2nd December 2018

Global Developments Bottomline:

The macroeconomic picture remains mixed, with data mostly pointing towards a deceleration of global growth. In addition, several black swans could materialize over the next few months. For example, the Bank of England warned of shock in case of a disorderly Brexit with GDP dropping up to 10.5% over 5 years in the worst case scenario. Furthermore, the EU has decided to act decisively against the Italian government budget proposal paving the way to a series of sanctions, from a fine to a freeze in structural funds. Also the new tensions between Russia and Ukraine could disrupt an uneasy truce on the Donbass front and warrant new sanctions against Russia.

 

Regional Developments

    • Bahrain’s central bank is planning to develop implementation guidelines for some compliance functions for Islamic banks.
    • Money supply (M2) in Egypt grew by 15.4% yoy to EGP 3.56trn (USD 198.33bn) in Oct, up from 16.3% the month before.
    • Starting Dec 4, Egypt’s central bank is ending the use of a mechanism guaranteeing that foreign investors wanting to sell out of Egyptian securities could pull out their money in dollars.
    • Though Egypt’s central bank is not able to support the currency directly anymore, state banks are stepping in to keep the pound steady, reported Reuters. Two of the biggest state-owned commercial banks are stepping into the interbank market towards the end of the day to fill outstanding requests for dollars to maintain the pound steady in a narrow band of 17.78-17.98 to the dollar.
    • Bilateral non-oil trade between Egypt and Saudi Arabia grew to SAR 9.32bn (USD 2.48bn) in Jan-Sep this year.
    • Egypt and Saudi Arabia are in the process of completing the electricity interconnection project procedures by Mar 2019 to exchange about 3k MW.
    • Revenues from Egypt’s Suez Canal increased by 7.8% mom to USD 506.1mn in Oct – the highest level this year.
    • Iraq’s crude oil exports from its southern ports stood at around 3.3mn barrels per day (bpd) towards end-Nov versus 3.47mn bpd in Oct, reported Reuters.
    • The Iraqi parliament will vote this week to approve eight candidates for the PM’s cabinet, including the defence and interior ministers; only 14 of the 22 ministers are confirmed so far.
    • Jordan’s cabinet approved a JOD 9.25bn (USD 13bn) budget for 2019. The budget expects revenues to touch JOD 8.6bn, foreign aid to be around JOD 600mn and estimates deficit at 2% of GDP. This will be sent to the parliament for approval.
    • Jordan’s energy minister revealed that gas from Egypt is expected to reach the country by Jan, after experimental pumping started in Sep; talks are still ongoing about the pricing of the Egyptian gas.
    • Kuwait’s exports grew by 36.9% yoy to KWD 157.3mn in Jan-Oct this year. Arab markets accounted for 75.6% of Kuwait’s total exports (KWD 119.57mn).
    • Kuwait’s central bank has launched a “sandbox”: representatives from local banks will join a central bank taskforce to assess the products and services being proposed.
    • Expat remittances from Kuwait increased by 7.2% yoy to USD 7.31bn in H1 2018.
    • Lebanon’s finance minister revealed that the country has exceeded its budget for 2018, and that the government and central bank are taking steps to ensure the state can continue to fund itself.
    • Oman’s budget deficit narrowed by 36.1% yoy to OMR 1.9bn in the period Jan-Sep compared to OMR 3bn over the same period in 2017 thanks to higher oil revenues.
    • In preparation for the World cup 2022, Qatar imported QAR 37.82bn (USD 10.48bn) transportation equipment during Jan-Sep 2018 (+20.25% yoy). Imports of transportation and machineries represented 43.7% of total imports in this period.
    • Saudi Arabia’s general reserves fell 7% yoy to SAR 572.55bn in Oct while current account posted a 38.85% increase to SAR 59.4bn.
    • Inflation in Saudi Arabia picked up by 2.4% in Oct (Sep: 2.1%), thanks to a 7.3% hike in food and beverage prices. Housing and utility costs dropped 3.6% yoy.
    • Saudi Arabia’s oil exports grew by 40.9% yoy to SAR 642.22bn in Jan-Sep 2018; crude oil exports accounted for nearly 79% of total exports during this period.
    • The cost of construction in Saudi Arabia is forecast to increase at a marginally lower rate in the next 12 months, according to Colliers International. The firm expects average construction cost inflation to be 1.8% for the 12 months from Nov 2018, versus 1.9% registered during Q3 2017-Q3 2018.
    • Three IPOs raised USD 484mn in Q3 this year, with issuances from Kuwait, Oman and Saudi Arabia, according to the PwC GCC Capital Markets Watch Q3 2018.

     

    UAE Focus

    • UAE has launched six initiatives to promote trade and shape the future of the economy, according to the minister of economy. This focuses on regulating e-commerce, promoting the economy, supporting and regulating public-private partnerships, as well as achieving growth in non-oil commodity exports.
    • Inflation in UAE declined to 1.6% in Oct (Sep: 3.1%), given a 5.2% dip in housing costs. Food and beverage prices increased by 2.1% while transport costs were up 9.3%.
    • Money supply (M2) growth in the UAE was 1.7% in end-Oct (end-Sep: 2.7%); bank deposits shrank 0.4% mom to AED 1.721trn while lending accelerated 3.9% yoy (3.7%).
    • UAE banks have increased investments in government bonds by 0.58% yoy to AED 206.22bn (USD 56.22bn) during Jan-Oct 2018, according to the UAE central bank.
    • The UAE’s Securities and Commodities Authority, the Dubai Financial Services Authority and ADGM Financial Services Regulatory Authority will allow funds passporting to foster the development of the domestic investment funds market.
    • The Abu Dhabi Executive Council approved a resolution to exempt all new economic licenses issued in the Emirate from all local fees for 2 years.
    • Abu Dhabi set up a new water and electricity company.
    • UAE fuel prices have been reduced for Dec: petrol prices are down by 12.5-13.9% mom while diesel price declined by 9% mom to AED 2.61.
    • Indians remitted AED 34.83bn from the UAE during H1 this year, accounting for around 39.6% of total remittances, followed by Pakistanis (AED 7.48bn, 8.5%) and Filipinos (AED 6.25bn, 7.1%) and Egyptians (AED 4.75bn, 5.4%).
    • The UAE will initiate a new system next year to digitally track all cigarette products to guarantee compliance with excise tax requirements.

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