Global headwinds to slow several Asian countries

Updated 28 March 2015

Global headwinds to slow several Asian countries

Notwithstanding the weak start for the global economy, Asian economies are expected to continue to grow rapidly in 2015. "We expect economic growth to average 5.7 percent in 2015, the same rate as in 2014. However this masks significant differences across Asian countries that mainly depend on their exposure to global headwinds. India and Myanmar stand out as bright spots for 2015, while China, Indonesia, Malaysia and Singapore are expected to slow, given that these economies are most exposed to the weakening of the global economy. Looking ahead, this divergence in growth performance is likely to continue with countries less dependent on external demand (India and Myanmar) performing better than others," QNB said in its report.
At the current juncture, the brightest spot in Asia is India. The implementation of Prime Minister Narendra Modi’s ambitious reform agenda is expected to unleash India’s growth potential. The recently announced budget proposed three key areas of reform: (i) addressing supply bottlenecks; (ii) reducing the subsidy bill; and (iii) introducing a uniform federal goods and services tax (GST). Overall, the government expects these reforms to result in a growth rate of 8.0-8.5 percent in 2015/16, compared with an estimated 7.5 percent in 2014/15. If these three key reforms are fully implemented, we expect these growth rates to be achieved, making India one of the fastest growing economies in the world.
Myanmar is opening up to the rest of the world economy after two decades of international economic sanctions and underinvestment. As a result, the IMF expects Myanmar to grow by 7.8 percent in 2014/15, compared with 8.3 percent in 2013/14. Structural reforms are attracting FDI in infrastructure and the financial and manufacturing sectors. However, Myanmar still needs to implement significant structural reforms to improve the ease of doing business. Going forward, the growth outlook remains favorable but downside risks remain.
China missed its 2014 growth target of 7.5 percent by 0.1 percent (the first outturn below target since 1998), mainly as a result of slower investment growth, a weakening of global demand for Chinese exports and lower growth in private consumption. Going forward, the government announced a growth target of around 7.0 percent for 2015 on the back of weak domestic demand and strong deflationary risks. We expect growth to be slightly lower than 7.0 percent due to domestic and foreign headwinds.
In the Philippines, the economy is performing robustly, supported by strong remittances from overseas workers and accommodative monetary and financial conditions. Going forward, lower oil prices are expected to provide a stimulus to growth while inflation is likely to slow. The IMF projects the Philippines to grow by 6.3 percent in 2015, from 6.2 percent in 2014.
In Vietnam, the economy improved in 2014 underpinned by robust exports and foreign direct investment (FDI). Domestic demand, however, remains subdued partly due to tight financial conditions and inefficient state-owned enterprises (SOEs). The IMF forecasts Vietnam to grow by 5.6 percent in 2015, compared with 5.5 percent in 2014.
Malaysia’s economy is slowing as a result of lower oil prices and weaker domestic demand. The government has responded to lower oil prices by implementing significant fiscal consolidation which will weigh on growth in 2015. As a result, the IMF expects Malaysia to grow by 4.8 percent in 2015, compared with 5.9 percent in 2014.
Indonesia continues to face significant challenges amidst lower global commodity prices and tighter financial conditions. As a result, we expect economic growth to slow to 4.5 percent in 2015 as the USD debt overhang and the stronger USD are a drag on growth, making the government’s investment program harder to implement.
In Singapore, activity is slowing, reflecting headwinds from the global economy as well as lower domestic investment and real estate prices. "We expect growth of 2.5 percent in 2015, compared with 3.0 percent in 2014, on sluggish global demand and declining domestic investment spending," QNB said.
Overall, Asian economies are expected to continue on a similar growth path this year as they experienced in 2014. However, strong global economic headwinds suggest significant downside risks to several Asian countries most exposed to global trade. The projected slowdown in US economic growth in Q1, deflation in advanced economies, the prospects of higher US interest rates and lower commodity prices are all likely to contribute to a significant slowdown in external demand for Asian exports and a cooling of domestic demand. As a result, Indonesia, Malaysia and Singapore are most at risk of a further slowdown, while India and Myanmar are the least exposed. Nevertheless, Asia is still likely to remain the fastest growing region in the world in 2015.


A female entrepreneur brings crowdlending to Saudi Arabia

(Photo/Shutterstock)
Updated 25 January 2020

A female entrepreneur brings crowdlending to Saudi Arabia

  • Shariah-compliant peer-to-peer lending platform called Forus to be launched this year
  • Founder Nosaibah Alrajhi aims to help businesses and small investors in the Kingdom

RIYADH: It is no secret that small businesses struggle with obtaining funds to expand, with one avenue being particularly tricky in the region: Trying to rely on a national bank for help.
While things are improving, they are not doing so quickly enough. These longstanding problems have inspired Nosaibah Alrajhi, a former investment banker, to launch Forus, a Shariah-compliant peer-to-peer lending platform that she hopes can help bolster Saudi Arabia’s economic growth and enrich both business owners and small investors.
“It’s very straightforward: We bring together investors and SMEs (small and medium enterprises). Crowdlending will provide a steadier and safer return than say, investing in stocks or investment funds,” said Alrajhi, who serves as co-founder and chief executive.
“If you compare it to real estate, for example, you need a lot of cash upfront to invest in property, but with P2P (peer-to-peer) lending it provides almost everyone with the opportunity to invest and get a return.”
Having received a special license in July 2019, Forus will launch its platform in early 2020. For investors, it is quick and easy to register: You just need to complete a standard know-your-customer (KYC) process, and you will then be able to lend SR500 ($133) to SR10,000 to whichever companies you choose.
For would-be borrowers, Forus will undertake a credit and risk analysis that usually takes about 10 days.
“We do all the due diligence, and once companies meet our benchmarks, they’re listed on the platform, giving investors — individual and institutional — the opportunity to lend them money,” said Alrajhi. “We call it income investments — investors get their money back, plus fees.”
Companies listed on the online platform are rated according to risk — the bigger the risk, the larger the return for lenders. Companies can borrow up to a maximum of SR2 million.
“Investors can look at the companies’ financial reports, their strategy, their team, their products, as well as specific financial ratios that will help them make their decision,” said Alrajhi.
A company will request to borrow a certain amount, and once this is fully pledged by investors, it will receive the loan. Forus, in turn, earns a small commission. Loans are for six to 48 months.
“Our marketplace is providing investors with diversified alternative options (for) investing, while businesses are empowered with an opportunity to grow and scale,” said Alrajhi.
“We achieve this by minimizing friction, streamlining the customer experience and providing a seamless, secure and transparent platform.”
Alrajhi holds an MBA from Madrid’s IE Business School, where her research led her to spot a gap in the market for a fintech-based, P2P lender in Saudi Arabia.
“If you look at the market today, there’s only a few banks who are willing to lend to SMEs, which banks see as quite high risk,” said Alrajhi. “In Saudi, there are roughly 16,000 SMEs looking for loans.”
Forus uses a murabaha — cost plus financing — structure for its loans, which are not interest-bearing and so are Shariah-compliant.
In English, Shariah-compliant lending will refer to a profit rate rather than an interest rate, although in Arabic there is no such linguistic distinction.
Nevertheless, Forus’s loans are Islamic. “In Saudi, the biggest market is for Shariah-compliant financial services,” said Alrajhi.
She hopes her platform will provide a win-win for investors and SMEs — investors can earn a bigger return on their money, while SMEs can obtain the funds needed to expand their operations and increase profits.
In the longer term, Forus plans to expand to Egypt and Pakistan, but for now Alrajhi’s focus is firmly on her native Saudi Arabia.
“One of the main impacts we aim to have is transparency, which will then enable financial inclusion and help increase GDP (gross domestic product),” she said.
“We’ve talked to so many SMEs, and we found that almost all are facing challenges when it comes to borrowing.”
She leads a team of 10 staff at Forus, and is a female trailblazer in the Kingdom’s male-dominated financial services sector and more broadly in Saudi Arabia, where women constitute less than 25 percent of the workforce.
“Within the next five years, Saudi’s financial sector will look completely different,” said Alrajhi.


This report is being published by Arab News as a partner of the Middle East Exchange, which was launched by the Mohammed bin Rashid Al Maktoum Global Initiatives and the Bill and Melinda Gates Foundation to reflect the vision of the UAE prime minister and ruler of Dubai to explore the possibility of changing the status of the Arab region.