Cracks widen in eurozone as war in Ukraine rages on; Canadian dollar climbs to 5-month high — Macro Snapshot

European Central Bank President Christine Lagarde also warned that, as the conflict drags on, Europe’s economy could suffer more than feared just a few weeks ago.
European Central Bank President Christine Lagarde also warned that, as the conflict drags on, Europe’s economy could suffer more than feared just a few weeks ago.
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Updated 30 March 2022

Cracks widen in eurozone as war in Ukraine rages on; Canadian dollar climbs to 5-month high — Macro Snapshot

Cracks widen in eurozone as war in Ukraine rages on; Canadian dollar climbs to 5-month high — Macro Snapshot

RIYADH: Europe’s economy is increasingly strained by Russia’s war in Ukraine as growth stalls, confidence plummets and inflation soars, data and warnings from policymakers made clear on Wednesday.

Sanctions on Russia following its invasion last month have pushed energy prices to record highs across the continent, sapping confidence and raising the risk of another recession, even before some states have recovered from a COVID-fueled downturn.

Germany, the bloc’s biggest economy and one of the most reliant on Russian energy, will be among the hardest hit and the government’s council of economic advisers on Wednesday more than halved their growth forecast for this year, to 1.8 percent.

“The risk of a recession is substantial,” Volker Wieland, one of the panel’s members said, adding the economy would now take until the third quarter to return to its pre-pandemic size.

The advisers, whose forecasts guide the government in setting fiscal policy, also predicted that German inflation would double to over 6 percent.

European Central Bank President Christine Lagarde also warned that, as the conflict drags on, Europe’s economy could suffer more than feared just a few weeks ago.

In Vienna, Austria’s central bank cut its growth forecast and sharply raised its inflation outlook for this year, saying its new predictions would worsen further if the war dragged on. 

Stagflation dilemma 

Lagarde said households were already becoming more pessimistic and businesses could soon be postponing investment.

Her warning was underlined by a sentiment indicator that showed the war had sent consumer confidence in the eurozone plummeting and inflation expectations to record highs. 

The European Commission’s economic sentiment index dropped to 108.5 in March from a downwardly revised 113.9 in February, while consumer confidence plunged to -18.7 from -8.8.

The biggest hit to confidence came from inflation, which is sapping consumer spending power, even as governments quickly roll out subsidies to ease some of the pain.

In Spain, one of the bloc’s biggest economies, inflation accelerated to 9.8 percent in March, the fastest pace since May 1985, from 7.6 percent in February. 

German price growth, meanwhile, soared past expectations to hit 7.6 percent, a level not seen since the early 1980s, suggesting that the eurozone reading on Friday is almost certain to exceed economists’ 6.6 percent forecast.

“Those inflation numbers were absolute whoppers, big big upside surprise to the numbers,” Chris Scicluna, head of research at Daiwa Capital Markets, said.

Mexico inflation

Mexican central bank board member Gerardo Esquivel said headline and core inflation rates in Mexico are still very high, according to comments he made in a podcast published by Mexican bank Banorte on Wednesday.

Inflationary pressures that had started mounting with the COVID-19 pandemic increased after Russia invaded Ukraine a month ago, Esquivel said.

Chile’s revises growth forecast 

Chile’s central bank revised its forecast for 2022 economic growth on Wednesday, dropping it to a range of 1 percent to 2 percent from an estimate of 1.5 percent to 2.5 percent in December.

“The economy will expand at rates below its potential in 2022 and 2023, with contractions in private consumption and investment,” the central bank said in a statement.

It also predicated that annual inflation would reach 8.2 percent this year, above the central bank’s tolerance range and up from a previous estimate of 4.5 percent.

The central bank said the rise in consumer prices was a response to the “excessive increase in spending” in recent quarters, which was supported by COVID-19 stimulus programs.

On Tuesday, the central bank raised its benchmark interest rate by 150 basis points to 7 percent, as it rapidly withdraws the monetary stimulus that followed the start of the pandemic in March 2020.

US economic growth 

The US economy grew robustly in the fourth quarter, the government confirmed on Wednesday, but momentum has slowed significantly amid a surge in COVID-19 infections at the start of the year, snarled supply chains and soaring inflation.

Gross domestic product increased at a 6.9 percent annualized rate, the Commerce Department said in its third estimate of fourth-quarter GDP growth. That was revised slightly down from the 7.0 percent pace estimated in February.

The economy grew at a 2.3 percent rate in the third quarter. Growth is 3.1 percent above its pre-pandemic level. Economists polled by Reuters had expected GDP growth would be revised up to a 7.1 percent rate. The revision to the fourth-quarter GDP reading reflected downgrades to consumer spending and export growth.

For all of 2021, the economy grew 5.7 percent, the strongest since 1984, after the government provided nearly $6 trillion in pandemic relief. It contracted 3.4 percent in 2020, the biggest drop in 74 years.

Fed Reserve

The Federal Reserve this month raised its policy interest rate by 25 basis points, the first hike in more than three years and signaled an aggressive stance that has left the bond market fearing a recession down the road. The widely tracked US 2-year/10-year Treasury briefly inverted on Tuesday for the first time since September 2019.

Corporate profits growth slowed significantly in the fourth quarter as domestic financial corporations suffered a decrease. There were also moderate increases in profits of domestic non-financial corporations and from the rest of the world.

Corporate profits with inventory valuation and capital consumption adjustments increased at a $20.4 billion rate in the fourth quarter after rising at a $96.9 billion pace in the third quarter.

Canadian dollar jumps 

The Canadian dollar strengthened to its highest level in nearly five months against its US counterpart on Wednesday as oil prices rose and investors assessed prospects of Russia reducing military operations in parts of Ukraine.

 The safe-haven US dollar  fell to its lowest in almost two weeks and the euro gained, with currency traders optimistic about peace talks in Ukraine, even amid warnings about the damage to Europe’s economy. 

Dollars purchases in Lebanon 

Lebanon’s central bank on Wednesday extended a circular allowing banks to purchase an unlimited amount of US dollars on its Sayrafa exchange platform until the end of April, a central bank statement said.


Saudi Arabia’s PIF announces establishment of Aseer Investment Company

Saudi Arabia’s PIF announces establishment of Aseer Investment Company
Updated 01 December 2022

Saudi Arabia’s PIF announces establishment of Aseer Investment Company

Saudi Arabia’s PIF announces establishment of Aseer Investment Company
  • AIC will unlock a wide range of investment opportunities for domestic and international investors across number of sectors

RIYADH: Saudi Arabia’s Public Investment Fund announced on Thursday the establishment of the Aseer Investment Company (AIC) to operate as its investment arm in the Aseer region of Saudi Arabia.

The new company will promote and stimulate local and foreign direct investment to develop and transform the region into a year-round tourism destination.

AIC will unlock a wide range of investment opportunities for domestic and international investors across number of sectors including tourism, hospitality, healthcare, sports, education, food, and many other fast-growing domestic industries.

The company will contribute to fostering public-private partnerships, creating jobs for the local community and promoting the region’s tourism and attractive investment opportunities.

“Aseer Investment Company aims to become a leading facilitator of broad-ranging investment opportunities in Aseer, Raid Ismail, head of Direct Investments for the Middle East and North Africa at PIF said.  

“AIC will promote the region’s rugged mountains, stunning nature, and storied culture, preserve its ancient history and heritage, and transform it into a world-class tourist destination for visitors from across the globe in line with PIF’s strategy and Vision 2030,” he added.

The establishment of the company is in line with PIF’s strategy to unlock the capabilities of promising sectors in Saudi Arabia, support the country, and in line with Asir’s region position as a leading investment destination.


TASI slips 74 points to close at 10,840 amid investor ambiguity: Closing bell

TASI slips 74 points to close at 10,840 amid investor ambiguity: Closing bell
Updated 01 December 2022

TASI slips 74 points to close at 10,840 amid investor ambiguity: Closing bell

TASI slips 74 points to close at 10,840 amid investor ambiguity: Closing bell

RIYADH: Saudi Arabia’s benchmark index on Thursday fell 74.26 points to close at 10,840.74 after touching a peak of 10,957.64 at 10:20 SAST, reflecting a sense of ambiguity among investors. 

The parallel market Nomu also finished its trail 497.85 points lower at 18,903.74 after snowballing to 18,778.82 at 11:53 SAST. 

The advance-decline ratio, however, bucked the trend, with 126 stocks of the listed 219 heading north and 75 turning south. The total trading turnover was SR4.86 billion ($1.29 billion). 

Sahara International Petrochemical Co., in a regulatory filing on Thursday, announced a 15 percent cash dividend or SR1.50 per share, resulting in a dole out of SR1.087 billion for the second half of 2022. The company’s share price picked the drift and closed 5.72 percent higher to SR37.90. 

Taiba Investments Co. on Thursday also announced that it awarded a construction contract worth SR283 million to Orient Construction Company Weavers Ltd. to build a four-star Novotel hotel project in Madinah. The stock closed lower at SR26.90 after peaking at SR27.10. 

Meanwhile, Arabian Internet and Communications Services Co. (Solutions) informed Tadawul just before closing about its agreement with Saudi Telecom Company worth SR372.92 million to provide technical, administrative and logistical services. The share closed slightly lower at SR246. 

The Capital Market Authority on Thursday also Saudi Arabian Amiantit Co.’s request to increase its capital through a rights issue worth SAR 346.5 million. 

There was a blip of a bullish wave in the Software & Services index, which closed up 401 points at 36,540.33. The Healthcare Equipment & Services index also increased 103.04 points to close at 9,380.2.  

However, some of Thursday’s biggest losers were the Saudi British Bank, the National Company for Learning and Education, Arab National Bank, The Company for Cooperative Insurance and Bank Albilad. 

The Diversified Financial index was under the weather in November as it recorded the steepest decline of 15.9 percent in the Gulf Cooperation Council in November. 

A Kamco Invest research report highlighted that the Saudi Stock Exchange witnessed the after all the constituents of the index reported declines. 

Barring the Consumer Service index, the monthly sectoral performance chart declined across the board.  

The Utilities and Capital Goods indices were next with a decline of 15.2 percent and 11.7 percent, followed by Consumer Durables & Apparel and Materials indices with declines of 10.8 percent and 10.6 percent, respectively. 


Egypt to build 21 desalination plants in phase 1 of scheme -sovereign fund

Egypt to build 21 desalination plants in phase 1 of scheme -sovereign fund
Updated 01 December 2022

Egypt to build 21 desalination plants in phase 1 of scheme -sovereign fund

Egypt to build 21 desalination plants in phase 1 of scheme -sovereign fund
  • Egypt also aims to start production at a series of proposed green hydrogen projects in 2025-2026
  • The Sovereign Fund was set up in 2018 with a goal of attracting private investment in state-owned assets through partnerships and co-investments

CAIRO: Egypt plans to award deals next year to build 21 water desalination plants in the first $3 billion phase of a program that will draw on cheap renewable energy, the CEO of the country’s sovereign fund said on Thursday.
Egypt, which recently hosted the COP27 UN climate talks and is trying to boost lagging investment in renewables, also aims to start production at a series of proposed green hydrogen projects in 2025-2026, Ayman Soliman told the Reuters NEXT conference.
Egypt depends almost entirely on the Nile for fresh water, and faces rising water scarcity for its population of 104 million. The desalination program aims to generate 3.3 million cubic meters of water daily in the first phase, and eventually reach 8.8 million cubic meters daily at a cost of $8 billion.
There had been expressions of interest from more than 200 developers from at least 35 countries for the first phase, Soliman said.
The Sovereign Fund was set up in 2018 with a goal of attracting private investment in state-owned assets through partnerships and co-investments.
It is currently focused on getting private consortia to develop brownfield infrastructure, and private equity to develop state-owned enterprises ahead of public listings.
Privatization plans in Egypt have been repeatedly pushed back, with the government blaming delays on economic shocks including the COVID-19 pandemic and the war in Ukraine as well as on legal obstacles. The plans have also met resistance from advocates of continued state control, analysts say.
’ECONOMIC CONSTITUTION’
Soliman said a state ownership policy that is meant to map out which parts of the economy are open to private investment would serve as the government’s “economic constitution” going forward, and as a platform to crowd in private investment despite the rising cost of capital.
“We as a fund are very sharply focused on trying to find those champions to scale up, be it in agriculture be it in tourism, be it in infrastructure, or be it in banking financial services,” he said.
At the climate talks in Sharm el-Sheikh, the government converted into framework agreements nine of 15 memoranda of understanding (MoU) for green hydrogen projects concentrated in the Suez Canal Economic Zone (SCZONE) that would produce millions of tons of hydrogen and ammonia.
At least another three or four MoUs were close to being converted, and more MoUs were planned, with cheap renewable costs and the scale of the potential fuel export market toward Europe making Egypt competitive, Soliman said.
Framework agreements give developers access to specific locations to allow them to plan production.
“This is not a competition. We are creating a pipeline or a blueprint for that process, aiming to start production in 2025-26 and all the developers are working backwards from there,” Soliman said.
So-called green or clean hydrogen is produced using electrolyzers powered by renewable energy to split water from oxygen. It is seen as a potential future power source that could reduce emissions, though to date it is largely limited to experimental projects. Analysts say challenges facing its growth include high costs and energy inputs, as well as safety concerns.
Egypt’s projects would have desalinated water built in, and quantities required would be negligible compared to those produced under the national desalination scheme, according to the Sovereign Fund.


Saudi Arabia to lead the world in sustainable metal production: Vice Minister  

Saudi Arabia to lead the world in sustainable metal production: Vice Minister  
Updated 01 December 2022

Saudi Arabia to lead the world in sustainable metal production: Vice Minister  

Saudi Arabia to lead the world in sustainable metal production: Vice Minister  

RIYADH: Saudi Arabia will become the world leader in sustainable metal production, as the Kingdom explores its mining potential, as a part of its economic diversification in line with the goals outlined in Vision 2030, according to Khalid Al-Mudaifer, vice-minister for Mining Affairs, Ministry of Industry and Mineral Resources.   

Speaking at the Mines and Money conference in London, Al-Mudaifer said that minerals are indispensable to the energy transition from hydrocarbons to renewables.   

“Decarbonization – the net-zero transition – cannot happen without minerals and metals: a lot of minerals and metals. We need to scale up discoveries and we need to scale up production,” said Al-Mudaifer.   

He added: “The World Bank says that by 2050 the production of minerals such as graphite, lithium, cobalt and copper needs to increase by nearly 500 percent to meet the future demand for clean energy technologies. To achieve a ‘below 2°C increase’ future, the Bank estimated that more than 3 billion tons of minerals and metals are required.”   

The vice-minister added that mineral and metal supply chains need to become more resilient to meet rising demands, and noted that the ongoing geopolitical tensions have exposed the vulnerabilities in the sector, which may result in “cost spikes of some minerals by 350 percent.”   

The minister further pointed out that the potential of Saudi Arabia in the mining sector largely lies in precious and base metals including gold, zinc, copper, and silver, in addition to a few speciality metals like niobium and tantalum.  

He went on and said that Saudi Arabia is already the world leader in phosphate fertilizer production.   

Al-Mudairef also added that Saudi Arabia is ramping up the green hydrogen production need as a part of its renewable energy push, and the Kingdom will have the largest green hydrogen plant operational by 2026, with a production capacity of 250,000 tons annually.  

Earlier in October, during the Future Investment Initiative, Al-Mudairef said that Saudi Arabia’s ambition is to become a global hub for green minerals and related technologies.

“Minerals now are the medicine to heal our planet,” he said.   

He added that the mining sector should embrace advanced technologies to reduce carbon footprints.

“We need technologies in discovery and survey, and we need technologies in processing and producing green hydrogen and green minerals and to reduce the footprint for smaller mines for the future,” said Al-Mudairef. 


Travel sector emissions nearly 3% lower than reported: WTTC research

Travel sector emissions nearly 3% lower than reported: WTTC research
Updated 01 December 2022

Travel sector emissions nearly 3% lower than reported: WTTC research

Travel sector emissions nearly 3% lower than reported: WTTC research

Riyadh: Greenhouse gas emissions from the tourism sector were lower than previously thought in the run up to the COVID-19 pandemic, according to new data published by the World Travel and Tourism Council.

The research shows that in 2019 the sector’s greenhouse gas emissions totaled 8.1 percent globally — below an earlier estimate of 11 percent.

The findings mean that while between 2010 and 2019 the sector’s gross domestic product grew on average 4.3 percent annually, its environmental footprint only increased by 2.4 percent.

The WTTC’s research, the first of its kind, covers 185 countries and will be updated annually.

Julia Simpson, president and CEO of the WTTC, said: “8.1 percent is the stake in the ground. The key is to become more efficient and decoupling the rate at which we grow from the amount of energy we consume. From today, every decision, every change, will lead to a better and brighter future for all.”

The broader Environmental and Social Research will include measures of the sector’s impact against a range of indicators, including pollutants, energy sources, water use, as well as social data, including age, wage and gender profiles of travel and tourism related employment, the statement said.

WTTC will continue to release data on how the sector fares against these indicators throughout 2023.

The data comes in the same week as the World Travel and Tourism Global Summit in Riyadh.

Simpson used her speech at the event to allude to the research, stating that it was the largest such project ever undertaken by the Council.

“Until now we did not have a sector-wide way to accurately measure our climate footprint. This data will give governments the detailed information they need to make progress against the Paris Agreement and the UN Sustainable Development Goals," she said.

“Travel and tourism is making huge strides to decarbonize, but governments must set the framework. We need a steely focus on increasing the production of sustainable aviation fuels with government incentives,” Simpson went on, adding: “The technology exists. We also need greater use of renewable energy in our national grids – so when we turn on a light in a hotel room, it is using a sustainable energy source.”

Saudi Minister of Tourism Ahmed Al-Khateeb welcomed the research, and said: “We are proud to be a partner to the WTTC in this important research that will monitor impact for the future. Saudi Arabia recognizes that travelers and investors want policies that promote sustainability in the industry and we have embarked on a journey that will make the Kingdom a pioneer in sustainable tourism."

“Under the Saudi Green Initiative, we launched more than 60 initiatives in the past year to do just that. The first wave of initiatives represent more than $186 billion of investment in the green economy.”