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
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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.”


Apple’s holiday iPhone sales surge despite supply shortages

Apple’s holiday iPhone sales surge despite supply shortages
Updated 28 January 2022

Apple’s holiday iPhone sales surge despite supply shortages

Apple’s holiday iPhone sales surge despite supply shortages
  • Apple to report iPhone sales of $71.6 billion for the October-December period

SAN RAMON, California: Apple shook off supply shortages that have curtailed production of iPhones and other popular devices to deliver its most profitable holiday season yet.
The results posted Thursday for the final three months of 2021 help illustrate why Apple is looking even stronger at the tail end of the pandemic than when the crisis began two years ago.
At that point, Apple’s iPhone sales had been flagging as consumers began holding on to their older devices for longer periods. But now the Cupertino, California, company can’t seem to keep up with the steadily surging demand for a device that has become even more crucial in the burgeoning era of remote work.
Apple’s inability to fully satisfy the voracious appetite for iPhones stems from a pandemic-driven shortage of chips that’s affecting the production of everything from automobiles to medical devices.
But Apple so far has navigated the shortfalls better than most companies. That deft management enabled Apple to report iPhone sales of $71.6 billion for the October-December period, a 9 percent increase from the same time in the previous year.
Those sales gains would have likely been even more robust if Apple could have secured all the chips and other components needed to make iPhones. That problem plagued Apple’s July-September quarter when management estimated that supply shortages reduced its iPhone sales by about $6 billion. The company may address how supply shortages affected its performance in the most recent quarter during a conference call with analysts scheduled later Thursday.
Despite what drag the shortages caused, Apple still earned $34.63 billion, or $2.10 per share, a 20 increase from the same time in the previous year. Revenue climbed from the previous year by 11 percent to $123.95 billion.
Apple’s ongoing success help push the company’s market value above $3 trillion for the first time earlier this month. But its stock price has tumbled 13 percent since hitting that peak amid worries about a projected rise in interest rates aimed at dampening the torrid pace of inflation that has been fueled in part by supply shortages.
Its shares gained more than 3 percent in Thursday’s extended trading after the Apple’s fiscal first-quarter numbers came out.
The supply issues looming around Apple’s devices have magnified the importance of the company’s services division, which is fueled by commissions from digital transactions on iPhone apps, subscriptions to music and video streaming and repair plans.
The up to 30 percent commissions collects from apps distributed through Apple’s exclusive app store have become a focal point of a fierce legal battle that unfolded in a high-stakes trial year, as well as proposed reforms recently introduced in the US Senate that tear down the company’s barriers that prevent consumers from using alternative payment systems.
For now, though, the services division is still booming. Its revenue in the past quarter hit $19.52 billion, a 24 percent increase.
Apple is widely believed to be maneuvering toward another potentially huge money-making opportunity with the introduction of an augmented reality headset that would project digital images and information while its users interact with other physical objects and people. True to its secretive form, the company has never said it is working on that kind of technology.
But Apple CEO Tim Cook has openly shared his enthusiasm for the potential of augmented reality in public presentations, and analysts believe the long-rumored headset could finally roll out later this year — unless it’s delayed by supply shortages.


Lebanon’s finance minister says replacing central bank governor is not ‘wise’

Lebanon’s finance minister says replacing central bank governor is not ‘wise’
Updated 28 January 2022

Lebanon’s finance minister says replacing central bank governor is not ‘wise’

Lebanon’s finance minister says replacing central bank governor is not ‘wise’

BEIRUT: Lebanon’s finance minister said on Thursday replacing the central bank governor, Riad Salameh, today is not “wise.”
Finance Minister Youssef Khalil told local broadcaster MTV that nobody proposed removing the central bank governor, but “I do not imagine changing the central bank governor today is a wise matter.”
Salameh, who has support from several top politicians, is being probed in Lebanon and at least four European countries, with his role under close scrutiny since Lebanon’s economic collapse in 2019.
Salameh denies any wrongdoing during almost three decades leading the central bank.


Aramco CEO says energy transition not going smoothly: Reuters

Aramco CEO says energy transition not going smoothly: Reuters
Updated 27 January 2022

Aramco CEO says energy transition not going smoothly: Reuters

Aramco CEO says energy transition not going smoothly: Reuters

BEIRUT: Saudi Aramco CEO Amin Nasser said on Thursday that the energy transition “was not going smoothly,” pointing to a resurgence in demand for oil and gas as the global economy recovers while supplies lag on the back of falling investment, according to Reuters.

“We all agree that to move towards a sustainable energy future a smooth energy transition is absolutely essential but we must also consider the complexities and challenges to get there,” he told the B20 conference in Indonesia via video link.

“We have to acknowledge that the current transition is not going smoothly,” he said.

- Reuters


SNB board recommends dividends of over $1bn for the second half of 2021

SNB board recommends dividends of over $1bn for the second half of 2021
Updated 27 January 2022

SNB board recommends dividends of over $1bn for the second half of 2021

SNB board recommends dividends of over $1bn for the second half of 2021

RIYADH: Saudi National Bank, the Kingdom’s biggest lender, said its board has recommended cash dividends of SR4.03 billion ($1.1 billion), or 9 percent of capital, for the second half of 2021.

SNB’s shareholders will receive SR0.9 per share, with a total amount of 4.48 billion shares eligible for dividends, a bourse statement by the bank revealed.

This brings the annual dividend yield to 2.12 percent, based on a share price of SR73, given the bank paid out SR0.65 per share for the first half of the same year.

The distribution date is yet to be disclosed, according to the statement.


Data-led innovation needed to help Saudi firms process information, says Dell ahead of LEAP

Data-led innovation needed to help Saudi firms process information, says Dell ahead of LEAP
Updated 27 January 2022

Data-led innovation needed to help Saudi firms process information, says Dell ahead of LEAP

Data-led innovation needed to help Saudi firms process information, says Dell ahead of LEAP

RIYADH: The majority of Saudi businesses gather data faster than it can be analyzed and used, Dell Technologies has warned ahead of the LEAP tech event being held in Riyadh from Feb. 1-3.

The US firm is set to take part in the forum, which is focused on future and disruptive technologies.

Ahead of the event, Mohamed Talaat, vice president in Saudi Arabia, Egypt and Levant at Dell Technologies, pointed to research by his company in 2021 that showed 70 percent of Saudi respondents have data-driven business and consider data as the lifeblood of their organisation.

However, 59 percent said they were gathering data faster than they could analyze and use.

Talaat said: “Saudi Arabia today stands at the threshold of change, underpinned by the nation’s ambitious vision and drive to transform, innovate and build a legacy for generations to come.

“Dell Technologies remains committed to advancing the country’s transformation agenda. We're empowering local organizations with end-to-end infrastructure and client solutions. They not only support a data-driven work culture, but are also capable of predicting the future and achieving better business results.”