Fitch lifts Saudi outlook to stable on higher oil prices, improved state finance

Fitch lifts Saudi outlook to stable on higher oil prices, improved state finance
Fitch assumes Brent prices to average $63 per barrel this year. (Reuters)
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Updated 16 July 2021

Fitch lifts Saudi outlook to stable on higher oil prices, improved state finance

Fitch lifts Saudi outlook to stable on higher oil prices, improved state finance
  • If oil averages $63 a barrel this year, the agency predicts the Kingdom’s budget deficit will fall from 11.2 percent of GDP last year to 3.3 percent

RIYADH: Ratings agency Fitch on Thursday revised its outlook for Saudi Arabia to stable from negative, citing rising oil prices and the government’s continuing efforts to adjust its finances. Fitch maintained the Kingdom’s sovereign rating at “A.”

“The outlook revision reflects prospects for a smaller deterioration in key sovereign balance-sheet metrics than at the time of the previous review, owing to significantly higher oil prices and continued government commitment to fiscal consolidation,” the agency said.

Saudi Arabia, the world’s largest oil exporter, was hit last year by the twin shocks of the COVID-19 pandemic and record-low oil prices. However a rebound in demand for crude and the easing of coronavirus restrictions have helped to lift the economy in recent months.

Most of the improvement in oil prices came as Saudi Arabia worked with Russia and other allied producers to balance the market through voluntary cuts in production. The alliance, known as OPEC+, is in discussions to extend this agreement until the end of 2022.

The speed of recovery in the Saudi economy was evident in the first quarter of 2021, as real non-oil output grew by 2.9 percent and the private sector recorded growth of 4.4 percent, Fahad Al-Mubarak, governor of Saudi Central Bank, said on Wednesday. Private final consumer spending rose by 1.3 percent.

Mazen al-Sudairi, the head of research at Al Rajhi Capital, told Arab News that with government reforms helping to support economic recovery in the Kingdom at a time when other economies worldwide are still suffering as a result of the pandemic, the improved Fitch rating was not a surprise.

“With the non-oil economy continuing to grow and the budget deficit falling on the back of higher oil prices, ratings agencies are expected to positively change their outlook,” he added.

Saudi Arabia’s budget deficit jumped to 11.2 percent of gross domestic product (GDP) last year, from 4.5 percent in 2019, but Fitch said the increase was less pronounced than the one that followed the 2014-2015 oil-price shock, due to Saudi fiscal reforms.

The Kingdom last year introduced a range of austerity measures, including the tripling of the value-added tax rate and the withdrawal of a cost-of-living allowance.

It also transferred $40 billion from the central bank to the Public Investment Fund (PIF), the sovereign wealth fund at the center of plans to transform the Saudi economy, to spur investment.

Assuming Brent prices average $63 a barrel this year, Fitch forecasts the Kingdom’s budget deficit will narrow to 3.3 percent of GDP this year, an improvement on the 4.9 percent deficit projected by the government.

Net foreign assets at the central bank recently dropped to about $433 billion, their lowest level in more than a decade. Fitch expects reserves at the Saudi central bank to increase to $470 billion in 2022-2023 as the current account switches to a surplus and PIF increases domestic investments.


Qatar Energy to launch green bonds in 2022; state commits to emissions reduction

Qatar Energy to launch green bonds in 2022; state commits to emissions reduction
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Updated 12 sec ago

Qatar Energy to launch green bonds in 2022; state commits to emissions reduction

Qatar Energy to launch green bonds in 2022; state commits to emissions reduction

RIYADH: Qatar Energy is looking to raise between $5 to $10 billion from issuing green bonds, banking sources told CNBC Arabia.

Qatar Energy is developing an environmental framework in collaboration with global investment banks, including Goldman Sachs, to move into the green bond market in conjunction with the global trend towards reducing carbon emissions, sources said.

The offering is expected to take place in the first quarter of 2022 or by the end of June 2022, sources added.

Separately, Reuters reported that the Ministry of Environment and Climate Change in Qatar launched a national climate change action plan aimed to reduce greenhouse gas emissions by 25 percent by 2030.

The plan also envisioned reducing "carbon intensity" of its liquefied natural gas facilities by 25 percent by the same year.

Qatar's move follows other Gulf Arab states, including Saudi Arabia which announced its net-zero emission target by 2060 ahead of the COP26 climate change summit in Glasgow next week.


Qatar is the world’s largest producer of liquefied natural gas and aims to expand LNG production to 127 million tonnes annually by 2027. It says its gas production helps combat climate change globally because it can help the world shift from high-polluting fuels like oil and coal to renewable energies.


Saudi Arabia will welcome a million cruise ship passengers by 2028, Cruise Saudi MD claims

Saudi Arabia will welcome a million cruise ship passengers by 2028, Cruise Saudi MD claims
Updated 54 min 13 sec ago

Saudi Arabia will welcome a million cruise ship passengers by 2028, Cruise Saudi MD claims

Saudi Arabia will welcome a million cruise ship passengers by 2028, Cruise Saudi MD claims

A million cruise ship passengers will visit Saudi Arabia by 2028 according to ambitious plans set out by the managing director of the country’s Cruise Saudi company.

Fawaz Farooqui set out the goal during a session at the Future Investment Initiative Forum in Riyad, as he also claimed 50,000 direct and indirect jobs will be created by the industry by 2035.

He also pledged that five cruise ports will operate in Saudi Arabia by 2025.

Farooqui added that plans for Cruise Saudi had been hampered by the pandemic, and said: “Our plan was to bring the first cruise passenger in 2023, but the pandemic hit and many unfortunate incidents happened to the industry.”

Farooqui’s comments came just days after Cruise Saudi became a member of the World Travel & Tourism Council as the Kingdom continues its drive to diversify its economy away from oil as per the Vision 2030 agenda.


‘Like fire and nuclear, there must be rules for AI,’ says leading tech voice

‘Like fire and nuclear, there must be rules for AI,’ says leading tech voice
Updated 28 October 2021

‘Like fire and nuclear, there must be rules for AI,’ says leading tech voice

‘Like fire and nuclear, there must be rules for AI,’ says leading tech voice

Humanity needs rules for dealing with artificial intelligence (AI) in the same way it learned to manage fire and nuclear technology, one of the sector’s up and coming voices has claimed.

Bruno Maisonnier, founder and CEO of AI firm AnotherBrain, admitted there was a danger with the new technology, but that is no different from every major discovery since the dawn of man.

Speaking at the Future Investment Initiative Forum in Riyad, Maisonnier said: “There’s risk with AI as well as there are risk with every new technology, that’s part of human history 

“We brought fire and people died from fire, we brought nuclear and people died from that . 

“Each time we have the same reaction: First we fear and then we start to put the feedback and learn and put rules to get the positive out of this technology

“The same goes with AI. The question is when do we have to set these rules?

“Rules must be put but first we must allow the evolution to happen.”

Also speaking at the forum, Pascal Weinberger, CEO and co-founder of tech firm Bardeen AI, insisted that machines will never be able to fully replace humans in many environments.

“There are a lot of things that machines are better at than humans, and vice versa — especially at common sense,” he said.


Nokia's quarterly profit beats on 5G demand

Nokia's quarterly profit beats on 5G demand
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Updated 28 October 2021

Nokia's quarterly profit beats on 5G demand

Nokia's quarterly profit beats on 5G demand
  • The company expects comparable operating profit margin to be towards the upper end of the target range of 10 percent to 12 percent

Nokia reported a stronger-than-expected third-quarter operating profit on Thursday on higher demand for 5G gear, but warned the global shortage of semiconductors would hit its supply chain.


Shares of the Finland-based company were up 5 percent as investors lauded its efforts to get back on track following product missteps last year by riding on 5G demand and taking market share away from rivals, particularly in China.


Any problem in supplying to customers on time might dent those ambitions.


"At the moment, we are limited by semiconductor availability, that will affect Q4 and it's quite possible that this challenge will get bigger before it starts getting better," Chief Executive Officer Pekka Lundmark said in an interview.


Global producers of goods from televisions to cars have faced a host of supply chain issues ranging from a shortage of vital components, manpower, logistics snarls, and delays at plants because of power cuts in China.


Rival Ericsson last week also warned of supply chain issues.


"We are working every single day with the suppliers on all levels of the organisation and I have also been personally involved in these discussions," Lundmark said.


Nokia's quarterly net sales rose 2 percent to 5.4 billion euros ($6.27 billion) from 5.3 billion a year ago, in line with analysts' expectations.


The company expects comparable operating profit margin to be towards the upper end of the target range of 10 percent to 12 percent


Comparable operating profit during July-September surged to 633 million euros from 486 million last year, beating the 488 million euros forecast by 11 analysts polled by Refinitiv.


While its mainstay mobile network business suffered from lost business in the United States, network infrastructure grew 6 percent in constant currency and cloud and network services rose 12 percent.


"The 5G market is still growing and we expect that it will still take a couple of years before it reaches its peak," Lundmark said


In July, Nokia won its first 5G radio contract in China, while rival Ericsson lost market share after Sweden last year decided to ban Chinese vendors from their 5G networks.


Lundmark said revenue from China has started to flow in but the available market there for non-Chinese vendors was limited.


Transport problems holding back $2-a-kg hydrogen fuel, says Aramco's technology chief

Transport problems holding back $2-a-kg hydrogen fuel, says Aramco's technology chief
Updated 28 October 2021

Transport problems holding back $2-a-kg hydrogen fuel, says Aramco's technology chief

Transport problems holding back $2-a-kg hydrogen fuel, says Aramco's technology chief

RIYADH: Low-carbon hydrogen can be produced at a cost of $2 per kg but the issue is transporting the fuel to where it is needed, according to the chief technology officer of Aramco.

Speaking at the Future Investment Initiative Forum in Riyad, Ahmad Al Khowaiter said the technology for capturing the gas has proven itself reliable “over many years” and is “at scale today”.

Khowaiter claimed that hydrogen is the only option in “many of the harder to decarbonise sectors” as the world seeks to drastically reduce its carbon footprint.

He confirmed that Aramco, the Saudi-state owned oil and gas company, has been operating its own production pilot with the capacity for 800,000 tonnes a year of hydrogen for the last six years with “no problems, no challenges”.

“I really do believe that technology is mature, the cost structures are very compatible with the competitive energy costs that are needed for hydrogen” he told delegates at the conference, adding: “It really does allow, for example, low carbon hydrogen to be produced today at scale with very competitive costs.”

Khowaiter went on: “The challenge with hydrogen is transport, so the big challenge is converting it to something that can be transported or compressing it in transport. 

“At the point of production we’re talking $1.5 to £2 a kg range, which is far below alternatives for now, as the alternatives have to scale up.”