Kingdom leads GCC in nonoil production

Updated 17 July 2013

Kingdom leads GCC in nonoil production

The Gulf Cooperation Council (GCC) countries are strenuously working to diversify income sources and minimize reliance on oil through investment in leading industrial activities, local media reported.
Saudi Arabia, in particular, is leading the GCC region to develop nonoil sector where the value of the ongoing nonoil projects is estimated at $ 17 billion (SR 63.7 billion), Al-Riyadh daily said quoting a report by Gulf Investment Corporation (GIC).
The Kingdom has reportedly occupied the 12th rank among the world's biggest 40 countries concerned with renewable energy sources.
In other GCC countries, the UAE has spent $ 5 billion in solar energy projects, currently under construction, whereas the value of nonoil projects is estimated at $ 2.1 billion, which are mostly concentrated in Abu Dhabi Emirate.
The Kingdom recently announced four solar energy projects, notably the solar energy project in Makkah, announced in the last quarter of 2012, whereby the holy city will become the first area to use an alternative energy source in the Kingdom, the local media said.
In Qatar, meanwhile, nonoil projects captured some $ 2.8 billion, mostly in iron and steel industries. Cement industry is predicted to lead business sector in the next five years at the growth rate of 11.2 percent followed by consumer industry sector at 7.7 percent.
On the other hand, the GCC countries will continue to achieve high rates of economic growth in the current year despite a slight decline in the oil prices and lower exports, which dropped by 5 percent compared to last year’s figures, the local media said.
Based on the above situation, levels of personal incomes have steadily increased, which led to the expansion of bank deposits, particularly in Saudi Arabia, the UAE and Qatar, and encouraged the banks to expand banking credits.
Meanwhile, Saudi Arabia has topped the MENA countries in terms of solar energy projects where it got 4.1 points out of 5 points, according to a report released by VtM, a US solar research firm.
Turkey came second at 3.9 points, followed by Abu Dhabi and Morocco jointly at 3.6 points in the third rank, Jordan in the fifth rank (3.2 points), Dubai in the sixth rank (3.1 points), Algeria and Egypt jointly in the seventh rank (3 points), and Qatar in the ninth rank (2.4 points).
The MENA region has the biggest solar energy potentials globally whereas Saudi Arabia and Turkey will lead the regional countries in terms of the highest energy demand and will become the first two countries to use the electric scale of GigaWatt (or billion watts) by 2015, according to the VtM report.


Lebanon’s credit ratings show reform urgency

Beirut is struggling to deal with waste and corruption in its public finances. (Reuters)
Updated 3 min 19 sec ago

Lebanon’s credit ratings show reform urgency

  • Fitch warns Beirut needs major capital inflows to fund twin budget and current account deficits

BEIRUT: Lebanon is committed to economic reforms and will overcome its crisis, the finance minister said after Fitch downgraded the country’s credit rating to CCC while S&P kept it
at B-/B. Minister Ali Hassan Khalil said the ratings reports showed the urgency for reform, which the government has long put off. “There should be no slacking for a single moment,” he told Reuters. Lebanon is grappling with one of the world’s heaviest public debt burdens at 150 percent of GDP and years of low economic growth. Government finances, riddled with corruption and waste, are strained by a bloated public sector, debt-servicing costs and subsidizing the state-power producer.
Lebanese leaders have warned of financial crisis without changes. The impetus to enact reforms has grown with the slowdown of deposits into its banking sector, a critical source of finance for the state.
The government is now trying to put public finances on a more sustainable path with a deficit cut in the 2019 budget and a plan to fix the state-run power sector, which bleeds funds while inflicting daily power cuts on Lebanese. Fitch said its downgrade of the country’s credit rating to CCC from B- reflected “intensifying pressure on Lebanon’s financing model and increasing risks to the government’s debt servicing capacity.” Lebanon requires substantial capital inflows to fund its large twin budget and current account deficits, it added.
“We will deal responsibly with the reports,” Khalil said. “We are confident we will be able to get out of the crisis.”
S&P Global affirmed Lebanon’s credit rating at B-/B and said the outlook remains negative. It considers Lebanon’s foreign exchange reserves sufficient to service government debt in the “near term.”
The report said it expects Lebanon to make progress on reforms to improve investor confidence given the weakness of foreign currency inflows. However it said it too could lower its rating in the coming 6 to 12 months if banks deposits and central bank foreign exchange reserves continue to fall.

FASTFACT

150% - Lebanon has one of the world’s heaviest public debt burdens at 150 percent of GDP

“Continued weakness in foreign currency inflows and the use of (the central bank’s foreign exchange) reserves to meet government debt-service could test the country’s ability to maintain the currency peg,” the report said. The Lebanese pound is pegged to the dollar. Moody’s downgraded Lebanon’s rating to Caa1 in January.
Markets have been pricing in the risk of a sovereign credit rating downgrade in recent days.
The latest downgrade would have no “material impact” on investor holdings of Lebanon’s bonds as the debt was already rated non-investment grade, said Jan Dehn, head of research at emerging markets investment manager Ashmore Group. “The government has done more on the reform side than many Lebanese governments in the past.”
Economists have questioned whether the government’s efforts were enough to meet its goals. The IMF said last month the deficit would likely be well above the government’s target of 7.6 percent of national output. In 2018, it was over 11 percent.
Nassib Ghobril, chief economist at Byblos Bank, said the current situation should be a “wake-up call” for politicians to form a credible plan that would result in an investment grade rating.
Ghobril said cutting the deficit was a good step, but the government must do more to trim expenditures instead of “the easy way out” by raising taxes and fees. “They have to restructure the public sector; they have to fight tax and customs evasion, not in words but in actions.”