SAMA chief sees inflation falling to 4.3% in 2014

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Updated 06 March 2013
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SAMA chief sees inflation falling to 4.3% in 2014

RIYADH: Inflation in Saudi Arabia is running at acceptable levels, the country’s central bank chief said on Sunday, playing down concerns that the economy could be overheating.
Fahad Al-Mubarak, governor of the Saudi Arabian Monetary Agency (SAMA), told a news conference inflation was expected to ease next year having edged up to a seven-month high of 4.2 percent year-on-year in January.
Al-Mubarak, a former chairman and managing director of Morgan Stanley Saudi Arabia, has not met the press inside the Kingdom since being appointed in December 2011, though he did speak in public in Abu Dhabi last year.
“Current inflation is tolerable and if you compare to other emerging markets we are well below,” he said. “The expectation for this year and next year — and I will cite the IMF (International Monetary Fund) — is expected to be a bit lower at 4.6 in 2013 and 4.3 in 2014.”
SAMA said in January inflationary pressures in the Kingdom should remain stable in the first three months of this year.
The world’s top oil exporter has recovered since a 2009 downturn, helped by heavy public spending on welfare and housing construction, driven in part by reaction to unrest elsewhere in the Arab world.
Asked if he was concerned about the high level of bank lending to the private sector, Al-Mubarak said: “Not at all. The bank lending to the private sector is consistent with all the policies that SAMA puts (in place) and monitors.”
Bank lending to Saudi Arabia’s private sector rose 15.9 percent in January, only slightly slower than a 16.4 percent increase in the previous month, which was the fastest clip since February 2009.
He said the ratio of loans to deposits among the banks was about 75 percent, below the level of 85 percent which SAMA sets as a cap to limit loan growth.
“It is positive that the banks continue to lend to the private sector,” he said, adding that the quality of banks’ lending portfolios had improved in recent years, resulting in fewer bad loans.
Al-Mubarak also said SAMA’s key policy rates — the repo and reverse repo — were appropriate since there were no signs of economic overheating, and their current levels of 2.0 percent and 0.25 percent, respectively, served banks quite well.
“The only (development that would change this interest rate policy) is if it causes overheating to the economy. We don’t see it overheating. It is quite normal,” he said.
Saudi Arabia pegs its riyal to the dollar, which Al-Mubarak said continued to serve its economy well, repeating the country’s long-standing policy position.
Because of the peg, SAMA needs to keep its policy rates near US benchmarks to avoid excessive pressures on its currency link.
SAMA last changed its repo rate in January 2009, cutting it by 50 basis points to temper the impact of the global crisis. It reduced its reverse repo rate by 25 basis points in June 2009.
“As you notice throughout the world they are moving toward the very low interest rate and the objective of that is to continue to support lending to the private sector to participate in growth and create jobs,” Al-Mubarak added.
Al-Mubarak declined to provide a forecast for Saudi economic growth, saying SAMA took guidance from IMF predictions of 4.2 percent in 2013 and 3.8 percent in 2014.
Growth of the $ 728 billion Saudi economy, the largest in the Arab world, slowed to 6.8 percent last year from 8.5 percent in 2011, when it was buoyed by a higher oil output to compensate for shortages due to a civil war in Libya.


EU’s Barnier urges UK to accept EU court deal for Brexit

Updated 5 min 26 sec ago
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EU’s Barnier urges UK to accept EU court deal for Brexit

BRUSSELS: EU Brexit negotiator Michel Barnier warned Britain on Saturday that failing to agree a deal on the governance of a withdrawal treaty which preserves the primacy of the EU court would mean no treaty and no transition period.

Barnier also described British delays in spelling out what kind of trade relationship London wants as “a game of hide and seek” in remarks prepared for delivery to a gathering in Portugal of jurists specialized in EU law.

He chided British criticism of EU positions as a “blame game,” urging London to recognize that it could not retain many elements of EU membership after Brexit.

The sharp tone of the former French minister’s remarks follow several days of talks in Brussels between his team of EU negotiators and British counterparts, after which a senior EU official dismissed as “fantasy” both London’s overall proposals for future close relations and an offer to avoid a disruptive “hard border” between Northern Ireland and EU member Ireland.

British ministers said those remarks were not “helpful.”

Barnier said he was ready to have “political level” talks to try to advance in three key areas where uncertainty remains, 10 months before Britain is due to leave in March 2019 — how to rule on future disputes over the withdrawal treaty, a “backstop” solution for the Irish border and a framework for future ties.

Referring to discussions within Prime Minister Theresa May’s government on whether to drop an insistence on having no customs union, he said: “If the United Kingdom would like to change its own red lines, it must tell us. The sooner the better.”
“We are asking for clarity,” he added. “A negotiation cannot be a game of hide and seek.”

On the issue of the governance of a withdrawal treaty, which both sides hope to have ready around October, Barnier repeated the EU’s insistence that primacy of the European Court of Justice inside the Union be maintained in regulating any dispute that could not be resolved by a joint committee appointed by the political leadership of the two sides.

“We cannot accept that a jurisdiction other that the Court of Justice of the European Union determines the law and imposes its interpretation on the institutions of the Union,” he said.

The role of British judges would be respected, he added.

But without an agreement on this, the whole deal would collapse: “Without an agreement on governance, there will be no withdrawal agreement and so no transition period.”

Many businesses are counting on an interim accord to maintain a broad status quo between Britain and the EU after Brexit until the end of 2020.

Barnier, who has been hoping to making substantial progress on key issues before May meets fellow EU leaders at a Brussels summit in a month, also criticized what he called a “blame game” in which British officials were accusing the EU of failing to show flexibility to allow continued close cooperation in areas such as security, the economy and research.

This, Barnier said, was to ignore the close legal framework within the EU which was the basis for trust and cooperation among its nation-state members. “We cannot share this decision-making autonomy with a third country,” he said.

“The United Kingdom must face up to the reality of the Union ... It is one thing to be inside the Union and another to be on the outside.”