Regional Economic Commentary – Week 26

Regional & GCC Developments:

  • Bahrain’s sovereign wealth fund Mumtalakat has “no intention of borrowing this year” and plans to finance its projects this year using income from investments and will not seek government assistance, according to its chief executive.
  • A new SPV has been proposed by industry experts to collect USD 1.1bn to revive and fund four stalled developments in Bahrain.
  • US investments in Egypt fell by 85.9% yoy in 2015 while trade dropped by 10.7% to EGP 41.9bn, according to official statistics. The number of American tourists visiting Egypt increased by 22% and the number of nights spent grew by 6.9% last year.
  • Banque Misr, Egypt’s second-largest state bank, disclosed that it had obtained a USD 105mn murabaha financing facility from three UAE banks (without revealing their names) and that it will be paid back in two years.
  • Jordan reached an agreement with the IMF over the Extended Fund Facility: under this program, the country is expected to achieve a budget surplus of JOD 170mn in 2019. Reform measures of raising prices and taxes were also announced: raising price of cigarettes, tax on liquor, fixed charge on fuel prices, among others. Measures to lower spending would save the country JOD 318mn by the end of this year, according to the finance minister.
  • Lebanese banks received USD 7.2bn in wire transfers last year, representing close to 15% of GDP, according to the head of Union of Arab Banks. Though lower oil prices and associated slowdown dipped remittances into the country by about 3.3% last year, it was less severe than 2014’s 8.4% drop on security concerns.
  • Oman’s Ministry of Tourism unveiled its 2040 strategy, which will see investments of around OMR20bn and creation of more than half a million jobs.
  • Foreign direct investment (FDI) inflows to Oman increased by 11% yoy to USD 822mn in 2015, according to UNCTAD’s World Investment Report 2016, but remained well below their pre-crisis annual average of above USD 2bn, according to the UN agency. The FDI inflow in 2015 was equivalent to 4.8 % of Oman’s GDP compared to 3.3% of GDP in 2014.
  • Oman’s Ministry of Finance commissioned five international banks to arrange the issue of two dollar-denominated sukuk totalling USD 2.5bn – a USD 1bn five-year issue and a USD 1.5bn ten-year issue – to finance the budget deficit.
  • Qatar approved laws to set up a new state-owned company to sell oil products; the company is to be established and represented by Qatar Petroleum, and be wholly owned by the state of Qatar.
  • Qatar’s real GDP growth is forecast to average 3.6% over 2016-2018, on “on the back of continued expansion in the non-hydrocarbon economy, which although moderating, remains strong”, according to the “Qatar Economic Outlook 2016-2018” report issued by the Ministry of Development Planning and Statistics.
  • Saudi Arabia’s Capital Market Authority has amended rules – by changing references to “shares” in the rules into “securities” – to allow foreign institutional investors to buy exchange-listed debt instruments, as part of the reform process. These reforms are likely to be implemented by mid-2017.
  • Liberalisation measures begin: Saudi Arabia granted SaudiGulf Airlines a license to operate domestic flights within the country. The airline will begin domestic flights from Sep 1 and expects to start international flights to Dubai from Dammam by the end of the year.
  • Saudi Arabia’s GDP growth is expected at just +0.8% this year, its weakest growth since 2002, as a result of lower government spending amidst lower oil prices according to Oxford Economics estimates. The report also discussed the dismal state of the GCC’s overall productivity performance: it made zero or negative contributions to the GCC economies at the economy level between 2002-2015, while accounting for marginal improvements when focusing on the non-oil sector.
  • Strong entrepreneurial class in the Middle East: research by HSBC Private Bank shows that the region has more than 2,800 active business owners, worth between USD 250,000 – USD 20mn, with the youngest average age of entrepreneurs at just 26 years old.

UAE Focus

  • “Several banks” were in talks for a “market makerrole with the Abu Dhabi Securities Exchange (ADX), disclosed the CEO of the exchange, without providing any further details. NBAD had launched and closed within a year its market making operations on ADX; though sources stated it as “unprofitable” for the bank, the exchange’s CEO stated that it was due to technical difficulties.  
  • Bank lending in the UAE picked up by 6.9% yoy in May (Apr: 6.6%) while M2 money supply growth was 1.4% (Apr: 4.5%)
  • Saudi Arabia accounted for 45% of Dubai’s trade in the region in 2015, according to the Dubai Chamber of Commerce, followed by Oman and Kuwait at 19% and 16% respectively.
  • The Commercial Bank of Dubai (CBD) is due to sign a USD 500mn loan deal to refinance existing debt (a USD 450mn loan that matures in Dec, according to a source), reported Reuters. Separately, Emirates NBD signed a three-year loan of USD 1.7bn last week- about USD 450mn more than it had originally sought.
  • Moody’s upgraded Emaar Properties to Baa3 long-term issuer rating with a stable outlook, on “financial strength and ability to create sustained shareholder value through its ongoing projects and assured recurring revenues from its malls and hospitality businesses”.
  • Masdar is aiming for a production capacity growth of 20% per annum in the next five years both in solar and wind energy, and plans to tap North Africa, Levant and the Indian subcontinent as potential growth markets in addition to the GCC.
  • The Dubai Municipality plans to establish the largest plant in the Middle East to convert solid waste into energy, as part of the emirate’s plan to reduce the landfill by 75% by 2021. The plant, to be built at a cost of AED 2bn, is expected to be operational in Q2 2020; receive 2,000 metric tonnes of municipal solid waste per day in phase 1 to produce 60 megawatts.  
  • Mercer’s “Cost of Living” survey places Dubai and Abu Dhabi among the top 25 most expensive cities for expatriates, ranking 21 and 25 respectively. Hong Kong topped the list, while Luanda (Angola), Zurich, Singapore and Tokyo accounted for the top 5.
  • UAE’s start-ups are making their presence felt globally, with a four-fold increase in their role compared to the year before, according to the GE’s 2016 Global Business Innovation Barometer. About 85% of UAE respondents recognised “digital Darwinism”: i.e. becoming obsolete as technology is evolving faster than they can adapt while 72% felt that lack of talent or inadequate skills hindered their ability to innovate. (More details: http://www.gereports.com/innovation-barometer-2016/)

Regional news and commentary courtesy of Nasser Saidi.
Feature Image Courtesy – Unknown.