Bulent Gökay, Keele University elaborates on how Turkey tries to keep wheels of economy turning despite worsening coronavirus crisis. It, contrary to its neighbours, would not go down the same way. Read on to find out why.
Turkey confirmed its first case of the new coronavirus on March 11, but since then the speed of its infection rate has surpassed that of many other countries with cases doubling every two days. On April 2, Turkey had more than 15,000 confirmed cases and 277 deaths from complications related to the coronavirus, according to data collated by John Hopkins University.
The Turkish government has called for people to stay at home and self-isolate. Mass disinfection has been carried out in all public spaces in cities. To encourage residents to stay at home, all parks, picnic areas and shorelines are closed to pedestrians.
Some airports are closed and all international flights to and from Turkey were banned on March 27. All schools, universities, cafes, restaurants, and mass praying in mosques and other praying spaces has been suspended, and all sporting activities postponed indefinitely.
Manufacturing remains open
Many small businesses in the service sector are closed, and many companies in banking, insurance and R&D have switched to working from home. But in many industrial sectors, such as metal, textile, mining and construction, millions of workers are still forced to go to work or face losing their jobs. In Istanbul, where more than a quarter of Turkey’s GDP is produced, the public transport system still carries over a million people daily.
Recep Tayyip Erdoğan, Turkey’s president, has openly opposed a total lockdown, arguing a stay-at-home order would halt all economic activity. On March 30, he said continuing production and exports was the country’s top priority and that Turkey must keep its “wheels turning”.
But in the short term, many of Turkey’s export markets for minerals, textiles and food, such as Germany, China, Italy, Spain, Iran and Iraq, are already closed due to the virus. This has led to enormous surpluses piling up in warehouses. Even where there are overseas customers, getting the goods delivered has proven difficult. The process of sanitising and disinfecting the trucks and testing the drivers before they travel takes many extra hours, sometime days, after waiting in long lines.
Still, Erdogan’s statements give the impression that he sees this pandemic not only as a serious crisis, but also as an opportunity for Turkish manufacturers. The hope is that, after the Chinese shutdown, European producers which depend on Chinese companies for a range of semi-finished products may consider Turkey as an alternative supplier in the longer term. That’s why the government is still allowing millions of workers to go to factories, mines and construction sites despite the huge health risk.
A bruised economy
The Turkish government announced a 100 billion lira (£12 billion) stimulus package on March 18. It included tax postponement and subsidies directed at domestic consumption, such as reducing VAT on certain items and suspension of national insurance payments in many sectors for six months. But this is an insignificant sum for an economy as big as Turkey’s.
Most of the support will go to medium and large companies that were forced to close, and only a very tiny amount to individual workers. In order to benefit from the scheme, a person must have worked at least 600 days in the past three years (450 days for those in Ankara). Those with most need get the lowest level of help or no help from the state.
The tourism sector, which accounts for about 12% of the economy, has already been decimated. Some 2.5 million workers will not be able to work as they had been expecting to in the peak tourist months between April and September.
Limited room for manoeuvre
Even before the virus hit Turkey the economy was already weak, still trying to recover from the impacts of a 2016 coup attempt and a 2018 currency crisis, both of which caused severe stress to Turkey’s economic and financial systems.
In March, Turkey’s Central Bank reduced its benchmark interest rate by 1%, and several of the country’s largest private banks announced measures to support the economy, such as suspending loan repayments. As a result, the Turkish lira initially held up reasonably well, compared with other emerging market economies, but it fell to an 18-month low on April 1 as the coronavirus death rates accelerated. Official interest rates have fallen below 10%, providing some protection to those holding Turkish lira versus some foreign currencies.
Turkey’s financial options to limit the impact of the crisis are limited. Credit rating agency Moody’s revised its prediction for the country GDP from 3% growth in 2020 to a 1.4% contraction. Still, it may get a reprieve from the low oil price. Turkey imports almost all its energy needs, and with the recent fall in the price of oil and gas, this means Turkey could save about US$12 billion (£9.6 billion) in energy imports.
It is hard to see very far ahead. During the next few months, it’s expected that Turkey, alongside South Africa and Argentina, could be sliding toward insolvency and debt default. After that, everything depends on how this crisis progresses and how long it will take to end.
MENA sovereign wealth funds are set to yank billions from stock markets, with the cash needed back home reportedAlison Tahmizian Meuse in an article Gulf faces recession as oil deluge meets COVID-19 in an Asian Times article dated March 30, 2020. It is said elsewhere notably in the local media that these sovereign funds could shed something like $300 billion.
Middle East oil exporters are bracing for recession and the lowest growth rates since the 1990s, with economists warning that the “twin shocks” of Covid-19 and plummeting oil prices will have a knock-on effect across the region.
“Quarantines, disruption in supply chains, the crash in oil prices in light of the breakdown of OPEC+, travel restrictions, and business closings point to a recession in the MENA region, the first in three decades,” the Institute of International Finance warned this week.
Oil exporters in the Gulf and North Africa are projected to see growth levels drop to 0.8%, IIF said, based on an average price per barrel of $40. At the time of publication on Monday, crude was hovering at cents above $20 per barrel.
Petro-titans like Saudi Arabia, which have shifted major resources toward sovereign wealth funds in recent years, are expected to recall funds back home as their collective surplus of $65 billion is flipped inside out to a deficit of the same amount or more.
These sovereign wealth funds could shed up to $75 billion in stocks in the coming period, Reuters on Sunday quoted JPMorgan’s Nikolaos Panigirtzoglou as saying.
Saudi Arabia’s Public Investment Fund currently holds significant shares in everything from ride-hailing app Uber to Japan’s SoftBank.
Such funds have likely already offloaded as much as $150 billion-worth of stock in the month of March, said Panigirtzoglou.
How did we get here?
Saudi Arabia earlier this month launched an oil price war, flooding the market with crude in a game of chicken against Russia after the latter refused to collaborate on production cuts.
Moscow, which desired lower prices to compete with US shale, did not blink.
The result has been, Bloomberg reports, a “cascade” of oil surplus, with some landlocked producers literally paying buyers to relieve them of supplies they cannot store.
From Saudi Arabia to Algeria, MENA exporters are expected to see hydrocarbon earnings fall by nearly $200 billion this year, according to the Institute of International Finance report, resulting in a loss of more than 10% of GDP in this sector alone.
As the price war was launched, the novel coronavirus began spreading through the Gulf, shattering hopes of diversifying toward tourism in the near future.
Saudi Arabia, with approximately 1,300 confirmed cases as of Monday, has shuttered the gates of Mecca over fears it could become the new virus epicenter after Iran.
The religious pilgrimage to Islam’s holiest sites, mandatory for every Muslim, nets Saudi Arabia billions of dollars each year.
The financial troubles in the Gulf do not stop at the Persian Gulf, but are slated to have a painful knock-on effect across the Middle East region.
Young people from Lebanon, Jordan, and Egypt – with its population of 100 million, have for decades turned to the Gulf Arab states for jobs after graduation, doing everything from running restaurants in Riyadh to working in banks in Dubai.
Such positions have become even more crucial in a time of heightened visa restrictions in the United States and Europe.
A recession in the Gulf, thus spells an even worse outlook for already struggling economies in the Levant, which often look to the oil producers for help during hard times.
“A global recession will lead to a reduction in trade, foreign direct investment, tourism flows, and remittances to Egypt, Jordan, Morocco, and Lebanon,” IIF said.
Egypt, the report notes, is expected to see a “significant drop” in critical Suez Canal transit revenues, as global trade suffers.
The Egyptian government earlier this month revoked the press credentials of Guardian correspondent Ruth Michaelson after she reported on a researcher’s findings that Egypt was seeing a higher number of Covid-19 cases than reported.
Nation will be able to finance current account deficit for 35 years even with prices this low
The UAE is best-positioned among GCC economies to weather the decline in oil prices as it can finance its current account deficit longer than any of its regional peers, says a new report.
According to Capital Economics, the UAE can finance its current account deficit for 35 years if oil prices stay at $25 a barrel. Kuwait comes second followed by Qatar, Saudi Arabia, Bahrain and Oman.
“In the four largest Gulf economies – Saudi Arabia, the UAE, Kuwait and Qatar – current account deficits could be financed through a drawdown of large foreign exchange savings for a considerable amount of time. Saudi Arabia could do so for around a decade and the other three countries for even longer,” said Jason Tuvey, senior emerging markets economist at
Capital Economics. The report said the UAE still runs a current account surplus at $30 a barrel.
Brent crude was trading down $3.37, or 12 per cent, at $25.35 a barrel by 1720GMT after dropping as low as $25.23, its weakest since 2003. US crude was down $5.19, or 19 per cent, at $21.76. The session low was the lowest since March 2002.
Data showed that UAE-based sovereign wealth funds held over $1.21 trillion worth of assets in August 2019 compared to $825.76 billion by Saudi Arabia, $592 billion by Kuwait, $320 billion by Qatar and $22.14 billion by Kuwait.
Oil prices have plummeted over the last few weeks, firstly due to coronavirus and then the collapse of Opec+ talks on production cuts. Brent has dropped 45 per cent in the past month from $57.60 a barrel on February 17 to $31.60 on March 17.
Tuvey noted that large foreign exchange savings provide substantial buffers and the likes of Bahrain and Oman, which are most vulnerable to a period of low oil prices, and can probably rely on financial support from their neighbours to avert devaluations.
He said dollar pegs in Bahrain and Oman are more vulnerable, with foreign exchange savings only able to cover current account shortfalls for a couple of years at most. Bahrain secured a $10 billion financing package from its neighbours in mid-2018.
In recent days, GCC governments have stepped up fiscal support in order to mitigate the economic hit from efforts to contain the virus. “If oil prices stay low even after the virus fears have subsided, austerity will come on to the agenda and this means that an eventual recovery in non-oil sectors will be slow-going,” he said.
Khatija Haque, head of Mena research at Emirates NBD, has said that the UAE posted a budget surplus of Dh37 billion ($10 billion) in 2019 and is well-positioned to withstand lower oil prices in 2020.
“If we strip out volatile oil revenues, we estimate the UAE’s non-oil budget deficit narrowed to just under 20 per cent of non-oil GDP, down from 27 per cent of non-oil GDP in 2015, and pointing to a tightening of fiscal policy in recent years,” Haque said.
Monica Malik, chief economist at Abu Dhabi Commercial Bank, said the sharp fall in oil prices and the outlook for a price war adds significant downside risks to the economic outlooks of GCC countries.
“We estimate that all GCC countries will realise a significant fiscal deficit at the current oil price of $37 per barrel, with Oman and Saudi Arabia seeing particularly significant shortfalls relative to GDP. A weaker oil revenue backdrop will require a meaningful pull-back in government spending, as was the case in 2015 and 2016, to limit the size of the fiscal deficit,” Malik said.
She sees a forecasted increase in output from Saudi and Russia and the changing dynamics of oil market fundamentals will likely bolster global oil stocks significantly in 2020. A number of oil-importing countries are also likely to accumulate inventories at the current low price levels, which in turn would lower oil demand during second-half of 2020.
Furthermore, the outlook for inventories beyond 2020 will depend on global demand and coronavirus-related developments in the coming months, she added.
Edward Bell, commodity analyst at Emirates NBD Research, has said that dust has not entirely settled yet caused by travel restrictions and lockdowns due to coronavirus.
The Saudi Entertainment Ventures Company (Seven), established by the Public Investment Fund (PIF) and mandated to invest, develop and operate entertainment destinations in Saudi Arabia, has announced the expansion of new entertainment complexes to prime locations across the kingdom.
RIYADH, These will delight residents and tourists alike and contribute to positioning Saudi Arabia as a hub for entertainment and leisure, said a statement from Seven.
The entertainment complexes will meet the fast-growing tourism sector and contribute to realising the goals outlined in Saudi Vision 2030, it stated.
These projects are being developed in key strategic geographic locations, providing large resident populations with innovative leisure choices that will appeal to all the family. Each complex will feature several entertainment and leisure choices including cinemas, play areas, rides, food and beverage (F&B) outlets, attractions and more, it added.
Chairman Abdullah Al Dawood said Seven is building the entertainment ecosystem of the kingdom, having already opened the first cinema in Saudi Arabia in 35 years.
“We have a clearly structured development plan to build 20 entertainment destinations, 50 cinemas and two large theme parks in prime locations across the kingdom,” stated Al Dawood.
In Jeddah, Seven will develop several entertainment complexes adding to the leisure choices for over four million residents and visitors.
With entertainment complexes coming up by the azure waters of the Red Sea as well as in areas that are popular among residents, the leisure ecosystem of Jeddah will witness a dramatic transformation.
In line with the vision of the leadership to offer more attractions that add to the quality of life of residents and visitors to the holy cities of Makkah and Madinah, Seven will open new entertainment complexes.
Another addition is in Taif, the fifth biggest city in Saudi Arabia and the unofficial ‘summer capital’, where the cool climes draw people to its location on the slopes of the Sarawat Mountains.
Known as the spring by the sea for its popularity among tourists as a scuba-diving destination with white sandy shores, Yanbu is another strategic location. With easy connectivity from Riyadh and Dammam, Al-Kharj will also feature a Seven entertainment complex.
Another area which will feature a project by Seven will be Buraydah, located in the centre of Saudi Arabia, said the statement from Seven.
Abha and Khamis, set in the Asir Mountains and known for equitable all-year weather, will also have new entertainment complexes by Seven, adding to their touristic value.
The port city of Jazan by the Red Sea, serving as a large agricultural heartland of the kingdom, features several ambitious infrastructure projects and is another natural choice for Seven – along with Tabuk, one of the historic sites, rich in rock art, archeological sites, castles and mosques.
Adding to the entertainment ecosystem of the capital city of Riyadh is the development of the entertainment complex at Al Hamra that will serve the densely populated neighbourhoods in the north-east of Riyadh.
At the intersection of King Abdullah Road and East Ring Road, the project will serve over 2.5 million people within a radius of a 30-minute drive. Another exciting upcoming addition to Riyadh is the entertainment complex at Al Nahda, with the Nahda Park Metro Station just a few metres away. Announced last year, work on these projects is progressing as per schedule.
Further adding to the communities of Dammam and Al Khobar, which serve as vital hubs for several key industries and global businesses, Seven is bringing waterfront attractions that will create unforgettable moments of joyful entertainment for everyone. Announced last year, these projects will also offer a range of entertainment choices for residents and visitors.
“We are committed to realising the goals of Saudi Vision 2030 to accelerate the creation of world-class entertainment assets in the Kingdom that support economic diversification, create new jobs, and contribute to socio-economic progress. Our complexes will position the kingdom as an entertainment, culture and tourism hub of the region,” he stated.
“At Seven, we believe in promoting and creating opportunities for the private sector to thrive in the fast-evolving entertainment landscape of the kingdom,” noted Al Dawood.
“We are inviting the most ambitious and creative business partners and vendors to join us in our remarkable step forward to shape the entertainment landscape of the Kingdom,” he added.
“A multi-faceted investment strategy is needed to achieve the three objectives of income, growth and stability,” points out Willem Sels, chief market strategist, HSBC Private Banking.
The outlook for the Middle East and North Africa (Mena) region for the new decade is a “fascinating” one, full of continued economic reforms, transformation and market liberalisation, according to HSBC. “With these developments, opportunities are expected to be widespread, across multiple industries and across the region. The combination of supportive monetary policy and responsive central banks are a few of the additional supportive variables for the region,” it said in a release yesterday.
The new decade will not be as kind to investors as the last and this will mean a new path for investments, said HSBC Private Banking in its first quarter’s investment outlook. “We will most likely see a US recession at some point in the next ten years, and while central banks’ policies should remain accommodative, it is clear that the new decade will mean a new path for investments,” says HSBC Private Banking in its investment outlook for the first quarter of 2020. “A multi-faceted investment strategy is needed to achieve the three objectives of income, growth and stability,” pointed out Willem Sels, chief market strategist, HSBC Private Banking. In a low growth and low interest rate environment, returns are unlikely to be as high as they were in the past decade, and in an environment where broad-based market upside is lower than in the past, and political risks remain high, HSBC Private Banking believes diversifying risk exposures will be especially important. HSBC Private Banking says portfolios should avoid excessive cash balances as well as the lowest rated end of high yield. It favours dollar investment grade, emerging markets’ local and hard currency debt, complemented with dividend stocks, real estate and private debt instruments to generate further income. It also sees opportunities to boost the return potential of portfolios by focusing on quality companies with sustained earnings growth and, where appropriate, it believes some leverage can help boost the net income of portfolios. It can also make sense selectively to look to hedge funds and private equity to capture growth opportunities and private equity to look through short-term market volatility. “It’s a new path for investments, but sometimes, new paths lead you to the most interesting sights” Sels noted. In 2020-21, HSBC Private Banking says investors can expect interesting opportunities for long term growth in sectors, geographies or themes related to the ‘Fourth Industrial Revolution’ or ‘sustainability’. It is also optimistic that the ageing, urban, digital, mobile, sharing-based, knowledge-based, circular, fast-paced and increasingly Asian global economy provides companies and investors with plenty of opportunities.
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.
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