Lebanese PM, Saudi minister talk support for country’s economy

Saudi Finance Minister Mohammed Al-Jadaan
Updated 24 September 2019

Lebanese PM, Saudi minister talk support for country’s economy

  • Beirut remains one of the world’s most heavily indebted governments, a victim of low growth and lack of capital inflow

BEIRUT: Prime Minister Saad Al-Hariri spoke to the Saudi finance minister on Saturday about support for the Lebanese economy and preparations for the first meeting of a bilateral council, his media office said.

Saudi Finance Minister Mohammed Al-Jadaan said on Wednesday that Riyadh was in discussions with the Lebanese government about providing financial support, lifting Lebanon’s dollar-denominated government bonds.

Lebanon, one of the world’s most heavily indebted states, faces financial strains linked to a slowdown in capital inflows needed to meet the financing needs of the government and the import-dependent economy. Years of low growth also weigh heavily.

Central bank foreign assets have been in decline. These, excluding gold, fell around 15 percent from an all-time high in May last year to $38.7 billion in mid-September.

In a phone call, Hariri and Al-Jadaan discussed “preparations to hold the first meeting of the Lebanese-Saudi joint committee and ... the agenda that includes agreements and memorandums of understanding that are intended to be signed.”

They also discussed “ways leading to the support of the Lebanese economy and the participation of the Saudi private sector in projects included in the Cedre conference,” a reference to a major infrastructure investment program.

Lebanon won pledges of some $11 billion in financing for the investment program at the “Cedre” conference in Paris last year. But foreign governments including France first want to see Beirut follow through on long-delayed reforms aimed at putting the public finances on a sustainable path.

A Lebanese official source told Reuters on Wednesday that work was underway to convene the bilateral council in October.

The statement from Hariri’s office gave no details of what kind of financial support Saudi Arabia might provide.

Krisjanis Krustins, director at Fitch Ratings, noted that one step taken by Saudi Arabia and others to help Lebanon in the past was to deposit funds at the central bank.

“Buying bonds is another option and another thing that could be done is support for purchase of petroleum products. Investments are another option but (it’s) not clear what assets they would buy other than bonds,” Krustins said.

Finance Minister Ali Hassan Khalil said on Wednesday Lebanon would “very soon” start measures to issue foreign currency bonds of about $2 billion.


Japan’s households tighten purse strings as sales tax and typhoon hit

Updated 06 December 2019

Japan’s households tighten purse strings as sales tax and typhoon hit

  • Falls in factory output, jobs and retail add to fears of worsening slowdown after Tokyo unveils $122bn stimulus package

TOKYO: Japanese households cut their spending for the first time in almost a year in October as a sales tax hike prompted consumers to rein in expenses and natural disasters disrupted business.

Household spending dropped 5.1 percent in October from a year earlier, government data showed on Friday.

It is the first fall in household spending in 11 months and the biggest fall since March 2016 when spending fell by 5.3 percent. It was also weaker than the median forecast for a 3 percent decline.

That marked a sharp reversal from the 9.5 percent jump in September, the fastest growth on record as consumers rushed to buy goods before the Oct. 1 sales tax hike from 8 percent to 10 percent.

“Not only is the sales tax hike hurting consumer spending but impacts from the typhoon also accelerated the decline in the spending,” said Taro Saito, executive research fellow at NLI Research Institute.

“We expect the economy overall and consumer spending will contract in the current quarter and then moderately pick up January-March, but such recovery won't be strong enough.”

Household spending fell by 4.6 percent in April 2014 when Japan last raised the sales tax to 8 percent from 5 percent. It took more than a year for the sector to return to growth.

Compared with the previous month, household spending fell 11.5 percent in October, the fastest drop since April 2014, a faster decline than the median 9.8 percent forecast.

Analysts said a powerful typhoon in October, which lashed swathes of Japan with heavy rain, also played a factor in the downbeat data. Some shops and restaurants closed during the storm and consumers stayed home.

Separate data also showed the weak state of the economy.

The index of coincident economic indicators, which consists of a range of data including factory output, employment and retail sales data, fell a preliminary 5.6 points to 94.8 in October from the previous month, the lowest reading since February 2013, the Cabinet Office said on Friday.

It was also the fastest pace of decline since March 2011, according to the data.

Real wages adjusted for inflation, meanwhile, edged up for a second straight month in October, but the higher levy and weak global economy raise worries about the prospect for consumer spending and the overall economy.

While the government has sought to offset the hit to consumers through vouchers and tax breaks, there are fears the higher tax could hurt an economy already feeling the pinch from global pressures.

Japan unveiled a $122 billion fiscal package on Thursday to support stalling growth and as policymakers look to sustain activity beyond the 2020 Tokyo Olympics.

A recent spate of weak data, such as exports and factory output, have raised worries about the risk of a sharper-than-expected slowdown. The economy grew by an annualized 0.2 percent in the third quarter, the weakest pace in a year.

Analysts expect the economy to shrink in the current quarter due to the sales tax hike.