Italy endorses China’s Belt and Road plan in first for a G7 nation

Chinese President Xi Jinping (L) and Italy’s President Sergio Mattarella address a joint press conference following their meeting on March 22, 2019 at the Quirinale presidential palace in Rome, as part of Xi Jinping’s two-day visit to Italy. (AFP)
Updated 24 March 2019

Italy endorses China’s Belt and Road plan in first for a G7 nation

ROME: Italy endorsed China’s ambitious “Belt and Road” infrastructure plan on Saturday, becoming the first major Western power to back the initiative to help revive the struggling Italian economy.
Saturday’s signing ceremony was the highlight of a three-day trip to Italy by Chinese President Xi Jinping, with the two nations boosting their ties at a time when the United States is locked in a trade war with China.
The rapprochement has angered Washington and alarmed some European Union allies, who fear it could see Beijing gain access to sensitive technologies and critical transport hubs.
Deputy Prime Minister Luigi Di Maio played down such concerns, telling reporters that although Rome remained fully committed to its Western partners, it had to put Italy first when it came to commercial ties.
“This is a very important day for us, a day when Made-in-Italy has won, Italy has won and Italian companies have won,” said Di Maio, who signed the memorandum of understanding on behalf of the Italian government in a Renaissance villa.
Taking advantage of Xi’s visit, Italian firms inked deals with Chinese counterparts worth an initial 2.5 billion euros ($2.8 billion). Di Maio said these contracts had a potential, future value of 20 billion euros.
The Belt and Road Initiative (BRI) lies at the heart of China’s foreign policy strategy and was incorporated into the ruling Communist Party constitution in 2017, reflecting Xi’s desire for his country to take a global leadership role.
The United States worries that it is designed to strengthen China’s military influence and could be used to spread technologies capable of spying on Western interests.
WARM WELCOME
Italy’s populist government, anxious to lift the economy out of its third recession in a decade, dismissed calls from Washington to shun the BRI and gave Xi the sort of red-carpet welcome normally reserved for its closest allies.
Some EU leaders also cautioned Italy this week against rushing into the arms of China, with French President Emmanuel Macron saying on Friday that relations with Beijing must not be based primarily on trade.
There was not even universal backing for the BRI agreement within Italy’s ruling coalition, with Deputy Prime Minister Matteo Salvini, who heads the far-right League, warning against the risk of China “colonialising” Italian markets.
Salvini did not meet Xi and declined to attend a state dinner held in honor of the visiting leader on Friday.
Di Maio, who leads the 5-Star Movement, says Italy is merely playing catch up, pointing to the fact that it exports significantly less to China than either Germany or France.
Italy registered a trade deficit with China of 17.6 billion euros last year and Di Maio said the aim was to eliminate the deficit as soon as possible.
After talks with Italian Prime Minister Giuseppe Conte and Di Maio in the morning, Xi flew to the Sicilian city Palermo for a private visit on Saturday afternoon.
He is due to head to Monte Carlo on Sunday before finishing his brief tour of Europe in France, where he is due to hold talks with Macron and German Chancellor Angela Merkel.


IMF predicts worst Mideast downturn in half century

Updated 13 July 2020

IMF predicts worst Mideast downturn in half century

  • The region will see real gross domestic product fall by 4.7 percent this year
  • Overall growth revision was led by subdued activity among oil exporters

DUBAI: The IMF Monday again sharply lowered its Middle East and North Africa economic forecast, to its lowest level in 50 years, over the “twin shock” of the coronavirus pandemic and low oil prices.
The region’s economy will contract by 5.7 percent this year, and shrink by as much as 13 percent in countries torn by conflict, the Washington-based International Monetary Fund warned.
The economic malaise will see poverty and unemployment rise, stoking social unrest, and send budget deficits and public debt surging, it said.
In its regional economic outlook update, the IMF projected the economies of the Middle East and North Africa to contract by 5.7 percent this year, 2.4 percentage points lower than its April forecast.
The projection is the lowest in over 50 years, according to World Bank data, and comes after the region posted modest growth last year.
The battered energy-based economies of the Gulf Cooperation Council (GCC) states are forecast to shrink by a hefty 7.1 percent, 4.4 percentage points lower than April.
“The region has been facing a crisis like no other — a twin shock that affected the normal functions of their economies during the confinement measures,” Jihad Azour, director of IMF Middle East and Central Asia Department, told AFP.
Mideast countries applied some of the most stringent lockdowns and measures against the coronavirus, halting most economic activities.
Oil prices plunged by about two-thirds in a freefall as the global economy ground down to prevent the spread of the coronavirus. They have partially recovered to around $40 a barrel.
The region’s oil-exporting countries are expected to lose around $270 billion of energy revenues, “which is a big drop,” Azour said.
The IMF said that the region’s hardest-hit countries will be those that are “fragile and in conflict situations,” with their economies forecast to contract by as much as 13 percent.
GDP per capita in those unstable countries is expected to plummet from $2,900 in 2018-2019 to just $2,000 this year.
“This is a dramatic downturn that will aggravate existing economic and humanitarian challenges and raise already high poverty levels,” the report said.
“Social unrest could be rekindled as lockdown measures are lifted.”
Azour warned that job losses, together with worsening poverty and inequality, could create stability challenges for governments in the region.
“(Job losses) will come on top of an already high level of unemployment, especially at youth level,” he said.
The IMF said that large and growing deficits are expected to push public debt levels to 95 percent of GDP among Middle East oil importers by the end of this year.
Debt levels are forecast to grow rapidly in Sudan to 258 percent of GDP, in Lebanon to 183 percent and in Egypt over 90 percent, it said.
The woes of oil-importing nations are also compounded by a sharp drop in remittances from their nationals working overseas, who have been put out of work due to the pandemic, Azour said.
The IMF report also warned that the potential decline in expatriate workers — who account for more than 70 percent of the labor force in some oil-exporting countries — would also dampen their recovery.
Some 25 million expatriates work and live in the six GCC states, forming half of the population of the group which takes in Saudi Arabia and the United Arab Emirates along with Bahrain, Kuwait, Oman and Qatar.
Oxford Economics predicted in May that employment across the GCC could fall by 13 percent this year, with job losses of some 1.7 million in Saudi Arabia and 900,000 in UAE.
Azour said that with so few certainties in the current environment, the situation could be even worse than forecast.
“We are in an odd situation where the level of uncertainty is still high; uncertainty about the capacity to control the pandemic and its expansion, uncertainty about the recovery itself, and also uncertainty about the oil prices,” Azour said.