IMF reverses Iran growth, lifts Saudi forecast

IMF reverses Iran growth, lifts Saudi forecast
Iranian MP's display their disagreement over the a bill to counter terrorist financing in parliament in Tehran on October 7, 2018. The International Monetary Fund on Tuesday predicted Iran’s economy will sink deep in the red due to renewed US sanctions. (AFP)
Updated 09 October 2018

IMF reverses Iran growth, lifts Saudi forecast

IMF reverses Iran growth, lifts Saudi forecast
  • Iran's oil-dependent economy is expected to shrink by 1.5 percent this year and by 3.6 percent in 2019
  • Saudi economy is expected to grow by 2.2 percent in 2018 and 2.4 percent next year

DUBAI: The International Monetary Fund on Tuesday predicted Iran’s economy will sink deep in the red due to renewed US sanctions but forecast increased Saudi growth on the back of higher oil production.
In its World Economic Outlook, the IMF said the oil-dependent economy of the Islamic republic is expected to shrink by 1.5 percent this year and by 3.6 percent in 2019.
In May, before US President Donald Trump announced reinstating sanctions against Tehran, the IMF had projected Iran’s economy would grow by 4.0 percent in 2018 and again next year.
The IMF said the Iranian economy was now expected to contract over the next two years “on account of reduced oil production, before returning to modest positive growth in 2020-23.”
Trump withdrew the United States from the 2015 nuclear deal between Iran and world powers in May, and his administration reimposed a round of sanctions on the Islamic republic in August.
Iranian crude exports, which reach some 2.5 million barrels per day normally, have plunged by over half a million bpd and are expected to dive further when expanded sanctions on oil take effect next month, depriving Tehran of its main source of income.
The IMF also sharply slashed growth forecasts for the whole Middle East and North Africa region due to the slump in the Iranian economy and increased energy costs.
It now projects the MENA region to grow by 2.0 percent this year and 2.5 percent in 2019, 1.2 percent and 1.1 percent lower, respectively, than it forecast in April.
“The downward revisions reflect to an important extent the worsening of growth prospects for Iran, following the reimposition of US sanctions,” it said.
The IMF, however, lifted its projections for economic growth in Saudi Arabia, the region’s biggest economy, and its oil-rich neighbors in the Gulf.
It said the Saudi economy, which contracted by 0.9 percent last year, is expected to grow by 2.2 percent in 2018 and 2.4 percent next year, raising previous projections by 0.5 percent.
The growth is being “driven by a pickup in non-oil economic activity and a projected increase in crude oil production in line” agreed by the Organization of the Petroleum Exporting Countries and independent producers, the IMF said.
Oil prices, which account for about 80 percent of Saudi public income, have increased by more than 70 percent since June last year to over $80 a barrel.
The London-based Capital Economics think-tank said last week that revenues of Saudi Arabia and the five other Gulf states are expected to rise by $200 billion this year compared to 2017 due to high oil prices and output.


SAP sees flat 2021 revenue after Q4 results beat market expectations

SAP sees flat 2021 revenue after  Q4 results beat market expectations
Updated 2 min 54 sec ago

SAP sees flat 2021 revenue after Q4 results beat market expectations

SAP sees flat 2021 revenue after  Q4 results beat market expectations

BERLIN: Business software group SAP forecast flat revenue and a decline in operating profit in 2021 after reporting fourth quarter results that beat market expectations, sending its shares up in early trading on Friday.
Giving an early view of 2020 results and setting 2021 guidance, SAP said adjusted revenue, at constant currency, would be unchanged to up 2 percent this year, while adjusted operating profit was seen falling by 1 percent to 6 percent.
“This update should trigger a modest relief rally,” said Citi analyst Amit Harchandani, adding, however, that the overall level of near-term uncertainty meant he would keep his neutral rating on the stock.
CEO Christian Klein abandoned his medium-term profit targets last October and said SAP would go all-in on its shift to cloud computing, cautioning that business would take longer than expected to recover from the coronavirus pandemic.
That announcement, which came with a third quarter earnings miss, sparked the biggest drop in SAP shares in a generation, causing the leading provider of enterprise software to lose its mantle as Europe’s most valuable technology company.
SAP’s 2020 revenue exceeded its lowered guidance, while profit hit the high end, the company said in a news release issued ahead of results scheduled on Jan. 29.
“Our strong finish to the year and the upcoming launch of our new holistic business transformation offering position us well to meet our new outlook targets,” Klein said in a news release that followed SAP’s late night results release.
The company plans a kickoff event, called SAP Rise, on Jan. 27 to promote its cloud drive.
SAP shares have lost more than a quarter in value since their all-time high set last September, valuing the Walldorf-based company at $156 billion.
Chief Financial Officer Luka Mucic highlighted SAP’s record cash flow generation in 2020 which, at €7 billion, was double a year earlier.
Cloud revenue continued to be impacted by lower pay-as-you-go transactional revenue, however, in particular for Concur, SAP’s expense management app that has been hit by a slump in corporate travel.
That was offset by strength in e-commerce, business technology platform and customer experience sales, as well as wins for SAP’s human resources application SuccessFactors.
“SAP also saw strong early take up of its new holistic business transformation offering among pilot customers, contributing to the cloud performance in the quarter,” the company said.
SAP says its switch to subscription-based cloud services will boost growth and profit margins in the long term, but weaning itself off the upfront fees that its legacy software licenses throw off will create near-term headwinds.
Non-IFRS cloud revenue at constant currencies rose by 13 percent in the fourth quarter, while current cloud backlog — the company’s preferred indicator of sales performance — grew by 14 percent, also at constant currencies.
Quarterly operating profit was lifted by lower share-based compensation expenses, rising 3 percent at constant currency. Adjusted operating margin, also at constant currency, expanded by 1.5 percentage points to 36.8 percent.