WEF: Economists warn of deepening human misery amid global economic fragmentation 

Special WEF: Economists warn of deepening human misery amid global economic fragmentation 
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Moscow's war of aggression has disrupted grain production in Ukraine but also the supply line from Russia's vast wheat fields. (Shutterstock)
Special WEF: Economists warn of deepening human misery amid global economic fragmentation 
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Protesters take part in a demonstration during the annual World Economic Forum (WEF) meeting in Davos, Switzerland, on May 22, 2022. (AFP)
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Updated 24 May 2022

WEF: Economists warn of deepening human misery amid global economic fragmentation 

WEF: Economists warn of deepening human misery amid global economic fragmentation 
  • Experts warn the pandemic and war in Ukraine have exacerbated the trend towards “deglobalization” 
  • Chief Economists Outlook forecast warns inflation and supply chain disruption will deepen food insecurity 

DUBAI: The World Economic Forum’s Chief Economists Outlook report has warned of potentially dire human consequences that could result from the fragmentation of the global economy, exacerbated by the effects of the COVID-19 pandemic and the war in Ukraine.

In their latest quarterly report, published on Monday, day two of the WEF annual meeting in Davos, Switzerland, experts forecast higher rates of inflation in the US, Europe and Latin America, with a resultant decline in real wages in both high-income and low-income countries.

The regions that appear particularly vulnerable to a lower rate of economic activity include the Middle East and North Africa, sub-Saharan Africa and South Asia, which have already experienced worsening levels of food insecurity in recent years.

As supply chains enter a third year of disruption, governments and businesses are rethinking their approach to exposure, self-sufficiency and security. As a result, experts warn that firms are realigning their supply chains along geopolitical fault lines, creating a new “economic iron curtain.”

Economists fear these trends could set global development back decades.

“We are at the cusp of a vicious cycle that could impact societies for years,” Saadia Zahidi, the WEF’s managing director, said in a statement issued on Monday. 

“The pandemic and war in Ukraine have fragmented the global economy and created far-reaching consequences that risk wiping out the gains of the last 30 years. 




Saadia Zahidi, WEF managing director, speaking during the panel discussion on Monday. (Supplied)

“Leaders face difficult choices and trade-offs domestically when it comes to debt, inflation and investment. Yet business and government leaders must also recognize the absolute necessity of global cooperation to prevent economic misery and hunger for millions around the world.”

The most visible effect of this disruption has been the rising price of food. The war in Ukraine is expected to increase wheat prices by 40 percent this year, while the price of vegetable oils, cereals and meats continue to skyrocket.

The process of “deglobalization,” a term coined by the Chief Economists Outlook report in 2021 to describe the effects of the COVID-19 pandemic, has been expedited by the economic and geopolitical fallout from the invasion of Ukraine.

The country is one of the world’s biggest exporters of grain and vegetable oils and the blockade of its Black Sea ports has disrupted the global supply of these commodities. In addition, Ukrainian farmers displaced by the conflict have been unable to tend this year’s crops, foreshadowing further shortages.

During a panel discussion at the Davos meeting, David Beasley, executive director of the World Food Program, said that about “49 million people are knocking on famine’s door in 43 countries,” including Yemen, Lebanon, Egypt, Mali, Burkina Faso, Congo, Guatemala and El Salvador. 

“This is going to be hell on earth,” Beasley said on the opening day of the WEF event. “Because of this crisis, we are taking food from the hungry to give to the starving.” 

 

It is not only rising food prices that concern economists. The World Bank expects energy prices to increase by 50 percent in 2022, before easing in 2023-24. Many fear that government efforts to mitigate the threat of energy insecurity will prioritize carbon-intensive sources rather than green renewables, setting back climate action.

In many advanced economies, the rising cost of living is already having a detrimental effect on quality of life.

Speaking during a visit to Tokyo on Monday, US President Joe Biden acknowledged the squeeze many Americans are feeling as a result of high inflation and supply-chain shortages but said a recession is not inevitable.

“Our GDP is going to grow faster than China’s for the first time in 40 years,” he said. “Now, does that mean we don’t have problems? We do. We have problems that the rest of the world has, but less consequential than the rest of the world has because of our internal growth and strength.”

Biden’s rejection of an imminent economic slump in the wake of financial market jitters about “stagflation,” which means persistent high inflation combined with high unemployment and stagnant demand in an economy, found backing from another of the speakers at the Davos gathering, Kristalina Georgieva, managing director of the International Monetary Fund.




Kristalina Georgieva, managing director of the International Monetary Fund, participating in a panel discussion of the WEF on Monday. (Screengrab from WEF video)

However, she admitted that the IMF expects weak growth in comparison with last year, when the world was emerging from the worst of the pandemic, and added that there is now a risk of further declines because of the war in Ukraine and the resulting fragmentation.

“The costs of further disintegration would be enormous across countries,” Georgieva said in a blog post ahead of the WEF meeting, highlighting the potential for new waves of cross-border migration.

“And people at every income level would be hurt — from highly paid professionals and middle-income factory workers who export, to low-paid workers who depend on food imports to survive.

“More people will embark on perilous journeys to seek opportunity elsewhere.”

 

 


First Abu Dhabi Bank committed to facilitate $75bn for sustainable financing, says top official 

First Abu Dhabi Bank committed to facilitate $75bn for sustainable financing, says top official 
Updated 16 sec ago

First Abu Dhabi Bank committed to facilitate $75bn for sustainable financing, says top official 

First Abu Dhabi Bank committed to facilitate $75bn for sustainable financing, says top official 

RIYADH: First Abu Dhabi Bank has reiterated its commitment to lend, invest, and facilitate business over $75 billion by 2030 to activities focused on sustainable solutions as the world moves towards energy transition using green sources.   

While speaking at the MEA Energy Week, Sarah Usmani, managing director, and head of the sustainable asset and project finance at FAB, said that the bank is very keen to support the energy transition which is currently happening in the Middle East.

She said there should be a partnership between the public and private sectors to make this energy transition happen in the most efficient manner.

“Energy projects are driven by governments. However, the private sector will also play an important role in the future,” Usmani added.

She noted that the region was dependent on hydrocarbons for 100 years, “so the transition here is not easy.” 

“There is a lot to do, and lots of investments to come,” added the FAB executive.

According to Usmani, green hydrogen is going to be a huge area of growth in the region. 

She expects the hydrogen market to expand in the next two to three years.

Usmani also insisted that the willingness to support and adopt new technologies is also necessary for a sustainable future.

 


Egypt In-Focus — New $3bn investments from Qatar negotiated; Egypt mulls Panda bonds

Egypt In-Focus — New $3bn investments from Qatar negotiated; Egypt mulls Panda bonds
Updated 9 min 33 sec ago

Egypt In-Focus — New $3bn investments from Qatar negotiated; Egypt mulls Panda bonds

Egypt In-Focus — New $3bn investments from Qatar negotiated; Egypt mulls Panda bonds

CAIRO: Egypt's Finance Minister Mohammed Maait has confirmed negotiations about Qatar’s new investment of up to $3 billion in the Egyptian economy, Ashraq reported. 

The confirmation comes after Qatar announced a package of investments worth $5 billion in the Egyptian market at the beginning of the year.

Egypt mulls plan to issue Panda bonds

Maait also announced that Egypt is studying the issuance of Panda bonds for the Chinese market during the first half of the next fiscal year 2022/23, without specifying the value of this issuance.

A Panda bond is a Chinese renminbi-denominated bond from a non-Chinese issuer, sold in China.

The finance minister also expects Egypt’s remittances from abroad to reach about $31-$32 billion by the end of the current fiscal year.

These remittances represent one of the most important sources of foreign exchange for Egypt, along with tourism, the Suez Canal, and exports.

Drawbacks of "Hot Money"

The finance minister also spoke out against foreign purchases of Treasury Bills, which he referred to as "Hot Money", while pushing for increased foreign direct investments. 

T-bills have shown their instability during worldwide shocks, where $15 billion were lost in 2018, and another $20 billion during the pandemic outbreak, he noted.  

Egypt met with another setback due to the Russian-Ukrainian war, losing another $20 billion in T-bills, Al Arabiya reported.

Egyptian Prime Minister discusses car shortage crisis 

Prime Minister Mohammed Madbouly has opened discussions on the car shortage crisis in Egypt. 

The involved entities — car companies, and banks — have come together to figure out a solution for the disruption in the supply chain. 

In addition to this, they discussed how the Egyptian government could relieve import restrictions on foreign cars, following the Russian-Ukrainian war. 

As the car sales declined for a second month in a row since April, the Egyptian government has promised to restore these lost sales and meet the country’s requirement of food and cars from abroad. 

 


India In-Focus — Shares recover; White House discusses Russia gas cap; Exports of raw sugar on cards

India In-Focus — Shares recover; White House discusses Russia gas cap; Exports of raw sugar on cards
Updated 19 min 23 sec ago

India In-Focus — Shares recover; White House discusses Russia gas cap; Exports of raw sugar on cards

India In-Focus — Shares recover; White House discusses Russia gas cap; Exports of raw sugar on cards

MUMBAI: Indian shares recouped early losses to close higher on Tuesday as oil explorer ONGC and aluminum producer Hindalco rose on a rebound in commodity prices after China relaxed some COVID-19 curbs.

The NSE Nifty 50 index ended 0.11 percent higher at 15,850.2, and the S&P BSE Sensex edged up 0.03 percent at 53,177.45 in last-hour buying, managing to gain for a fourth straight day after falling up to 0.7 percent each earlier in the session.

State-owned ONGC was the top Nifty percentage gainer, rising 5.6 percent to log its best session since mid-May. Hindalco Industries climbed 4.1 percent, gaining for a fourth straight session.

White House begins discussions with India on Russian gas

White House national security adviser Jake Sullivan said on Tuesday discussions have begun with countries, including India, on the implementation of a Russian gas cap.

“We have begun talks with India about how a price cap would work and what the implications would be,” he said.

In April, President Joe Biden told Indian Prime Minister Narendra Modi it was not in India’s interest to increase its imports of energy from Russia.

India to allow exports of raw sugar

India is considering allowing mills to ship out stocks of raw sugar that have piled up in ports and warehouses, trade and government sources said on Tuesday, weeks after it imposed curbs on overseas sale of the sweetener.

Additional shipments from India, the world’s biggest exporter of sugar after Brazil, could weigh on raw sugar futures, which are trading near their lowest in four months.

“We are looking into it,” said a senior government official, who sought anonymity in line with official rules. “The proposal regarding raw sugar is under consideration.”

He was referring to a request from sugar mills for the government to let them ship out unrefined stocks as they grapple with mounting stockpiles of the sweetener following the ceiling on exports.

Last month, India capped this season’s exports at 10 million tons, a figure they had almost reached, in a bid to prevent a surge in domestic prices as the world’s second-most populous nation battles high food inflation.


Saudi banking sector’s net profit increases 23% to $4bn in Q1: KPMG

Saudi banking sector’s net profit increases 23% to $4bn in Q1: KPMG
Updated 20 min 51 sec ago

Saudi banking sector’s net profit increases 23% to $4bn in Q1: KPMG

Saudi banking sector’s net profit increases 23% to $4bn in Q1: KPMG

RIYADH: Saudi Arabia’s banking sector witnessed a sturdy growth in net profit of 22.83 percent in the first quarter of 2022 compared to the same period last year, according to KPMG. 

The global accounting firm analyzed the performance of Saudi’s 10 listed banks and noted the sector recorded a net income of SR14.76 billion ($3.93 billion) in the first quarter of the year.

This was up from SR12.02 billion during the same period last year.   

The total assets of these 10 listed banks increased by 3.75 percent to SR3146 billion in the first three months of 2022. 

The report further added that the banking sector, at the close of 2021, showed a resurgence after the pandemic with an increase in profit of 40.15 percent. 

The KPMG report noted that the expected credit loss charge declined by 11.47 percent year on year in the first quarter of 2022. 

Saudi banks’ total equity stands at SR474 billion as of end of 2021, yielding an average return on equity of 10.3 percent against 7.46 percent in 2020. 

According to the report, the substantial growth in net income is largely driven by a decline in the impairment charge of 29 percent in the financial year 2021 compared to a year earlier. 

“Banks are responding to the requirements of the government to achieve greater economic development while considering the threats and opportunities permeating an evolving technological and risk environment,” Abdullah Hamad Al Fozan, chairman and CEO of KPMG Professional Services, wrote in his forward in the report.  

He added: “SAMA has taken new players in the financial sector under its wing and has embraced a positive attitude toward new technology to usher banking into the future.” 


Saudi minister meets US investors ahead of Biden visit

Saudi minister meets US investors ahead of Biden visit
Updated 27 min 12 sec ago

Saudi minister meets US investors ahead of Biden visit

Saudi minister meets US investors ahead of Biden visit

RIYADH: Saudi Arabia’s Minister of Investment has met with leading US CEOs as ties between the two countries warm up ahead of US President Joe Biden's visit to the Kingdom next month.

Khalid Al-Falih participated in a CEO roundtable with US companies and a high level Saudi delegation on June 28, the ministry announced on its Twitter account

Hosted by the US Commerce Department, the meeting aimed to strengthen relations and discuss new exciting investment opportunities.

It came less than a month before President Biden’s visit to the Middle East from July 13 to 16, in what will be his first trip to the region since being elected to the White House.

Biden will meet the Saudi King and Crown Prince for talks on addressing joint issues, Saudi embassy spokesman Fahad Nazer told “The Ray Hanania Show,” which is produced by Arab News and broadcast weekly on the US Arab Radio network.

Nazer said that the two leaders will discuss bilateral cooperation and joint efforts to address regional and global challenges including cyber security, climate change, and environmental initiatives.