Davos: IMF raises Saudi economic growth forecast for 2020

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Christine Lagarde said the IMF is making “a further downward revision” in its global economic forecasts. (WEF)
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Gita Gopinath, IMF chief economist, said an escalation in trade tensions and a possible worsening of financial conditions were two key sources of risk. (WEF)
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Policemen keep watch from a rooftop ahead of inauguration of World Economic Forum (WEF) in Davos. Reuters
Updated 21 January 2019

Davos: IMF raises Saudi economic growth forecast for 2020

  • Global economy faces slower growth and rising risks, fund says
  • Gloomy outlook published ahead of World Economic Forum meeting, which starts Tuesday

DAVOS: The International Monetary Fund (IMF) has raised its growth forecast for Saudi Arabia in 2020 — although said the Kingdom’s economy will expand slower than expected this year.

In its World Economic Outlook update for January, the IMF on Monday raised its growth forecast for the Kingdom to 2.1 percent, up 0.2 percentage points from a previous projection. 

However, the IMF lowered its forecast for this year to just 1.8 percent, down from the 2.4 percent it predicted in October, and is pessimistic about oil prices over the next two years.

The forecasts were part of a gloomy worldwide economic outlook unveiled amid the snowy slopes of Davos, Switzerland, ahead of the World Economic Forum’s Annual Meeting, which starts on Tuesday.

The IMF report, which warned of risk factors ranging from the US-China trade war to Brexit, was shared by Christine Lagarde, managing director of the IMF, and Gita Gopinath, economic counsellor and director of research at the fund.

The fund revised its global growth forecast for 2019 to 3.5 percent, 0.2 percentage points lower than the previous estimate. Growth for 2020 is forecast at 3.6 percent, 0.1 percentage point lower than previously forecast. 

It blamed continuing trade tensions between the US and China, falling international trade and investment, and weakening business confidence for the outlook. The IMF noted that US growth was decelerating, while Chinese growth was at the lowest since 1990.

In Europe, the IMF highlighted the risks from a disorderly Brexit, as well as economic weakness in Germany and Italy.

“While this does not mean we are staring at a major downturn, it is important to take stock of the many rising risks,” said Gopinath.

Growth in the Middle East, North Africa, Afghanistan, and Pakistan region is expected to remain subdued at 2.4 percent in 2019 before recovering to about 3 percent in 2020, the report said. 

Multiple factors weigh on the region’s outlook, including weak oil output growth — which offsets an expected pickup in non-oil activity — as well as tightening financial conditions in Pakistan, US sanctions against Iran, and geopolitical tensions in several countries.

The World Economic Outlook numbers are based on forecasts that oil will not rise above $60 on average over the next two years, significantly more pessimistic than the assessments of many experts and of policymakers in Saudi Arabia.

Gopinath explained that the lower 2019 forecast for Saudi Arabia reflected the decision to reduce oil output at last month’s meeting of the Organization of the Petroleum Exporting Countries. She said that while Saudi fiscal policy is more expansionary in 2019, leading to a pick-up in the non-oil sector, overall the OPEC cuts had a downward impact on the Kingdom’s economy.

The IMF’s Lagarde likened the global economy to a cross-country ski event, in which visibility, stability and cooperation between skiers had been reduced. She added that while there was not currently a risk of a recession, that policymakers had to address the potential vulnerabilities in the global economy and “be ready if a serious slowdown does materialize.”

The IMF said that its outlook “reflects a persistent decline in the growth rate of advanced economies from above-trend levels — occurring more rapidly than previously anticipated — together with a temporary decline in the growth rate for emerging market and developing economies in 2019, reflecting contractions in Argentina and Turkey, as well as the impact of trade actions on China and other Asian economies.”

Gopinath also said that there could be further risk to financial markets. “While financial markets in advanced economies appeared to be decoupled from trade tensions for much of 2018, the two have become intertwined more recently, tightening financial conditions and escalating the risks to global growth,” she wrote in a blog post. 

Former Nissan chairman Ghosn appears in Tokyo court

Updated 55 min 48 sec ago

Former Nissan chairman Ghosn appears in Tokyo court

  • It is the first of a series of hearings to iron out logistics for Carlos Ghosn’s actual trial
  • Nissan’s former chairman has hired a strong legal team as he fights to clear his name

TOKYO: Nissan’s former chairman, Carlos Ghosn, appeared in a Japanese courtroom Thursday for a hearing ahead of his trial on accusations of financial misconduct.
It was the first of a series of hearings to iron out logistics for Ghosn’s actual trial. The trial date has not been set, and experts say it could be months away.
Ghosn, who led the Japanese automaker for two decades, was arrested in November and charged with underreporting his income and breach of trust. He was released on bail in March, rearrested in April on fresh accusations and then released again on bail on April 25.
Ghosn insists he is innocent and says he was targeted in a “conspiracy” by others at Nissan Motor Co.
Nissan, which is allied with Renault of France, has seen profits nose-dive amid the fallout from Ghosn’s arrest.
Ghosn has hired a strong legal team as he fights to clear his name. One of his top lawyers, Junichiro Hironaka, was seen walking into the courtroom Thursday with Ghosn.
One of the conditions of Ghosn’s release on bail is that he is forbidden to contact his wife. Prosecutors say that’s to prevent evidence tampering.
Ghosn’s lawyers challenged that restriction, saying it is a violation of human rights, but the Supreme Court rejected their appeal Tuesday.
The lawyers can appeal again to have the restriction removed.
In a briefing Thursday, Deputy Chief Prosecutor Shin Kukimoto welcomed the Supreme Court’s decision.
“For married people to be together is important, but I feel there was enough reason for the Supreme Court to support us in this restriction,” he said.
Kukimoto declined comment on the hearing, which was closed to reporters and the public.
Kukimoto also said the maximum penalty upon conviction of all 15 counts of the charges Ghosn is facing is 15 years in prison and a fine of ¥150 million ($1.4 million).