Saudi oil sector expands 5.1%
Saudi oil sector expands 5.1%
Some analysts said the data pointed to a risk of growth in Saudi Arabia slowing to near zero this year, which would be its worst performance since the global financial crisis of 2009.
Gross domestic product, adjusted for inflation, grew 1.5 percent from a year earlier between January and March, down from a revised growth rate of 1.8 percent in the fourth quarter of 2015, the state statistics office said. It was the slowest growth since 0.3 percent in the first quarter of 2013.
The oil sector expanded 5.1 percent in the first quarter of this year as Saudi Arabia increased its production of crude and exported more refined products.
But the non-oil sector shrank 0.7 percent, its worst performance in at least five years.
“The important thing to remember is that austerity will be a multi-year process. There will be more measures in the next few years and these will continue to keep growth subdued,” said Monica Malik, chief economist at Abu Dhabi Commercial Bank.
Within the non-oil part of the economy, the private sector grew just 0.2 percent in the first quarter while the government sector shrank 2.6 percent, the official data showed.
The weakness of the non-oil sector was partly due to the fact that the first quarter of 2015 was unusually strong; in January that year, authorities awarded public employees two months’ extra salary to mark his accession to the throne.
But the fourth-quarter 2015 growth rate of 1.8 percent was revised down sharply from an original estimate of 3.6 percent. That points to the possibility of a similar revision for the first-quarter figures.
Malik said ADCB was cutting its Saudi GDP growth forecast for the whole of this year to a drop of 0.1 percent, from a previous prediction of 0.5 percent growth.
She noted that while private sector and non-oil activity could pick up slightly from the second quarter of this year, partly because there were signs that the government was paying some of its outstanding bills to private firms, oil output was not continuing to rise significantly year-on-year.
If the economy slows excessively, the government still has the option of spending more to stimulate growth; the central bank holds $573 billion of net foreign assets, and Riyadh has begun borrowing abroad this year to finance some expenditure.
But if it eases up on its austerity program too much it may increase pressure on the Saudi riyal’s peg against the US dollar, fueling concern among some foreign investors about the long-term sustainability of its economy.
In a report released late last month, London-based Capital Economics said it was expecting growth of between zero and 0.5 percent this year.
“Further ahead, as the fiscal squeeze continues, we think the economy is likely to remain weak for the foreseeable future.”
Japan, EU to sign widespread trade deal eliminating tariffs
- Both sides are heralding the deal, which covers a third of the global economy and more than 600 million people
- Besides the latest deal with the EU, Japan is working on other trade agreements, including a far-reaching trans-Pacific deal
TOKYO: The European Union and Japan are signing a widespread trade deal Tuesday that will eliminate nearly all tariffs, seemingly defying the worries about trade tensions set off by President Donald Trump’s policies.
The signing in Tokyo for the deal, largely reached late last year, is ceremonial. It was delayed from earlier this month because Japanese Prime Minister Shinzo Abe canceled going to Brussels over a disaster in southwestern Japan, caused by extremely heavy rainfall. More than 200 people died from flooding and landslides.
European Council President Donald Tusk and European Commission President Jean-Claude Juncker, who arrived Monday, will also attend a gala dinner at the prime minister’s official residence.
Both sides are heralding the deal, which covers a third of the global economy and more than 600 million people.
The deal eliminates about 99 percent of the tariffs on Japanese goods to the EU, but remaining at around 94 percent for European imports into Japan for now and rising to 99 percent over the years. The difference is due to exceptions such as rice, a product that’s culturally and politically sensitive and has been protected for decades in Japan.
The major step toward liberalizing trade was discussed in talks since 2013 but is striking in the timing of the signing, as China and the US are embroiled in trade conflicts.
The US is proposing 10 percent tariffs on a $200 billion list of Chinese goods. That follows an earlier move by Washington to impose 25 percent tariffs on $34 billion of Chinese goods. Beijing has responded by imposing identical penalties on a similar amount of American imports.
Besides the latest deal with the EU, Japan is working on other trade agreements, including a far-reaching trans-Pacific deal. The partnership includes Australia, Mexico, Vietnam and other nations, although the US has withdrawn.
Japan praised the deal with the EU as coming from Abe’s “Abenomics” policies, designed to wrest the economy out of stagnation despite a shrinking population and cautious spending. Japan’s growth continues to be heavily dependent on exports.
By strengthening ties with the EU, Japan hopes to vitalize mutual direct investment, fight other global trends toward protectionism and enhance the stature of Japanese brands, the foreign ministry said in a statement.
The EU said the trade liberalization will lead to the region’s export growth in chemicals, clothing, cosmetics and beer to Japan, leading to job security for Europe. Japanese will get cheaper cheese, such as Parmesan, gouda and cheddar, as well as chocolate and biscuits.
Japanese consumers have historically coveted European products, and a drop in prices is likely to boost spending.