Fed policy tightening not all bad for Gulf economies — Jefferies

Fed policy tightening not all bad for Gulf economies — Jefferies
Jerome Powell suggested this week that the Fed will begin tapering later this year. (Reuters)
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Updated 24 September 2021

Fed policy tightening not all bad for Gulf economies — Jefferies

Fed policy tightening not all bad for Gulf economies — Jefferies
  • A likely strengthening of the dollar, to which Gulf currencies are pegged, may push down inflation, because it makes imports less expensive

RIYADH: The impending end of super-loose monetary policy from the Federal Reserve will have both positive and negative effects on the economies of the Arabian Gulf, according to Alia Moubayed, a managing director at investment bank Jefferies International.

A likely strengthening of the dollar, to which Gulf currencies are pegged, may push down inflation, because it makes imports less expensive, Moubayed said in an interview with Asharq.

Higher interest rates on dollar-denominated assets tend to lead to outflows from emerging markets, but Moubayed said that the Gulf markets have recently witnessed an influx of foreign capital, especially into stocks, and so should not be affected as badly as many of their EM peers.

Higher interest rates will increase the financing burden on governments with large budget and trade deficits, such as Bahrain, Moubayed said.

However, countries such as Qatar, Saudi Arabia and the UAE will “benefit from shrinking deficits due to the rise in oil prices and the increase in revenues in national currencies,” she said.

The Federal Reserve announced yesterday that it will likely start reducing its asset purchase program soon, and said policy makers are increasingly minded to start raising interest rates in 2022 instead of 2023 as previously envisioned.

If progress toward employment and inflation targets continues, the slowdown in asset purchases may start in November and end in mid-2022, the Fed said.


‘Saudization’ plan rolled out in key areas in Al-Baha region of the Kingdom 

‘Saudization’ plan rolled out in key areas in Al-Baha region of the Kingdom 
Updated 14 sec ago

‘Saudization’ plan rolled out in key areas in Al-Baha region of the Kingdom 

‘Saudization’ plan rolled out in key areas in Al-Baha region of the Kingdom 

Riyadh: Sales outlets in the Al-Baha region will be required to only employ Saudi citizens, under plans announced by the Minister of Human Resources.

The move will come into action on January 14 2022, as a part of the country’s ‘Saudization’ plan, and will see 10 other sectors in the area also required to abide by the scheme. 

These include electrical appliances, plastic materials, soap and detergents, water, food and beverages. 

The announcement excluded professions of cleaning, loading/unloading, and driving.

Cafes will also have a 'Saudization' quota of 50 percent, while restaurants will have a target of 40 percent.

This comes following the recent announcement by the Crown Prince on Sunday, to launch strategic offices to drive development in three key regions of Al-Baha, Al-Jouf, and Jazan.


Permian Basin oil output up to near pre-pandemic level: Bloomberg

Permian Basin oil output up to near pre-pandemic level: Bloomberg
Updated 8 min 36 sec ago

Permian Basin oil output up to near pre-pandemic level: Bloomberg

Permian Basin oil output up to near pre-pandemic level: Bloomberg

RIYADH: The Permian Basin of West Texas and New Mexico is increasing its oil output to an average 4.826 million barrels a day in October, Bloomberg reported citing a US government report on Monday.

The output in the most prolific shale patch in America is near to its pre-pandemic levels of 4.913 million bpd recorded in March 2020.

Production rose as benchmark US crude prices, which is at seven year high, underpinned by a severe supply deficit.


Mideast economy recovering but social unrest on the rise: IMF

Mideast economy recovering but social unrest on the rise: IMF
A member of Lebanon's Hezbollah movement fires his gun during the funeral of some of their members who were killed during clashes in the capital Beirut's southern suburbs on October 15, 2021. (AFP via Getty Images)
Updated 33 min 51 sec ago

Mideast economy recovering but social unrest on the rise: IMF

Mideast economy recovering but social unrest on the rise: IMF
  • "The region is going through recovery in 2021. Since the beginning of the year, we see progress in the economic performance"

The Middle East and North Africa is on track to economic recovery, but rising social unrest and unemployment are threatening to hinder "progress", the International Monetary Fund said Tuesday.


The MENA region, which includes the Arab countries and Iran, saw its real GDP growth shrink by 3.1 percent in 2020 due to lower oil prices and sweeping lockdowns to prevent the spread of the coronavirus.


But with rapid vaccination campaigns, particularly in the Gulf nations, the IMF predicted that GDP growth would rise to 4.1 percent this year, a slight upgrade of 0.1 percent from the last projection in April.


"The region is going through recovery in 2021. Since the beginning of the year, we see progress in the economic performance," Jihad Azour, director of the Middle East and Central Asia Department at the IMF, told AFP in an interview.


But "this recovery is not the same in all countries. It is uncertain and uneven because of the divergence in vaccination... and geopolitical developments", Azour added.


The IMF said this month that while prospects for oil-exporting economies improved with higher oil prices, low-income and crisis-hit countries are witnessing "fragile" recoveries.


It warned of "a rise in social unrest" in 2021 that "could pick up further due to repeated infection waves, dire economic conditions, high unemployment and food prices".


Unemployment rates increased in MENA last year by 1.4 percent to reach 11.6 percent.


This rise exceeds that seen during the global financial crisis and the 2014-15 oil price shock, the IMF said.


The fund also warned of the longer-term risk of the uneven recovery, which could lead to a "permanent widening of existing wealth, income, and social gaps and, ultimately, weaker growth and less inclusive societies".


About seven million more people in the region are estimated to have entered extreme poverty during 2020-21 compared to pre-crisis projections, according to the IMF.


In Lebanon, the continuing drop in the value of the currency has dashed hopes that the government formed last month can stem an economic crisis, branded by the World Bank as one of the worst since the mid-19th century.


Nearly 80 percent of the Lebanese population lives below the poverty line.


"The Fund has already started technical discussions with the authorities... to develop what would be in fact that the framework within which the fund can help Lebanon," said Azour, a former Lebanese finance minister.


Gulf nations ranked in world’s best places to live and work: HSBC report

Gulf nations ranked in world’s best places to live and work: HSBC report
Getty Images
Updated 19 October 2021

Gulf nations ranked in world’s best places to live and work: HSBC report

Gulf nations ranked in world’s best places to live and work: HSBC report

Three Gulf countries are among the top 10 best places to live in the world for expats, with UAE climbing 10 places to secure the 4th position, while Bahrain ranked 8th and Qatar took the 10th position. 

Switzerland retained its position as the number one place expats rated to live, while Australia came second, according to HSBC's 14th annual Expat Explorer study. 

Saudi Arabia was ranked 39th globally, out of the 48 places. 

Quality of life in the UAE constituted the main reason that makes expats stay longer. 

Chief executive officer of HSBC at UAE, Abdulfattah Sharaf said “The overwhelming sense of optimism from expats in the UAE about the 12 months ahead is reflective of the quick response from authorities to tackle the social and economic impact of the pandemic.”

The survey looked at people’s salaries, career growth potential, job security and savings, but it also asked people about social issues. 


Aramco Oil Pipeline to raise multi-billion dollar bonds: Bloomberg

Aramco Oil Pipeline to raise multi-billion dollar bonds: Bloomberg
Updated 19 October 2021

Aramco Oil Pipeline to raise multi-billion dollar bonds: Bloomberg

Aramco Oil Pipeline to raise multi-billion dollar bonds: Bloomberg

RIYADH: A consortium of investors in Saudi Aramco's oil pipelines, led by Washington-based EIG, is preparing to sell billions of dollars of bonds as soon as this week, Bloomberg reported citing people familiar with the matter.

The consortium may raise at least $4.5 billion of bonds, three of the people said. The aim is to refinance a loan of about $10.5 billion taken on to fund the pipeline investment. 

Citigroup Inc. and JPMorgan Chase & Co. will be among the banks managing the sale, the people said, asking not to be named for matters of privacy.

China’s Silk Road Fund and Abu Dhabi sovereign wealth fund Mubadala Investment Co. were also part of the consortium that paid $12.4 billion for a 49 percent stake in an Aramco subsidiary that has leasing rights over the pipelines. The deal was completed in June.

Aramco is looking for new ways to raise cash to maintain a $75 billion dividend and complete huge investment plans, Bloomberg said.