2021 Year in Review: New coronavirus variant, inflation test strength of global economic recovery

Special 2021 Year in Review: New coronavirus variant, inflation test strength of global economic recovery
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Updated 30 December 2021

2021 Year in Review: New coronavirus variant, inflation test strength of global economic recovery

2021 Year in Review: New coronavirus variant, inflation test strength of global economic recovery
  • The IMF estimates that global gross domestic product grew 5.9 percent in the course of the year
  • Shortages in energy markets have caused gas and coal prices to soar to an all-time high in Europe

DUBAI: According to all the orthodox economic and financial indicators, 2021 was a year of strong recovery from the “lockdown recession” of the previous year.

But despite surging growth forecasts, soaring stock markets and strong commodity prices, as the year drew to a close two shadows loomed over economic prospects — the threat from the omicron variant that appeared in November and rising global inflation trends that threatened to throw economic policymakers’ calculations into confusion.

Gita Gopinath, the chief economist of the International Monetary Fund, highlighted the push-pull nature of the global economic outlook.

“As the global economy recovers from the pandemic, a great deal of uncertainty remains about the new COVID-19 variants and increased inflation pressures in many countries,” she said.




While the global economy continues to show signs of recovery from the pandemic, uncertainty remains new COVID-19 variants and increased inflation pressures. (AFP/File Photos)

“If allowed to spread uncontrolled, omicron could lead to large-scale hospitalizations and further restrictions on mobility and travel, which will again have a negative impact on global economies, both advanced and emerging.”

Regional economists echoed her caution. Nasser Saidi, Middle East economic expert, said: “Unless the vaccination pace improves drastically (especially in low-income nations) and the new variant is rapidly brought under control, the global economy could see brakes applied on growth at least in the first quarter of next year.”

However, the reservations caused by the new variant cannot hide the fact that the world economy recovered strongly in 2021. The IMF estimated that global gross domestic product grew 5.9 percent in the course of the year — a big turnaround from the 3.1 percent decline that total GDP suffered in 2020 when the pandemic hit and all countries went into lockdown.

For the world’s biggest economy, the US, the reversal was even more notable — from a 3.4 percent decline in 2020, in 2021 the economy is forecast to grow by 6 percent. A healthy American economy pulls the rest of the world along with it.




If soaring prices in energy and other commodities are a worry for the big advanced economies, they are the opposite for the Middle East. (AFP/File Photos)

The election of President Joe Biden, committed to an aggressive policy of antivirus measures coupled with multi-trillion dollar initiatives to invest in infrastructure, gave the economy and financial markets a big boost in the year.

American stock markets — boosted by the Biden spending packages and continued support from US financial authorities — had one of their best years. The S&P 500, the most reliable index of American equity health, was nearly 30 percent up on the year.

But there were still warning signs in the US that made the policymakers twitchy. In particular, inflationary pressures continue to rise. The official inflation rate was reported at 6.8 percent in December, its highest level for nearly four decades.

Federal Reserve chairman Jay Powell insisted for much of the year that the rise in prices was “transitory,” but continued to sound a cautious note on whether the Fed would “taper” its support for financial markets into 2022 and slowly increase interest rates.




Regional economies, especially in the big oil-exporting countries in the Gulf, have enjoyed a year of solid expansion and recovery from the 2020 lockdowns. (AFP/File Photos)

“Supply and demand imbalances related to the pandemic and the reopening of the economy have continued to contribute to elevated levels of inflation. These problems have been larger and longer lasting than anticipated, exacerbated by waves of the virus,” Powell said.

For that other great engine of global economic growth, China, the year was distinctly mixed. The IMF forecast GDP growth of 8 percent in 2021 — almost back to the staggering levels that drove world economic progress in the first two decades of the century — but “the momentum is slowing,” the IMF warned, projecting a GDP growth rate of 5.6 percent in 2022.

Fears about the potential for the Chinese economy to drag the rest of the world upwards centered on some serious structural defects — such as the weakness of the property market as exemplified by the virtual collapse of real estate group Evergrande.

There were also concerns that the Chinese economy was retreating from its role as a global economic stimulus. Experts such as Ian Bremmer, president of the Eurasia Group consultancy, warned that China’s retreat from US stock markets and other forms of commercial cooperation in technology with the US and the rest of the world were problematic for the global economy.




American stock markets — boosted by the Biden spending packages — had one of their best years, but experts have concerns that China’s retreat from US stock markets and other forms of commercial cooperation in technology with the US and the rest of the world would be problematic. (AFP/File Photos)

“The dangers of President Xi getting it wrong are grave — for his own prestige and the semiconductor industry that China is reliant on,” Bremmer said.

The third major economic force in the world, Europe, also witnessed strong economic recovery in 2021, with IMF forecasts showing GDP growth of 5 percent in the Euro currency area and 6.8 percent in the post-Brexit UK.

While these projections are encouraging for European policymakers, they also disguise the reality of severe restrictions as a result of the omicron variant in many countries, and a looming winter energy crisis for many on the continent.

Gas and coal prices have soared to all-time highs in Europe as shortages in global energy markets are exacerbated by political tensions with the main supplier of gas, Russia. Oil prices, too, are strong, adding to European’s inflationary fears.




The long-suffering Dubai Financial Market witnessed 27 percent growth, while the Abu Dhabi Securities Exchange saw a spectacular 67 per cent jump in share values. (AFP/File Photo)

But if soaring prices in energy and other commodities are a worry for the big advanced economies, they are the opposite for the Middle East. Regional economies, especially in the big oil-exporting countries in the Gulf, have enjoyed a year of solid expansion and recovery from the 2020 lockdowns.

In Saudi Arabia, the rising price of crude oil in 2021, along with expansion in the non-oil sectors of the Kingdom’s economy, mean that the forecast of 2.8 percent GDP growth made by the IMF is likely to be beaten.

The Saudi budget, announced in December, showed that policymakers expect to be able to report a surplus in 2022 for the first time in nearly a decade, as strong oil prices and post-pandemic recovery work their way through the Kingdom’s economy.

Finance minister Mohamed Al-Jadaan said: “We are telling our people and the private sector or economy at large that you can plan with predictability. Budget ceilings are going to continue in a stable way regardless of how the oil price or revenues are going to happen.”




In Saudi Arabia, the rising price of crude oil in 2021, along with expansion in the non-oil sectors of the Kingdom’s economy, mean that the forecast of 2.8 percent GDP growth made by the IMF is likely to be beaten. (AFP/File Photo)

The specter of inflation hanging over the global economy is not seen as a significant threat to the Saudi economy, with forecasts of between 1 and 2 percent in 2022 much lower than international comparisons. Nonetheless, the experts predict Saudi Arabia and other dollar-pegged economies in the region will have to follow the Federal Reserve if it raises interest rates in 2022.

One common feature of regional economies in 2021 which looks certain to continue in 2022 has been the spectacular growth in financial markets, fed by booming share prices and an explosion of initial public offerings in the main investment centers.

On the Saudi Tadawul market, share prices rose nearly 30 percent year-on-year, culminating in the successful and oversubscribed IPO of the Tadawul itself. More IPOs are in the pipeline for 2022, investment analysts predict.

In the UAE, there was a similar explosion in stock markets, boosted by a series of government-related IPOs. The long-suffering Dubai Financial Market witnessed 27 percent growth, while the Abu Dhabi Securities Exchange saw a spectacular 67 per cent jump in share values.

Tarek Fadlallah, chief executive of Nomura Asset Management in the Middle East, told Arab News: “The Middle East has enjoyed a good year in terms of economic and financial markets. The region is getting a reputation as a safe haven in these troubled COVID times for investors, business people and tourists alike.”


Stuck bags add to tangles at Paris airports amid travel boom

Stuck bags add to tangles at Paris airports amid travel boom
Updated 02 July 2022

Stuck bags add to tangles at Paris airports amid travel boom

Stuck bags add to tangles at Paris airports amid travel boom
  • Union activists said many more passengers flew without their bags
  • The scene at Charles de Gaulle on Saturday was busy but typical for the first weekend in July

PARIS: Airlines worked Saturday to deliver luggage to passengers around the world after a technical breakdown left at least 1,500 bags stuck at Paris’ Charles de Gaulle airport, the latest of several tangles hitting travelers this summer.
The airport’s baggage sorting system had a technical malfunction Friday that caused 15 flights to depart without luggage, leaving about 1,500 bags on the ground, according to the airport operating company. The airport handled about 1,300 flights overall Friday, the operator said.
Union activists said many more passengers flew without their bags, apparently because of knock-on effects from the original breakdown.
It came as airport workers are on strike at French airports to demand more hiring and more pay to keep up with high global inflation. Because of the strike, aviation authorities canceled 17 percent of flights out of the Paris airports Friday morning, and another 14 percent were canceled Saturday.
Passengers on canceled flights were alerted days ahead of their flights. The scene at Charles de Gaulle on Saturday was busy but typical for the first weekend in July, when France’s summer travel season kicks off.
Unions plan to continue striking Sunday but no flights have been canceled so far. They have threatened to renew the strike next weekend if negotiations with company management don’t succeed in finding a compromise.
Until now, French airports had been largely spared the chaos seen recently at airports in London, Amsterdam and some other European and US cities. Airlines and airports that slashed jobs during the depths of the COVID-19 crisis are struggling to keep up with soaring demand as travel resurges after two years of virus restrictions.


Oil prices up 2 percent on supply outages

Oil prices up 2 percent on supply outages
Updated 01 July 2022

Oil prices up 2 percent on supply outages

Oil prices up 2 percent on supply outages

LONDON: Oil prices rose about 2 percent on Friday, recouping most of the previous session’s declines, as supply outages in Libya and expected shutdowns in Norway outweighed expectations that an economic slowdown could dent demand, according to Reuters.

Brent crude futures were up $2.20, or 2 percent, at $111.23 a barrel by 1348 GMT, having dropped to $108.03 a barrel earlier in the session.

WTI crude futures gained $2.25, or 2.1 percent, to $108.01 a barrel, after retreating to $104.56 a barrel earlier.

Both contracts fell around 3 percent on Thursday, ending the month lower for the first time since November.

We “still see risks to prices as skewed to the upside on tight inventories, limited spare capacity and muted non-OPEC+ supply response,” Barclays said in a note.

Libya’s National Oil Corporation declared force majeure on Thursday at the Es Sider and Ras Lanuf ports as well as the El Feel oilfield. Force majeure is still in effect at the ports of Brega and Zueitina, NOC said.

Production has seen a sharp decline, with daily exports ranging between 365,000 and 409,000 bpd, a decrease of 865,000 bpd compared to production in “normal circumstances,” NOC said.

Elsewhere, 74 Norwegian offshore oil workers at Equinor’s Gudrun, Oseberg South and Oseberg East platforms will go on strike from July 5, the Lederne trade union said on Thursday, likely halting about 4 percent of Norway’s oil production.

Ecuador’s government and indigenous groups’ leaders on Thursday reached an agreement to end more than two weeks of protests which had led to the shut-in of more than half of the country’s pre-crisis 500,000 bpd oil output.

On Thursday, the OPEC+ group of producers, including Russia, agreed to stick to its output strategy after two days of meetings. However, the producer club avoided discussing policy from September onwards.

Previously, OPEC+ decided to increase output each month by 648,000 barrels per day in July and August, up from a previous plan to add 432,000 bpd per month.

US President Joe Biden will make a three-stop trip to the Middle East in mid-July that includes a visit to Saudi Arabia, pushing energy policy into the spotlight as the United States and other countries face soaring fuel prices that are driving up inflation.

Biden said on Thursday he would not directly press Saudi Arabia to increase oil output to curb soaring prices when he sees the Saudi king and crown prince during a visit this month.

A Reuters survey found that OPEC pumped 28.52 million bpd in June, down 100,000 bpd from May’s revised total.

Oil prices are expected to stay above $100 a barrel this year as Europe and other regions struggle to wean themselves off Russian supply, a Reuters poll showed on Thursday, though economic risks could slow the climb.

India introduced export duties on gasoil, gasoline and jet fuel on Friday to help maintain domestic supplies, while also imposing a windfall tax on oil producers who have benefited from higher global crude oil prices. 


Russia seizes control of partly foreign-owned energy project

Russia seizes control of partly foreign-owned energy project
Updated 01 July 2022

Russia seizes control of partly foreign-owned energy project

Russia seizes control of partly foreign-owned energy project

MOSCOW: Russian President Vladimir Putin has handed full control over a major oil and natural gas project partly owned by Shell and two Japanese companies to a newly created Russian firm, a bold move amid spiraling tensions with the West over Moscow’s military action in Ukraine, according to Associated Press.

Putin’s decree late Thursday orders the creation of a new company that would take over ownership of Sakhalin Energy Investment Co., which is nearly 50 percent controlled by British energy giant Shell and Japan-based Mitsui and Mitsubishi.

Putin’s order named “threats to Russia’s national interests and its economic security” as the reason for the move at Sakhalin-2, one of the world’s largest export-oriented oil and natural gas projects.

The presidential order gives the foreign firms a month to decide if they want to retain the same shares in the new company.

Russian state-controlled natural gas giant Gazprom had a controlling stake in Sakhalin-2, the country’s first offshore gas project that accounts for about 4 percent of the world’s market for liquefied natural gas, or LNG. Japan, South Korea and China are the main customers for the project’s oil and LNG exports.

Kremlin spokesman Dmitry Peskov said Friday that there is no reason to expect a shutdown of supplies following Putin’s order.

Shell held a 27.5 percent stake in the project. After the start of the Russian military action in Ukraine, Shell announced its decision to pull out of all of its Russian investments, a move that it said has cost at least $5 billion. The company also holds 50 percent stakes in two other joint ventures with Gazprom to develop oil fields.

Shell said Friday that it’s studying Putin’s order, which has thrown its investment in the joint venture into doubt.

“As a shareholder, Shell has always acted in the best interests of Sakhalin-2 and in accordance with all applicable legal requirements,” the company said in a statement. “We are aware of the decree and are assessing its implications.”

Seiji Kihara, deputy chief secretary of the Japanese cabinet, said the government was aware of Putin’s decree and was reviewing its impact. Japan-based Mitsui owns 12.5 percent of the project, and Mitsubishi holds 10 percent.

Kihara emphasized that the project should not be undermined because it “is pertinent to Japan’s energy security,” adding that “anything that harms our resource rights is unacceptable.”

“We are scrutinizing Russia’s intentions and the background behind this,” he told reporters Friday at a twice-daily news briefing. “We are looking into the details, and for future steps, I don’t have any prediction for you at this point.”

Asked during a conference call with reporters if Putin’s move with Sakhalin-2 could herald a similar action against other joint ventures involving foreign shareholders, Peskov said, “There can’t be any general rule here.”

He added that “each case will be considered separately.”

Sakhalin-2 includes three offshore platforms, an onshore processing facility, 300 kilometers of offshore pipelines, 1,600 kilometers of onshore pipelines, an oil export terminal and an LNG plant.
 

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Riyadh no longer one of the 100 most expensive cities for expats: Mercer

Riyadh no longer one of the 100 most expensive cities for expats: Mercer
Updated 01 July 2022

Riyadh no longer one of the 100 most expensive cities for expats: Mercer

Riyadh no longer one of the 100 most expensive cities for expats: Mercer

RIYADH: Saudi Arabia’s capital, Riyadh, has dropped 72 places in a ranking of the world’s most expensive cities for expats as it tumbled out of the top 100, according to a report issued by Mercer.

Riyadh was positioned at 103 in Mercer's Cost of Living Index 2022, falling from 29 in the previous year’s list. 

Commenting on Riyadh’s fall, Khaled Al-Mobayed, CEO of Menassat Reality Co., a Riyadh-based real estate developer, said: “The results came in contrary to the expectations, due to the pandemic’s ongoing consequences and the rising cost of logistics and supply chain.”

“Being out of the 100 top expensive cities is a good sign despite the challenges that the economy has gone through,” he added.

UAE's Dubai took over Lebanon's capital, Beirut, as the most expensive city among Arab countries in the region, ranking 31.

Despite being placed third in 2021, Beirut was not even on this year’s list of 227 cities due to the country’s economic turmoil.

The city’s fall reflects the severe drop in value of the Lebanese pound, according to Lebanese economic analyst Bassel Al-Khatib, who pointed out the minimum wage is now worth $20, while it was $450 before the economic crisis gripping the country. 

“Lebanon is extremely expensive to those who get paid in Lebanese pounds yet very cheap for those who get pain in US dollars,” he told Arab News, adding: “Lebanon was expensive for both citizens and foreigners, and with the currency dropping 95 percent and the dollar reaching record levels, the situation changed.”

“Everything has become expensive but not for foreigners who have dollars. All services by the government such as water, electricity fees, or internet are still the same but food prices skyrocketed,” he added.

Abu Dhabi was the second highest Arab city from the region, ranked at 61, while Jeddah came in at 111 this year compared to 94 in 2021.

Jordan's capital Amman ranked 115, followed by Bahrain's Manama at 117, Oman's Muscat at 119 and Kuwait city at 131.

Egypt's capital, Cairo, was placed at 154 while Rabat, Algiers and Tunis came as the least expensive in the region, ranking 162, 218 and 220 respectively.

Hong Kong topped the list as the most expensive city in the world in 2022, moving from second rank last year and taking the top spot from Turkmenistan’s capital, Ashgabat.

Switzerland’s Zurikh and Geneva followed as second and third most expensive cities, replacing Hong Kong and Beirut respectively.

Turkey’s capital, Ankara, came in as the least expensive city, ranking 227, taking the spot from Kyrgyzstan’s capital Bishkek.


France eyes ‘good investment opportunities’ in Saudi Arabia: Official

France eyes ‘good investment opportunities’ in Saudi Arabia: Official
Updated 01 July 2022

France eyes ‘good investment opportunities’ in Saudi Arabia: Official

France eyes ‘good investment opportunities’ in Saudi Arabia: Official

RIYADH: France is intensifying efforts to take advantage of Saudi investment opportunities in all sectors, mostly energy, technology, water and other industrial services, the country's Ambassador in Saudi Arabia said.

Saudi Arabia is an attractive region and a suitable environment for investments in all its vital sectors, Ludovic Pouille told a press conference.

The French government and the private sector are working to expand the number of companies operating in the Kingdom, which currently stands at about 135, Aleqtisadiah reported citing Pouille.

The aim is to gain large investment spaces, and to benefit from the reforms and economic developments undertaken by Saudi Arabia, which constitute a good opportunity for French companies, he said. 

The French ambassador said France will take the model of agreements between the Al-Ula Authority and his country’s institutions in the fields of infrastructure and culture, as a starting point for expanding the map of investments in the future.