IMF expects Egypt to contribute 1.7% to global growth

IMF expects Egypt to contribute 1.7% to global growth
Egypt’s inflation is also expected hit 21.6 percent in 2023 before dropping to 18 percent next year, IMF report stated. (Shutterstock)
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Updated 24 April 2023
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IMF expects Egypt to contribute 1.7% to global growth

IMF expects Egypt to contribute 1.7% to global growth

RIYADH: The Egyptian economy is expected to contribute around 1.7 percent to the growth of the global economy over the next five years, according to a Bloomberg calculation done on data released in the International Monetary Fund's World Economic Outlook.

This places the North African country in the ninth rank among the largest countries contributing to the expansion of the world economy until 2028.  

China is expected to be the biggest growth driver over the next five years with 22.6 percent share, according to Bloomberg calculations.

It will be followed by India and the US which are expected to contribute 12.9 percent and 11.3 percent to the global economy. 

Earlier this month, the IMF cut its forecast for Egypt’s real gross domestic product for the current fiscal year to 3.7 percent from its previous projection of 4 percent.

The IMF’s economic outlook report predicts the country’s real GDP growth for 2023/2024 to reach 5 percent, down from a previous forecast of 5.3 percent.

Egypt’s inflation is also expected to hit 21.6 percent in 2023 before dropping to 18 percent next year, the IMF report stated.

This saw the credit agency S&P Global downgrading Egypt’s outlook to negative as the country’s funding sources may not cover its high external funding requirements of $17 billion in the fiscal year ending June 30, 2023, and $20 billion in fiscal 2024.   

The country’s long and short-term foreign and local currency sovereign credit rating remained at “B/B”, noted the agency.   

“The negative outlook reflects risks that the policy measures implemented by Egyptian authorities may be insufficient to stabilize the exchange rate and attract foreign currency inflows to meet the sovereign fund’s high external financing needs,” S&P Global Ratings said in a report.  

On Saturday, the Egyptian Minister of Finance Mohamed Maait attributed the downgrade to external pressures on the country’s economy.   

The Ukraine war’s adverse global economic repercussions led to unprecedented inflation in the Egyptian economy, Maait said in a statement on the Cabinet’s Facebook page. 

S&P added that Egypt's credit rating could progress in the near future if the country was capable of meeting its foreign currency financing needs.   

This could be done through exchange rate flexibility and attracting large inflows of foreign currency through its program of offering stakes in state-owned enterprises.   

Maait added: “We are proceeding with the implementation of the economic reform program supported by the IMF.”  

In a bid to tackle the high external financing needs of the Egyptian economy, the government will implement a package of financial, monetary and structural measures, noted the minister.

Maait also highlighted the growth in foreign currency inflows to the country, in addition to the oil export industry’s solid performance and recent peak in natural gas export revenues of $700 million per month. 

In August 2022, the state endorsed a plan to limit electricity consumption with the aim of preserving natural gas for export and obtaining foreign currency.  

⁠⁠⁠⁠⁠⁠The minister disclosed that foreign direct investment surged 71 percent to reach $9.1 billion in 2022 from $5.2 billion the year before, and that remittances from expatriates reached $33 billion last year.  

Non-oil exports increased by 29 percent and Suez Canal revenues increased to $7 billion last year and are expected to reach more than $8 billion in 2023, in addition to the growth of tourism revenues, he said.  

Egypt's new budget has set aside 127.7 billion Egyptian pounds ($4.17 billion) for food subsidies, representing a growth of 41.9 percent annually.  

In addition, 119.4 billion Egyptian pounds were allotted for petroleum subsidies; and 6 billion Egyptian pounds for health insurance and medications, representing an increase of 58.2 percent over the previous fiscal year.  

Due to the recent war-led skyrocketing inflation, the country has faced a shortage of foreign currency and an increase in the cost of basic goods, pushing it to raise interest rates by 1,000 basis points and devalue the Egyptian pound three times since March of last year.   

 


UAE’s PMI grows but Egypt’s index falls to 11-month low: S&P Global

UAE’s PMI grows but Egypt’s index falls to 11-month low: S&P Global
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UAE’s PMI grows but Egypt’s index falls to 11-month low: S&P Global

UAE’s PMI grows but Egypt’s index falls to 11-month low: S&P Global

RIYADH: The UAE’s non-oil private sector expanded in February as it delivered the strongest output growth since June 2019, according to S&P Global’s purchasing managers’ index report.

The analysis saw the Middle Eastern country given a PMI standing of 57.1 – up from 56.6 in January – with increased new business, more robust client activity, and intensified marketing and development efforts contributing to this growth.

A PMI above 50 indicates that the sector is expanding, while below that number suggests contraction.

Meanwhile, business activity in Egypt’s non-oil private sector declined at the sharpest rate in just over a year, with the PMI dropping from 48.1 in January to 47.1 in February, according to S&P Global Egypt PMI. This marked the lowest level in 11 months and is weaker than the survey’s long-run trend.

The drop in activity can be attributed to several factors, including the worsening foreign exchange crisis as the sharp decline in Suez Canal trade due to Red Sea shipping disruptions exacerbated shortages of the US dollar and other foreign currencies. 

This, in turn, led to substantial increases in purchasing costs and contributed to the most significant lengthening of supplier delivery times since June 2022.

“Red Sea shipping disruption has roughly halved Suez Canal revenues so far in 2024, which February PMI survey data indicated had a considerable impact on foreign currency inflows and inflationary pressures,” said Senior Economist at S&P Global Market Intelligence, David Owen.

Supply chain disruptions from Red Sea shipment issues were also a challenge to the UAE private sector, leading to input delivery delays and a backlog of work. However, according to the report, supplier performance remained generally positive, with prompt input distribution when requested.

“One of the PMI’s largest components, the output index, rose to its highest level since June 2019, pointing to a rapid expansion of business activity ... capacity pressures were apparent, however, with backlogs of work rising at their fastest pace in nearly four years, as Red Sea shipping disruption fed through into transport delays,” Owen commented.

Consequently, hiring activity accelerated to manage workloads and address backlog growth, increasing employment levels at the fastest rate since May 2023, as reported.

While overall input costs rose in the UAE, driven by increases in material prices and wages, firms opted for price cuts. This strategy was aimed at retaining market share, often achieved through offering discounts to clients, according to the report.

In contrast, Egyptian companies opted to transfer increased purchase costs to customers, resulting in a sharp increase in selling charges, the most significant in 13 months. Consequently, new orders experienced the fastest decline since March 2023, particularly in domestic sales facing mounting price pressures.

Heightened inflationary pressures, particularly in wages, were noted as Egyptian firms raised salaries in response to the cost-of-living crisis. Consequently, there was a decrease in hiring activity within the non-oil private sector in the first quarter, with recent data indicating a slight decline in workforce numbers, according to the report.


PIF’s Alat and KACST ink deal to propel Saudi Arabia’s semiconductor industry 

PIF’s Alat and KACST ink deal to propel Saudi Arabia’s semiconductor industry 
Updated 25 min 59 sec ago
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PIF’s Alat and KACST ink deal to propel Saudi Arabia’s semiconductor industry 

PIF’s Alat and KACST ink deal to propel Saudi Arabia’s semiconductor industry 

RIYADH: Semiconductor manufacturing in Saudi Arabia is to be boosted by workers from the Kingdom after Public Investment Fund company Alat signed a partnership to drive localization.

Inked with the King Abdulaziz City for Science and Technology, the deal aims to support national goals for research, development, and innovation in the energy and industry sectors by developing local capabilities, while positioning the Kingdom as a global hub for the strategic semiconductor industry. 

Signed at LEAP 2024 in Riyadh, the partnership agreement, inked by Muneer bin Mahmoud Al-Dosouqi, president of KACST, and Amit Midha, CEO of Alat, aligns with Saudi Vision 2030 goals for economic growth and diversification. 

Midha said: “Alat aims to enable the establishment of next generation industry in Saudi Arabia, and by partnering with a renowned institution such as KACST, with its deep expertise in advanced technologies and talent development, we will play an essential role in the creation of Saudi Arabia’s own semiconductor industry.” 

The agreement with KACST will be spearheaded by Alat’s Semiconductor Business Unit, overseeing the development and manufacturing of chips in three pivotal technology segments: power, perception, and processing. 


Minister launches digital products and services to support families during LEAP

Minister launches digital products and services to support families during LEAP
Updated 41 min 23 sec ago
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Minister launches digital products and services to support families during LEAP

Minister launches digital products and services to support families during LEAP

RIYADH: Saudi families are set to gain easy access to a diverse range of social and digital support services, according to the human resources and social development minister.

The offerings and products were unveiled by Ahmed bin Sulaiman Al-Rajhi on March 4 during LEAP 2024, the ongoing third edition of the world’s biggest tech event in Riyadh.

They were aimed at advancing the ministry’s digital transformation agenda and simplifying access to services for beneficiaries, according to the HRSD website.

The offerings encompassed the family guidance system and consultations, facilitating access to counsellors through accredited specialists. Additionally, the social specializations system was launched, overseeing the issuance and management of licenses for specialists, and validating their professional classifications.

The introduction of the family protection system facilitates the registration and monitoring of reported cases through integration with relevant security authorities, ensuring the confidentiality and safety of both beneficiaries and reporters.

Al-Rajhi also initiated the empowerment service on the social support and protection platform, with the goal of empowering and preparing social security beneficiaries for employment through customized training programs aligned with their educational qualifications and skill sets.

The support platform, which assisted over 100,000 young people in 2023, offers training opportunities for beneficiaries to enhance their cognitive skills, with a focus on aligning labor market needs with job seekers, assisting startups and small businesses, and enhancing the well-being of social security beneficiaries.

The services also included business management, aiming to facilitate business practice procedures to be automated and integrated between relevant entities through the Qiwa platform, aiming to improve beneficiary experience and maintain business continuity, in integration with 13 government entities.


Saudi Arabia’s non-oil sector hits 5-month high as PMI soars to 57.2

Saudi Arabia’s non-oil sector hits 5-month high as PMI soars to 57.2
Updated 05 March 2024
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Saudi Arabia’s non-oil sector hits 5-month high as PMI soars to 57.2

Saudi Arabia’s non-oil sector hits 5-month high as PMI soars to 57.2

RIYADH: Saudi Arabia’s non-oil economy exhibited improved growth, with business activity accelerating at the fastest rate in five months, as indicated by an economic tracker.  

The Kingdom’s Purchasing Managers’ Index rose to 57.2 in February, marking a notable improvement from a two-year low in January. This uptick signals a significant improvement in the operating conditions of the non-oil private sector, according to the Riyad Bank Saudi Arabia PMI report by S&P Global.  

The firm’s chief economist Naif Al-Ghaith attributed the rebound of the PMI in February to robust growth in output and new orders, particularly driven by the services and construction sectors.  

“The upturn reflected the continued thriving of non-oil activities in the Kingdom which recorded a 4.6 percent increase according to GASTAT (General Authority for Statistics) flash estimates. The survey results also signalled expectations of a modest recovery in demand this year driven by the acceleration of Vision 2030 projects,” he added.  

The report also noted that this reading is the highest since September 2023, attributed to an improvement in client demand and indications of increased tourism activity.  

New export orders also exhibited a modest rebound, a trend credited by Al-Ghaith to the rising demand for domestic products in international markets and the high competitiveness of local industries. This suggests potential expansion in production and employment opportunities, according to the economist. 

While new work inflows accelerated compared to January, with reports indicating stronger market conditions and an increase in new clients, some firms mentioned that heightened competition had a dampening effect on sales growth. 

The report also highlighted a surge in employment, growing at the fastest pace in eight years, which led companies to make a solid cut to their outstanding work. 

This growth is attributed to the increase in new business and the positive outlook of firms regarding future demand. This optimism has also led firms to secure a steady flow of inputs at discounted prices from suppliers, resulting in inventory levels reaching the highest point since August 2022, as per the report. 

In terms of input price inflation, the recent survey by S&P Global indicated a slight easing in February. Costs continued to rise significantly overall, albeit at the slowest pace since July of last year. 

Selling prices rose marginally as some firms passed on higher costs to customers, while others lowered fees due to increased competition. This resulted in prices lagging behind cost increases, putting pressure on margins, the report added. 


Oil Updates – crude price extends fall as China’s economic reforms underwhelm investors

Oil Updates – crude price extends fall as China’s economic reforms underwhelm investors
Updated 05 March 2024
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Oil Updates – crude price extends fall as China’s economic reforms underwhelm investors

Oil Updates – crude price extends fall as China’s economic reforms underwhelm investors

LONDON: Oil prices fell for a second day on Tuesday as pledges by China to transform its economy amid stuttering growth since the COVID-19 pandemic failed to impress investors concerned about slower consumption, according to Reuters.

Brent futures for May fell 16 cents, or 0.2 percent, to $82.64 a barrel by 9:01 a.m. Saudi time, while US West Texas Intermediate fell 28 cents, or 0.4 percent, to $78.46. Brent was on track to fall for the fifth straight session on Tuesday.

China vowed to “transform” its economic development model and curb industrial overcapacity while setting an economic growth target for 2024 of around 5 percent, similar to last year’s goal and in line with analysts’ expectations.

That target, which would likely provide a boost for fuel consumption if achieved, will be harder to reach this year as China in 2023 benefited from the favorable base effect of a COVID-19-hit 2022, analysts said, potentially weighing on investor sentiment.

The world’s biggest crude importer also pledged to step up the exploration and development of oil and natural gas resources but at the same time vowed to tighten control over fossil fuel consumption.

While concerns over the Chinese demand outlook pressured prices lower, supply factors stemming from major producers reducing output and geopolitical worries from the Israel-Gaza war underpinned crude.

The Organization of the Petroleum Exporting Countries and its allies on Sunday extended their voluntary oil output cuts of 2.2 million barrels per day (bpd) into the second quarter to support prices amid global growth concerns and rising output outside the group.

However, US crude oil inventories are expected to have increased by about 2.6 million barrels last week, according to a preliminary Reuters poll on Monday, while distillates and gasoline stockpiles were forecast lower.

“The market has been moving higher in recent weeks amid improving fundamentals. Rising spot prices indicate the physical market has begun to tighten amid a host of other supply side disruptions,” analysts at ANZ said in a note on Monday.