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.”

 

 


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.


New Saudi smart city AlNama to be zero-carbon

New Saudi smart city AlNama to be zero-carbon
Updated 01 July 2022

New Saudi smart city AlNama to be zero-carbon

New Saudi smart city AlNama to be zero-carbon

RIYADH: Saudi Arabia’s new AlNama smart city will be a zero-carbon community, according to the company charged with designing the development.

The hospitality hub, located on a 10 sq. km area in Riyadh, will create 10,000 jobs in various sectors, including green-tech industries to create a ‘green circular economy’, Construction Week reported. 

The project is planned to provide 11,000 residential units and an eventual population of 44,000 people.

ALNAMA will be designed by Dubai's URB, and the firm’s CEO Baharash Bagherian said: “AlNama aims to be the next generation of self-sufficient city, producing all the city’s renewable energy needs, as well as the resident’s caloric food intake on site.

“Biosaline agriculture, productive gardens, wadis, and carbon-rich habitats are key features of the development’s innovative and resilient landscape design.

“The city was planned through the design of its landscape, rather than its buildings. This creates an urbanism that is more socially inclusive, more economically valuable, and more sensitive to the environment.”

AlNama will consist of eco-friendly glamping lodges, eco resorts and a nature conservation center to promote ecotourism, while an autism village, wellness center and clinics within the medical hub will help promote medical tourism.

The green-tech hub will provide an innovative ecosystem for urban-tech companies related to food, energy, water, waste, mobility, and building materials