10th February 2019

Global Developments BottomlineThe new set of US-China trade negotiations resume in Beijing this week, ahead of the Mar 1 deadline when US tariffs on USD 200bn worth of Chinese imports are scheduled to increase to 25% from 10%. The associated economic policy uncertainty has led to many dismal data releases across nations and has also seen central banks take a step back from tightening monetary policy. Data from Germany continued to disappoint, and the European Commission lowered its growth forecast for this year to 1.3% from 1.9%, also predicting the weakest expansion in Italy for five years. The Brexit saga continues with S&P warning about downgrades for some British companies in a no-deal Brexit – and possibly even lowering the UK’s credit rating.

 

Regional Developments

  • Bahrain’s real GDP growth of 1.6% in Q3 2018 was supported by the non-oil sector, especially an expansion in the construction and manufacturing sectors, as well as increased infrastructure spending.
  • Budget deficit in Bahrain narrowed by 35% yoy last year, reported the finance minister.
  • As Egypt plans to undertake privatization of its state-owned enterprises (SoEs), the cabinet announced the set-up of a fund to finance the development of SoEs.
  • PMI in Egypt weakened to 48.5 in Jan (Dec: 49.6), as both output (47.5 in Jan vs. Dec’s 48.8) and new orders (47.9 from 49.7) fell.
  • Egypt aims to reduce budget deficit to 5% of GDP within the next 3-4 years, compared to a target of 8.4% for the 2018-19 budget.
  • Unemployment in Egypt declined to 8.9% in Q4 last year, from 10% in Q3 2018. For the full year 2018, unemployment clocked in at 9.9%.
  • Egypt‘s central bank received the fifth tranche of the USD 12bn 3-year IMF loan (USD 2bn). The IMF statement highlighted the commitment of the authorities to continue with economic reforms, including removal of fuel subsidies by mid-2019.
  • Egypt’s net foreign reserves stood at USD 42.616bn at end-Jan from Dec’s USD 42.551bn.
  • Egypt’s finance minister revealed that foreign investors bought Egyptian treasury bills and bonds worth USD 900mn in Jan.
  • Egypt’s short-term dollar debt dropped by USD 3.25bn to about USD 14bn by end-2018.
  • Iraq paid USD 300mn compensation to Kuwait for losses caused by the Iraqi invasion.
  • Iran‘s oil minister stated that Iraq owed USD 2bn for gas and electricity exports.
  • Kuwait’s government has issued a decree to reduce expats in all government departments by next fiscal 2019-2020; localization will be raised to more than 90% by end of next fiscal.
  • Lebanon issued a draft government policy statement, which includes a commitment to reduce the debt-to-GDP ratio by boosting the size of the economy and reducing the budget deficit. Earlier in the week, Lebanon’s Finance Minister had identified electricity reform, budget deficit reduction and revenue increases as key priorities for the government.
  • Oman’s oil production grew by 0.8% yoy in 2018, averaging 978,400 barrels per day.
  • Oman’s Ministry of Manpower has extended the visa ban on some occupations for a period of 6 months.
  • Bloomberg reported that Deutsche Bank was in advanced talks to receive additional investment from Qatar (most probably the Qatar Investment Authority).
  • Saudi Arabia’s government reserves dropped by 14.7% qoq to SAR 489.5bn in Q4 2018, falling by more than half compared to 4 years ago.
  • Saudi Arabia’s PMI increased to a 13-month high of 56.2 in Jan (Dec: 54.5), thanks to an acceleration in new orders growth (62.8 in Jan vs. Dec’s 58.4). Employment growth edged up to 51 from Dec’s 20-month low, as 2.5% of surveyed firms increased hiring.
  • Saudi Arabia allocated SAR 11.5bn to reimburse the 2017-18 expat fee hikes for some companies. Only companies that had a higher or equal number of Saudi employees versus expats will be eligible for the reimbursement or waiver of fees, according to the decree.
  • Saudi Arabia has allocated around SAR 27bn to implement the initiatives and projects of the National Industrial Development and Logistics Programme (NIDLP), according to its head.
  • Saudi Arabia attracted USD 43bn worth of foreign investment between 2013 and 2017, from 493 investments made by 361 foreign firms, as per the Chamber of Commerce and Industry.
  • Saudi Arabia’s total savings surged by 24.3% yoy to SAR 758.92bn (USD 202.38bn) in Jan-Sep 2018, according to the Saudi General Authority for Statistics’ data.
  • Revenues from crude oil exports from Saudi Arabia increased by 40.9% yoy to SAR 812.18bn (USD 216.56bn) in Jan-Nov 2018.
  • OPEC sources disclosed that Saudi Arabia cut its crude output by about 400k barrels per day (bpd) to 10.24mn bpd in Jan.
  • MENA’s M&A deal value surged by 68.7% yoy to USD 26.76bn in 2018, disclosed Mergermarket. Cross-border MENA deals, which totalled 77 deals worth USD 14.21bn, recorded the highest value since the global financial crisis.
  • The HSBC’s Expat Explorer survey ranked Bahrain second and UAE fourth among the best destinations for expat careers this year. The list was topped by Germany and UK was placed third.

 

UAE Focus

  • UAE’s PMI edged up to a 7-month high of 56.3 in Jan, following Dec’s reading of 54, supported by faster output growth (a 5-month high of 63) and higher new orders growth (60.9 vs. Dec’s 58.3).
  • Six Saudi and Emirati banks will participate in the launch of the common digital currency project “Aber”, revealed the UAE central bank. The joint venture is scheduled to be completed within 12 months.
  • Bank lending in the UAE increased by 4.8% yoy to AED 16.56trn as of Dec 2018, according to the central bank.
  • UAE’s overall debt-to-GDP ratio dropped by 7.1 percentage points, revealed the IIF. Debt held by UAE households as percentage of GDP fell to 21.9% in Q4 2018 from 24.3% in Q3 2017, while the government’s debt fell from 19.9% to 18.3%.
  • Japan imported 22.778 million barrels of crude oil from the UAE in Dec 2018, accounting for 24.5% of Japan’s total crude oil imports.
  • Dubai announced plans to spend AED 2bn over 4 years to develop an e-commerce free trade zone, spanning 920k square metres, with construction set to begin this year.
  • The total number of operational restaurants and cafes in Dubai touched 11,813 in 2018, with new restaurants and cafes rising by 9.7% to 1109. The total number of workers in active restaurants and cafes reached 151,127, with an average of 13 workers per restaurant or cafe.
  • DP World reported a fall in shipping container volumes in Dubai: a decline of 4.6% to 3.6mn 20-foot equivalent units (TEUs); overall, for 2018, Dubai shipping container volumes fell 2.7% to 15mn TEUs.

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