region’s development challenges.
“In line with the goals of the World Bank Group’s historic capital increase announced last year, our programs have focused on scaling up support to meet the aspirations of people in MENA by focusing on the opportunities that digitisation, entrepreneurship and innovation and greater regional coordination can bring,” said Anna Bjerde, World Bank Director of Strategy and Operations for the Middle East and North Africa.
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