Saudi Arabia’s central bank warns global slowdown may hit growth

In April the International Monetary Fund (IMF) estimated that Saudi economic growth in 2019 may be slightly higher than its earlier forecast. (AFP/File photo)
Updated 10 June 2019
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Saudi Arabia’s central bank warns global slowdown may hit growth

  • Saudi Arabia’s economy grew by 2.2 percent in 2018, compared to a decline of 0.7 percent in 2017
  • Main risk for the Saudi economy comes from its exposure to the global oil market

RIYADH: Saudi Arabia’s economy is expected to pick up in 2019 but a global economic slowdown and its potential impact on the global oil market could impact growth, the Kingdom’s central bank said.

Saudi Arabia’s economy grew by 2.2 percent in 2018, driven by the oil sector, compared to a decline of 0.7 percent in 2017, the Saudi Arabian Monetary Authority (SAMA) said in a report.

The main risk for the Saudi economy comes from its exposure to the global oil market. The oil sector accounts for some 45 percent of Saudi GDP and more than 63 percent of government revenue. 

“There have been recent signsof slowing global growth, which could indirectly impact the Saudi economy,” the report warned. “Continued structural reforms will likely place some pressure on economic growth in the short-term,” it added, without giving a forecast for 2019.

In April the International Monetary Fund (IMF) estimated that Saudi economic growth in 2019 may be slightly higher than its earlier 1.8 percent  forecast due to the faster expansion of the non-oil sector compared to the wider economy.

The Saudi central bank governor told Reuters in April that Saudi economic growth in 2019 would be “no less than 2 percent”.

For the non-oil sector, growth is expected to be stimulated by expansionary fiscal policy as the budget for 2019 shows a significant increase in capital expenditure by SR245 billion ($65.3 billion), the report said.

Saudi Arabia’s s non-oil sector saw modest growth of 1.7 percent in 2018 versus 1 percent in the previous year, SAMA said. The country’s estimated budget deficit was SR136 billion Saudi or 4.6 percent of GDP in 2018 compared to the 9.3 percent deficit in the previous year. Government revenues grew to SR895 billion in 2018, up 30 percent over the previous year, it added.

Non-oil revenues totalled SR287 billion, a rise of 90 percent on the previous year, with more than half coming from tax revenues, while government expenditure rose by 11 percent to SR1 trillion in 2018.


BMW picks insider Zipse as CEO to catch up with rivals

Oliver Zipse
Updated 20 July 2019
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BMW picks insider Zipse as CEO to catch up with rivals

  • German giant has lost ground to Mercedes-Benz and Tesla as tech steps up

FRANKFURT: BMW has named Oliver Zipse as its new CEO, continuing the German carmaker’s tradition of promoting production chiefs to the top job even as the auto industry expands into new areas such as technology and services.
Hailing Zipse’s “decisive” leadership style, BMW hopes the 55-year-old can help it win back its edge in electric cars and the premium market  from rival Mercedes-Benz.
But some analysts questioned whether Zipse was the right choice with new fields such as software and services like car-sharing becoming increasingly important.
“What is intriguing is the cultural bias to appoint the head of production. It works sometimes but ... being good at building cars is not a defining edge the way it was 20 years ago,” said Jefferies analyst Philippe Houchois.
Current CEO Harald Krueger, and former chiefs Norbert Reithofer, Bernd Pischetsrieder and Joachim Milberg were all former production heads.
Zipse joined BMW as a trainee in 1991 and served as head of brand and product strategies and boss of BMW’s Oxford plant in England before joining the board.
He will become chief executive on Aug. 16, taking over from Krueger who said he would not be available for a second term.
“With Oliver Zipse, a decisive strategic and analytical leader will assume the Chair of the Board of Management of BMW. He will provide fresh momentum in shaping  the future,” said Reithofer.
Zipse helped expand BMW’s efficient production network in Hungary, China and the US, in a move that delivered industry-leading profit margins.
Under Krueger, BMW was overtaken in 2016 by Mercedes-Benz as the best-selling luxury car brand.
It also had an early lead over US  rival Tesla in electric cars, but scaled back ambitions after its i3 model failed to sell large numbers.
Reithofer initially championed Krueger’s low-key consensus-seeking leadership, but pressured him to roll out electric vehicles more aggressively, forcing Krueger to skip the Paris Motor Show in 2016 to reevaluate BMW’s electric strategy.
Krueger’s reluctance to push low-margin electric vehicles led to an exodus of talented electric vehicle experts, including Christian Senger, now Volkswagen’s (VW) board member responsible for software, and Audi’s Markus Duesmann, who is seen as a future CEO of the company.
Both were poached by VW CEO Herbert Diess, a former BMW board member responsible for research who was himself passed over for BMW’s top job in 2015.
VW has since pushed a radical 80 billion euro ($90 billion) electric car mass production strategy, and a sweeping alliance with Ford.

Other skills
“A CEO needs to have an idea for how mobility will evolve in the future. This goes far beyond optimising an existing business,” said Carsten Breitfeld, chief executive of China-based ICONIQ motors, and former BMW engineer. “He needs to build teams, attract talent, and promote a culture oriented along consumer electronics and internet dynamics.”
German manufacturers have dominated the high-performance market for decades, but analysts warn shifts towards sophisticated technology and software is opening the door to new challengers.
“Tesla has a lead of three to four years in areas like software and electronics. There is a risk that the Germans can’t catch up,” UBS analyst Patrick Hummel said.
Germany’s Auto Motor und Sport car magazine, normally quick to champion German manufacturers, this week ran a cover questioning BMW’s future.
“Production expertise is important, but if you want to avoid ending up being a hardware provider for Google or Apple, you need to have the ability to move up the food chain into data and software,” a former BMW board member said.