Global Developments Bottomline: Not much joy around the world – FDI into emerging markets falling to the lowest in 20 years; escalating worrisome economic wars, and breakdown of cross-party Brexit talks on one hand while geopolitical tensions in the Middle East edged up after Saudi oil facilities were hit by drones and oil tankers attacked off the Fujairah coast in the UAE (also showing the vulnerability of the Strait of Hormuz through which a fifth of oil production from the Gulf passes). Uncertainty seems to be on the cards this week too – up ahead are India’s election results on 23rd May (polling ends today and Modi’s political rivals are already forming alliances), the OPEC meeting to decide on oil output (which will have implications on Venezuela, Iran and Libya – all three have been affected by significant US foreign policy moves) , as well as European elections (polls are from May 23-26 to elect 751 lawmakers to the EU Parliament, with results out on 26th May).
- Bahrain’s 2019-2020 national budget was approved by the Shura Council. Budget deficit is forecast at BHD 1.3bn (BHD 696mn this year and BHD 600.7mn in 2020). Social welfare spending will be increased from BHD 380mn to BHD 435.6mn each year.
- Bahrain approved four major laws: Providing Cloud Computing Services to Foreign Parties Law aimed at international cloud providers; Letters and Electronic Transactions Law, which provides a new legal framework to associated banking and financing services; Small Vessels Registration and Safety Requirements Law allowing for ease in registration with the Transportation and Telecommunications Ministry rather than the Interior Ministry; amendments to the 2001 Money Laundering and Terrorism Funding Combating and Ban Law to widen the definition of terrorism based on FATF recommendations.
- The IMF have reached a staff-level agreement to disburse the final USD 2bn tranche of the USD 12bn loan to Egypt.
- Egypt’s unemployment rate dropped to 8.1% in Q1 2019, down from 8.9% in Q4 and 10.6% in Q1 last year. Number of unemployed stood at 2.267mn out of a total workforce of 27.968mn.
- Egypt’s trade deficit narrowed by 2.7% yoy to USD 3.63bn in Feb, as exports grew by 2.2% to USD 2.48bn and imports fell 0.7% yoy to USD 6.11bn.
- Egypt plans to attract $ 10bn of investment into the petroleum sector in the coming financial year, on top of the USD 30bn already invested over the past 3 years.
- Jordan’s exports to Iraq grew by 3.74% yoy to JOD 59mn in Jan-Feb, thanks to an agreement (including exemptions for Jordanian products & facilitating travel of trucks) signed early this year.
- Bank deposits in Kuwait increased by 1% mom and 2.4% yoy to KWD 43bn in Mar while credit was up 5.2% yoy to KWD 37.1bn.
- Remittances from expatriates in Kuwait touched KWD 19bn (USD 62bn) in the past 5 years, disclosed the financial committee of Kuwait’s parliament.
- Following multiple Cabinet sessions and public employees threatening an indefinite budget strike, Lebanon’s budget is still under discussion with the crucial cuts to public sector wages (including those of MPs) the main point of contention.
- Lebanon‘s PM stated that without “serious reforms”, the economic situation would not improve and that there would be no investments or job opportunities. Unlocking the CEDRE loans would allow for USD 12bn to finance infrastructure, that could potentially create 30-50k job opportunities annually.
- Lebanon’s finance minister stated that “all dues” would be paid on time, in reference to $650mn in Eurobonds maturing on May 20. The Parliament has authorized the government to borrow over $4.8bn in Eurobonds to finance all needs of the Cabinet for 2020.
- Oman‘s Capital Market Authority suspended a 10% tax on dividends for 3 years as of May 6, aiming to boost foreign investments.
- Oman plans to amend its current FDI Law to allow for 100% ownership for foreign companies as well as a reduction in the minimum capital required to invest.
- Fitch warned that Qatari banks’ exposure to the domestic real estate market is an “increasing risk to asset quality”, while also highlighting the weakening of tourism (and occupancy rates).
- Economic reforms in Saudi Arabia are starting to yield “positive results”, according to the IMF, citing reforms to the capital markets, legal framework, and business environment as well as rising female labour force participation and employment. The Fund, which estimates that budget deficit will rise to 7% of GDP this year, also cautioned that rising government spending increases the medium-term fiscal vulnerabilities to lower oil prices.
- Saudi Arabia‘s SAR 200bn non-oil stimulus may continue beyond 2021 (as planned currently), revealed MD of the Private Sector Stimulus Office on Bloomberg. About SAR 36bn is earmarked for this year, over and above the SAR 40bn already spent.
- Fee for Saudi Arabia’s permanent Special Privilege Iqama will be SAR 800k ($213,333) for one time while one-year temporary iqama will cost SAR100k ($26,666), reported the Saudi Gazatte.
- The Chairman of Saudi Arabia‘s Capital Market Authority stated that it may launch a new secondary market in the future to develop and diversify market products.
- MSCI added Saudi Arabia to its Emerging Markets Index last week; the 30 Saudi securities represent an aggregate 1.42% weightage in MSCI Emerging Markets Index.
- UAE and Saudi Arabia signed an authorised economic operator agreement, to improve customs cooperation (notably reduce export and import costs) and facilitate trade.
- UAE’s plan to set up retirement funds for expats gains traction, as the Federal Authority for Government Human Resources disclosed holding a meeting with major firms regarding the system. The planned new system will include an enhanced gratuity scheme and a private sector savings programme, according to the authorities.
- The Dubai Free Zone Council agreed to the One Free Zone Passport Initiative – to allow firms to operate in multiple free zones on a single license. The Council members also approved requirement of an insurance policy instead of a bank guarantee for free zone-based companies, in a bid to ease the cost of doing business.
- The UAE central bank has developed a Persona Non Grata system to boost the integrity of the financial sector.
- The industrial and business sectors accounted for 87% of total loans provided by UAE banks by end-Mar. Loans to the sectors increased to AED 699.1bn from AED 685.8bn in Dec 2018.
- Unemployment in Dubai, according to the labour force survey by Dubai Statistics Centre on a sample of 3000 households (consisting half expats and half citizens), found that only 0.5% of the population were jobless while Emirati unemployment nudged up to 4% last year from 2.9% in 2016 (and only 36.5% of working age Emirati women were employed).
- Real estate mortgages in Dubai exceeded AED 52.5bn in Jan-Apr 2019, according to the Dubai Department of Land and Property.
- The UAE’s long-term residency plan attracted over 6,000 applications from investors and entrepreneurs within a week.