GCC reforms remain on track despite pandemic, economists say

Cases of the virus peaked in the region around the middle of the year, in response to which GCC countries implemented stringent lockdowns and imposed travel restrictions. (Shutterstock)
Cases of the virus peaked in the region around the middle of the year, in response to which GCC countries implemented stringent lockdowns and imposed travel restrictions. (Shutterstock)
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Updated 12 February 2021

GCC reforms remain on track despite pandemic, economists say

GCC reforms remain on track despite pandemic, economists say
  • ‘After seeing negative growth in in 2020, we are expecting a rebound in 2021,’ said IMF’s mission chief for Saudi Arabia
  • GCC authorities have implemented a range of appropriate measures to mitigate the economic damage

LONDON: The coronavirus pandemic has highlighted the economic challenges facing nations in the Gulf region but has not changed the direction of their economies, experts told a web conference on Wednesday.
The comments came during an event on the Gulf Cooperation Council’s (GCC) economic prospects for 2021, hosted by Chatham House in London.
Tim Callen, assistant director of the Middle East and Central Asia department at the International Monetary Fund (IMF), said GCC countries experienced two significant shocks in 2020: the COVID-19 pandemic and disruptions in oil prices.
Cases of the virus peaked in the region around the middle of the year, in response to which GCC countries implemented stringent lockdowns and imposed travel restrictions. The number of cases began to fall, and lockdowns were eased, which supported the economic recovery in the second half of the year.
“GCC authorities have implemented a range of appropriate measures to mitigate the economic damage, including fiscal packages, relaxation of monetary and macro-prudential rules, and the injection of liquidity into the banking system,” the IMF said in a report, published in December, on how Gulf nations are addressing the two challenges.
There has been another spike in COVID-19 cases since the start of 2021, particularly in the UAE, which has led to even tighter preventative measures that have further affected economic activity. On the other hand some countries in the region are excelling in terms of vaccination rollouts, compared with the wider global situation.
Most countries experienced a big drop in growth in the first half of 2020, with the biggest hit taken in the second quarter. This was followed, in most cases, by a rebound in the third quarter. Data released by Saudi Arabia on Wednesday suggested the recovery continued into Q4.

Callen, who serves as the IMF’s mission chief for Saudi Arabia, said: “After seeing negative growth in in 2020, we are expecting a rebound in 2021.”
While oil prices recently reached their highest levels since before the pandemic, largely thanks to a Saudi cut in supply, in the long term the IMF forecasts lower oil revenues and so government spending will be strained.
“The good news is that some countries have already implemented adjustments,” Callen said. However, he added that this will “require sustained fiscal reforms that look across the gamut of the government wage bill, energy prices in the system, non-oil, tax revenue bases — and not all of the countries have yet introduced a value added tax (VAT), for example,”.
Karen Young, a resident scholar at the American Enterprise Institute, said: “The policy shifts that we are seeing in 2020 are a continuation of what has been underway since 2015” and is part of an ongoing trajectory.
“COVID made the economic diversification policies, that were innovative, more difficult to execute,” including travel, tourism, logistics and entertainment, as well as some types of investments, she added.
Young also touched on taxes and said more need to be introduced, including property, sales, VAT, incomes and corporate taxes.
On the GCC labor markets, Callen said there are a lot of reforms being introduced in Saudi Arabia, the UAE and Qatar regarding liberalizing the expat labor market.
“One of the key elements of reforms that we are going to need to see in the coming years is higher productivity for any given wage level,” he said.
Although the labor force participation rate of nationals remains low in the GCC (about 83 percent for men and 32 percent for women on average), it has risen over the past decade, with potential for further increases as highly educated nationals, especially women, enter the labor force, the IMF said in its report.
Moreover, a young population and rising labor force participation rates will lead to a large number of new labor force entrants in the coming years that cannot primarily be absorbed by the public sector, the report added.
“Depending on participation rates, the labor force could grow by an additional 2.5 million GCC nationals by 2025,” it forecasted.
Callen praised the “Vision” programs implemented by GCC member states and said they are heading in the right direction, but added that the big question is how do you diversify economies that are so heavily reliant on oil.
Rola Dashti, executive secretary of the UN Economic and Social Commission for Western Asia, said the reforms that are under way are important, but that additional types of reforms are also needed.
“The GCC economies have created a middle class dependent on state spending,” the Kuwaiti former minister said. “Sustainability of this is unobtainable, and not revisiting that social contract becomes a key issue on the state’s stability for the future.”
She said in most GCC countries, almost 83 percent of government expenditure goes to current spending such as salaries and subsidies but “this current spending of oil revenues, as we move forward, cannot cover it, not alone.”
“We need to look into how we will create a middle class that will generate wealth to the economy, vis-a-vis a middle class dependent on government spending,” said Dashti. “We need to create opportunities for the middle class targeted toward economic activities that generate foreign currency,” particularly since the GCC imports so much.
Regarding the economy, she said GCC countries excel in services rather than commodities, and are looking to compete on the global market in the financial services sector, technology, innovation and entrepreneurship, and green technology.


Cryptocurrencies slide as market selloff deepens

Cryptocurrencies slide as market selloff deepens
Updated 20 September 2021

Cryptocurrencies slide as market selloff deepens

Cryptocurrencies slide as market selloff deepens
  • Digital currencies gaining popularity among Indians in smaller cities

RIYADH: Prices of cryptocurrencies plunged on Monday as concerns over the spillover risk to the global economy from Chinese property group Evergrande’s troubles rippled over to wider markets.

Bitcoin tumbled 7.33 percent to $43,804 at 4:29 p.m. Riyadh time. Its rival Ether, the coin linked to the Ethereum blockchain network, fell 8.74 percent to $3,050.45, according to data from CoinDesk.

The loss in the value of cryptocurrencies comes at a time when institutional interest in the space has surged and some investment banks have ramped up their forecasts for cryptocurrencies in the coming months.

“Their fate seems a little tied to equities at the moment, and the price action is incredibly similar too,” said John Marley, CEO of forexxtra, a London-based FX consultancy. 

Ether price

Nikolaos Panigirtzoglou, managing director of JPMorgan said that the fair value of Ether is much lower than its current price.

According to a set of measurements based on the network’s activity, it calculated the value of the digital coin at $1,500, 55 percent below its market price.

One of the reasons cited was that Ethereum was not unique anymore, and it faced stiff competition from other chains such as Solana and Avalanche.

“We look at the hash rate and the number of unique addresses to try to understand the value for Ethereum. We’re struggling to go above $1,500. There is a question mark here. The current price is expressing an exponential increase in usage and traffic that might not materialize,” he stated.

 

Lawsuit

In the midst of an ongoing lawsuit with the US Securities and Exchange Commission, Ripple's legal team said they have no plans to settle with the SEC.

They are confident that SEC President Gary Gensler will be convinced that pursuing the case is to pick winners and losers in the crypto space based on innovation.

"Ripple’s legal team told Fox Business they have no plans to settle with SEC over lawsuit on XRP, confident they can show Gary Gensler in pursuing the case is picking winners and losers in the crypto business to the detriment of innovation,” Charles Gasparino tweeted.

 

Indians embrace crypto

Indian citizens are embracing cryptocurrencies to invest and earn extra money after the pandemic, according to reports from the regional media.

But what is even more interesting is that this growth has been greater in smaller cities, where interest in cryptocurrency is at its peak.

The profile of these participants was also interesting, as they are highly educated and open to diversifying their investment portfolios and not only focus on Bitcoin.

 A local exchange, Wazirx, has reported astonishing levels of new customers coming from these small towns, classified as Tier 2 and Tier 3 cities.

“Tier 2 and Tier 3 cities have driven almost 55 percent of the total user signups on Wazirx in 2021, thereby overtaking Tier 1 cities, which demonstrated a signup growth of 2,375 percent,” Wazirx CEO Nischal Shetty was quoted as saying in local media reports.


Saudi top 10 banks see robust growth in financing and deposits

Saudi top 10 banks see robust growth in financing and deposits
Updated 20 September 2021

Saudi top 10 banks see robust growth in financing and deposits

Saudi top 10 banks see robust growth in financing and deposits

RIYADH: Saudi Arabia's top 10 banks saw robust quarter-on-quarter growth in financing and deposits in the second quarter of 2021, Zawya reported, citing management consulting firm Alvarez & Marsal (A&M)'s KSA Banking Pulse.

Core operating income increased by 8.4 percent, compared to 1.2 percent in the first quarter of the year, in what is considered the fourth increase in a row, while loans and advances (L&A) increased by 13.1 percent and deposits by 12.6 percent.

L&A and deposit growth were primarily supported by the merger of National Commercial Bank and SAMBA to form Saudi National Bank (SNB), according to the report.

Operating expenses rose by 13.7 percent quarter-on-quarter and impairments jumped by 81.6 percent, affecting the second quarter's overall operating efficiency for the banking sector. This affected net profit for the top ten banks in the Kingdom.

Aggregate net income decreased over the same period by 8.1 percent to SR11 billion ($2.93 billion), while the fall in net profit was partially offset by a 11.1 percent increase in net interest income.

The top 10 banks in the report are SNB, Al Rajhi Bank, Riyad Bank , Saudi British Bank, Banque Saudi Fransi, Arab National Bank, Alinma Bank, Bank Albilad, Saudi Investment Bank and Bank Aljazira.


Blossoming Saudi fragrance market to hit over $3.8bn by 2030

Blossoming Saudi fragrance market to hit over $3.8bn by 2030
Updated 20 September 2021

Blossoming Saudi fragrance market to hit over $3.8bn by 2030

Blossoming Saudi fragrance market to hit over $3.8bn by 2030

DUBAI: The Saudi fragrance market is poised to reach $3.8 billion by 2030, according to a market report, with an annual growth rate of 8.2 percent from last year.

India-based P&S Intelligence said a growing trend in grooming and personal care will drive this performance of the Kingdom’s perfume sector, which in 2020 was valued at $1.74 billion.

The predicted growth follows a challenging year for industry, as manufacturing plants were shut down due to the COVID-19 pandemic.

The report said luxury product bifurcation will witness the fastest growth in the sector, as more consumers opt for high-end brands.

The parfum category, which uses the highest concentration of essential oils, took most of the market share in the past.

Demand for natural and organic perfumes will also increase, the report said, amid increasing brand consciousness among consumers.


Innovation zone aims to transform Cairo’s Bab al-Azab 

Innovation zone aims to transform Cairo’s Bab al-Azab 
Updated 20 September 2021

Innovation zone aims to transform Cairo’s Bab al-Azab 

Innovation zone aims to transform Cairo’s Bab al-Azab 

RIYADH: Egypt's Sovereign Fund plans to transform the historic Bab al-Azab area in Cairo’s Salah Al-Din Al-Ayoubi Citadel into the first integrated innovation zone in the Middle East and North Africa (MENA).

The fund signed a Memorandum of Understanding with Bidayat Investment company, under which the company will explore opportunities for cooperation in developing Bab Al-Azab and turning it into an innovation center to embrace Egyptian youth creators, founding partner Rachid Mohamed Rachid told Asharq Business.

The center also aims at embracing startup owners in fields such as engineering design, furniture manufacturing, jewelery, fashion, as well as films, he said.

Bidayat Investment Group has already established innovation centers in several international markets, such as Italy, France and Turkey.


Pakistan's Maqsad raises $2.1m pre-seed funds

Pakistan's Maqsad raises $2.1m pre-seed funds
Updated 20 September 2021

Pakistan's Maqsad raises $2.1m pre-seed funds

Pakistan's Maqsad raises $2.1m pre-seed funds

Pakistani e-learning platform Maqsad has raised USD$2.1 million in its latest funding round, just months after being created.

The edtech company offers after-school academic support to youngsters in English and Urdu, and the company aims to reach 100 million students in Pakistan.

The company will use the cash to fund a production studio, academics and animators in order to develop in-house content.

Maqsad co-founder Rooshan Aziz said: “Struggles of students during the early days of the pandemic motivated us to run a pilot program. With promising initial traction and user feedback, the potential to digitize the education sector became very clear.”