Russian central bank plans to intervene as ruble hits its lowest level since early in the war

Russian central bank plans to intervene as ruble hits its lowest level since early in the war
The Russian ruble slid past 100 against the dollar on August 14, 2023, its lowest level since March 23, 2022 -— shortly after Russia invaded Ukraine. (AFP)
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Updated 14 August 2023
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Russian central bank plans to intervene as ruble hits its lowest level since early in the war

Russian central bank plans to intervene as ruble hits its lowest level since early in the war
  • The Russian currency had passed 101 rubles to the dollar, continuing a more than one-third decline in its value since the beginning of the year and hitting the lowest level in almost 17 months
  • After Western countries imposed sanctions after the invasion of Ukraine in February 2022, the ruble plunged as low as 130 to the dollar

LONDON: The Russian ruble on Monday reached its lowest value since the early weeks of the war in Ukraine as Moscow increases military spending and Western sanctions weigh on its energy exports.
It led Russia’s central bank to announce an emergency meeting for Tuesday to review its key interest rate, raising the likelihood of an increase in borrowing costs that would support the flagging ruble.
The Russian currency had passed 101 rubles to the dollar, continuing a more than one-third decline in its value since the beginning of the year and hitting the lowest level in almost 17 months. The ruble recovered slightly after the central bank’s announcement.
The meeting was set after President Vladimir Putin’s economic adviser, Maksim Oreshkin, blamed the weak ruble on “loose monetary policy” in an op-ed Monday for state news agency Tass. He said a strong ruble is in the interest of the Russian economy and that a weak currency “complicates economic restructuring and negatively affects people’s real incomes.”
Oreshkin said Russia’s central bank has “all the tools necessary” to stabilize the situation and said he expected normalization shortly.
Bank deputy director Alexei Zabotkin told reporters Friday that it is adhering to a floating exchange rate because “it allows the economy to effectively adapt to changing external conditions.”
Analysts say the weakening of the ruble is being driven by increased defense spending — leading imports to rise — and falling exports, particularly in the oil and natural gas sector. Importing more and exporting less means a smaller trade surplus, which typically weighs on a country’s currency.
The Russian economy is now “working on different types of state orders related to the war, such as textile enterprises, pharmaceuticals and the food industry,” said Alexandra Prokopenko, nonresident scholar at the Carnegie Russia Eurasia Center and a former Russian central bank official.
Pivoting the entire economy to a war footing not only drives up imports but also raises the prospect of worsening inflation, she said.
To help lessen that prospect, the central bank said last week that it would stop buying foreign currency on the domestic market until the end of the year to try to prop up the ruble and reduce volatility.
Russia typically sells foreign currency to counter any shortfall in revenue from oil and natural gas exports and buys currency if it has a surplus.
The central bank also enacted a big increase of 1 percent to its key interest rate last month, saying inflation is expected to keep rising and the fall in the ruble is adding to the risk. The next meeting to discuss Russia’s key interest rate was planned for 15 September.
On Monday, some Russians in Moscow appeared concerned about the weakening currency.
“Prices will rise, which means that the standard of living will fall. It has already fallen, and it will fall even more — there are definitely more poor people,” said Vladimir Bessosedny, 63, a retired teacher.
Others hoped the fall of the ruble was temporary and that it would stabilize.
In January, the ruble traded at about 66 to the dollar but lost about a third of its value in subsequent months.
After Western countries imposed sanctions after the invasion of Ukraine in February 2022, the ruble plunged as low as 130 to the dollar, but the central bank enacted capital controls that stabilized its value. By last summer, it was in the 50-60 range to the dollar.
Zabotkin on Friday dismissed speculation that capital flight from Russia also was to blame for the ruble’s fall, saying the idea was “not substantiated.”


Budget Saudi Arabia to buy 70% stake in UAE freight firm Overseas Development

Budget Saudi Arabia to buy 70% stake in UAE freight firm Overseas Development
Updated 6 sec ago
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Budget Saudi Arabia to buy 70% stake in UAE freight firm Overseas Development

Budget Saudi Arabia to buy 70% stake in UAE freight firm Overseas Development

RIYADH: Saudi car rental firm United International Transportation Co. is set to acquire a 70 percent stake in the UAE’s freight forwarder Overseas Development through a recent deal.

The company, also known as Budget Saudi Arabia, said in a Tadawul statement that the purchase amount was based on the financial evaluation of the acquisition, and came in at 13.34 million dirhams ($3.63 million). 

The new sale and purchase agreement comes following the company’s announcement in March that it will procure 70 percent of Overseas Development LLC’s shares in its subsidiaries in Saudi Arabia, UAE, and Kuwait as part of a memorandum of understanding signed at the time. 

In February, the vehicle leasing company was given the go-ahead by the Kingdom’s competition watchdog to acquire Al-Jazira Equipment Co.   

In a Saudi Stock Exchange statement, it was revealed the General Authority for Competition had issued a no-objection notice regarding Budget Saudi Arabia’s complete purchase of the operational lease and car maintenance company, also known as Auto World.   


NEOM’s workforce anticipated to exceed 200k: CEO 

NEOM’s workforce anticipated to exceed 200k: CEO 
Updated 31 min 54 sec ago
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NEOM’s workforce anticipated to exceed 200k: CEO 

NEOM’s workforce anticipated to exceed 200k: CEO 

RIYADH: Saudi giga-project NEOM’s workforce is poised to surpass 200,000 as the Kingdom’s ambitious $500 billion-city enters its busiest development phase.  

This significant increase in labor marks a crucial milestone in the Vision 2030 initiative, underscoring the project’s pivotal role in reshaping the Saudi economy.  

NEOM, currently being built in the northwest of Saudi Arabia, has brought together over 100 of the world’s leading construction companies for a two-day industry forum, according to a statement.  

Addressing the event Nadhmi Al-Nasr, CEO of the giga-project, said: “As we go into our busiest ever phase of development, the scale of opportunities across NEOM is monumental. With projects progressing fast across all parts of the region, we are committed to collaborating with globally renowned contractors to achieve the vision of NEOM.” 

Participants gained insights into the plans and scope of upcoming opportunities and toured project sites to witness the ongoing construction firsthand.


Saudi inflation eases to 1.6% thanks to food price changes: GASTAT   

Saudi inflation eases to 1.6% thanks to food price changes: GASTAT   
Updated 53 min 6 sec ago
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Saudi inflation eases to 1.6% thanks to food price changes: GASTAT   

Saudi inflation eases to 1.6% thanks to food price changes: GASTAT   

RIYADH: Saudi Arabia’s inflation eased to 1.6 percent in March, down from 1.8 percent the previous month, driven by changes in the food and beverage sector.

The latest report from the General Authority for Statistics indicates that the Kingdom’s Consumer Price Index experienced a marginal decrease of 0.1 percent in March compared to February.  

The monthly inflation index was impacted by a 0.7 percent decrease in the food and beverage sector, primarily due to a 0.6 percent decline in meat and poultry prices.  

Additionally, prices in transportation, furnishing, and home equipment sectors experienced declines of 0.7 percent each. Similarly, recreation and culture, communications, and tobacco also saw decreases, with falls of 0.9 percent, 0.3 percent, and 0.1 percent, respectively. 

Conversely, prices rose in the housing, water, electricity, gas, and other fuel category by 0.7 percent, as well as in the personal goods and services category by 0.3 percent, and the clothing and footwear category by 0.1 percent.  

On the other hand, prices for services such as education, restaurants and hotels, and health remained largely unchanged in March.

Annual inflation rises 

However, on a yearly basis, the Kingdom’s CPI increased by 1.6 percent during March 2024 compared to the same period last year.  

This rise is primarily attributed to an 8.8 percent increase in the prices of housing, water, and electricity, as well as gas and other fuels, alongside a 0.9 percent rise in food and beverage prices.  

In contrast, prices of transportation decreased by 1.8 percent, and charges of personal goods and services decreased by 1.1 percent. 

According to GASTAT, rental prices were the main driver of inflation in March compared to the corresponding period in 2023. 

“Actual housing rents increased by 10.5 percent in March 2024, influenced by the increase in villa rents by 9.7 percent. This increase had a significant impact on the annual inflation rate for March 2024 due to the weight of this sector (21 percent),” stated the GASTAT report.   

Prices in restaurants and hotels also rose by 2.4 percent due to a 2.2 percent increase in food service prices. 

Similarly, the recreation and culture sector recorded a 0.7 percent increase, influenced by a 5.1 percent rise in holiday and tourism prices.  

Furthermore, the education category saw a 1.2 percent increase, driven by a 4.3 percent increase in secondary education fees. 

However, prices in the furnishing and home equipment sector decreased by 3.2 percent, driven by a 5.3 percent decline in furniture, carpet, and flooring prices.  

Also, prices in clothing and footwear decreased by 4 percent, due to a 6.6 percent decline in ready-made clothing prices.  

Healthcare expenses and tobacco prices decreased by 0.9 percent and 1.1 percent, respectively, compared to March 2023. 

Wholesale Price Index 

In another report, GASTAT noted that Saudi Arabia’s wholesale price index rose by 3.8 percent in March compared to the same month in 2023.   

According to the authority, this rise in WPI was driven by a 25.2 percent increase in the prices of basic chemicals and a 12 percent jump in the prices of refined petroleum products.  

In the third month of the year, prices of raw materials and metals decreased by 2.2 percent, and prices of metal products, machinery, and equipment decreased by 0.6 percent. 

The category encompassing food, beverages, tobacco, and textiles saw a 2.4 percent rise, driven by a 10 percent increase in leather, leather products, and footwear prices, along with a 4.9 percent uptrend in grain mill products, starches, and other food items. 

In contrast, agricultural and fishing products experienced a marginal 0.2 percent upturn, propelled by a 2.1 percent climb in live animals and animal products. 

Conversely, raw materials and metals witnessed a 2.2 percent decline, primarily due to a corresponding decrease in stones and sand prices.  

Moreover, metal products, machinery, and equipment recorded a 0.6 percent drop, attributed to a 6.5 percent decrease in radio, television, and communication equipment prices, as well as a 2.8 percent reduction in office equipment, accounting, and computer prices. 

Average prices up  

In a separate analysis, GASTAT noted that in March, local melons and pumpkins saw the most significant upticks compared to the prior month, with increases of 10.8 percent and 9.4 percent, respectively. 

Additionally, Harri sheep and Naemi sheep also experienced notable increases, rising by 8.5 percent and 7.1 percent, respectively. 

Conversely, the goods and services showing the most substantial percentage drops in March, compared to February, were local and imported onions, experiencing decreases of 17.9 percent and 13.2 percent, respectively. 

Additionally, medium local potatoes and Turkish plums also saw notable declines, with decreases of 6.9 percent and 6.4 percent, respectively.

Real estate price surges

GASTAT noted that in the initial quarter of 2024, the Real Estate Price Index rose by 0.6 percent compared to its counterpart in 2023.

It attributed the surge to a 1.2 percent uptick in residential land costs. 

Conversely, prices experienced a decline in commercial real estate by 0.5 percent and agricultural land sales by 0.1 percent.

The residential real estate division saw a notable 1.2 percent increase, primarily driven by a rise in housing prices of the same magnitude. 

This sector’s weight in the overall index contributed significantly to the index’s uptick, according to the authority.

Among different residential properties, apartments experienced an increase of 0.8 percent, while buildings decreased by 0.2 percent, villas by 2.3 percent, and houses by 1.6 percent in the first quarter of 2024 compared to the same period last year.

Conversely, prices in the commercial real estate sector declined by 0.5 percent, influenced by decreases of 0.5 percent in commercial land prices and 1.1 percent in prices of commercial exhibitions. 

However, the cost of commercial buildings and centers remained stable in the first quarter of 2024, showing no significant changes.

In contrast, the agricultural sector experienced a marginal decline of 0.1 percent, primarily due to a 0.1 percent decrease in agricultural land prices.

In the first three months of 2024, the General Real Estate Price Index rose by 0.3 percent compared to the previous quarter, driven by a 0.4 percent increase in residential sector prices, particularly in land. 

Apartment prices increased by 0.7 percent, while residential buildings, villas, and houses saw slight declines. 

Commercial sector prices remained stable, with no significant changes, while agricultural sector prices also stabilized.


Oil Updates – prices fall after Iran attack as market draws down risk premium

Oil Updates – prices fall after Iran attack as market draws down risk premium
Updated 15 April 2024
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Oil Updates – prices fall after Iran attack as market draws down risk premium

Oil Updates – prices fall after Iran attack as market draws down risk premium

SINGAPORE: Oil prices fell on Monday as market participants dialled back risk premiums following Iran’s weekend attack on Israel that the Israeli government said caused limited damage, according to Reuters.

Brent futures for June delivery fell 50 cents, or 0.5 percent, to $89.95 a barrel by 9:30 a.m. Saudi time, while West Texas Intermediate futures for May delivery were down 52 cents, or 0.6 percent, at $85.14 a barrel.

Iran’s attack involved more than 300 missiles and drones, and was the first on Israel from another country in more than three decades, raising concerns about a broader regional conflict affecting oil traffic through the Middle East.

But the attack, which Iran called retaliation for an air strike on its Damascus consulate, caused only modest damage, with missiles shot down by Israel’s Iron Dome defense system. Israel, which is at war with Iran-backed Hamas militants in Gaza, has neither confirmed nor denied it struck the consulate.

“An attack was largely priced in the days leading up to it. Also the limited damage and the fact that there was no loss of life means that maybe Israel’s response will be more measured,” said Warren Patterson, head of commodities strategy at ING, adding: “But clearly, there is still plenty of uncertainty and it all depends on how Israel now responds.”

As Iran currently produces over 3 million barrels per day of crude oil as a major producer within the Organization of the Petroleum Exporting Countries, supply risks include more strictly enforced oil sanctions and that an Israeli response could involve targeting Iran’s energy infrastructure, ING also said in a separate client note on Monday.

If there was significant supply loss, however, the US could release further crude oil from its strategic petroleum reserves, while OPEC has more than 5 million bpd of spare production capacity, it said.

“If prices were to rally significantly on the back of supply losses, one would imagine that the group would look to bring some of this spare capacity back onto the market. OPEC will not want to see prices going too high given the risk of demand destruction,” ING said in the note.

Oil benchmarks had risen on Friday in anticipation of Iran’s retaliatory attack, touching their highest levels since October.

Analysts were widely expecting at least a short-lived rally in prices this morning, but said that more significant and longer-lasting price effects from the escalation would require a material disruption to supply, such as constraints on shipping in the Strait of Hormuz near Iran.

So far, the Israel-Hamas conflict has had little tangible impact on oil supply.

The “strike on Iran’s embassy in Syria and Iran’s retaliation have raised tension in the Middle East. However, we don’t expect an immediate reaction in crude oil prices given ample spare capacity and an already elevated geopolitical risk premium,” said ANZ Research analysts in a note.

“Israel’s response will determine whether the escalation ends or continues. The conflict could still be contained to Israel, Iran and its proxies, with possible involvement of the US Only in an extreme case do we see it realistically impacting oil markets.”

Analysts at Citi Research said prolonged tensions through the second quarter this year have largely priced oil at $85-$90 per barrel.

As the market has been broadly balanced in supply and demand throughout the first quarter, any de-escalation could see prices falling back quite sharply to the high $70s or low $80s per barrel range.

“What is not priced into the current market, in our view, is a potential continuation of a direct conflict between Iran and Israel, which we estimate could see oil prices trade up to over $100 per barrel depending on the nature of the events,” the Citi analysts said in a note.


Saudi finance minister to lead Kingdom’s delegation at IMF-World Bank Spring Meetings  

Saudi finance minister to lead Kingdom’s delegation at IMF-World Bank Spring Meetings  
Updated 14 April 2024
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Saudi finance minister to lead Kingdom’s delegation at IMF-World Bank Spring Meetings  

Saudi finance minister to lead Kingdom’s delegation at IMF-World Bank Spring Meetings  

RIYADH: Saudi Finance Minister Mohammed Al-Jadaan will head the Kingdom’s delegation to the International Monetary Fund and the World Bank Group assemblies in Washington this week to discuss global economic developments.

Al-Jadaan will chair the first meeting of the International Monetary and Financial Committee under Saudi Arabia’s three-year chairmanship.
The meeting will review economic developments and the threats to overall global development. It will also discuss global economic policy, key priorities and the role of the Washington-based lender in providing financial assistance, advice, technical capacity building to member states, and financial support to countries in need.

The minister will also take part in the meeting of the World Bank Development Committee to discuss the global development plans implemented by the entity.  

Moreover, Al-Jadaan and the governor of the Saudi Central Bank, Ayman Al-Sayari, will also participate in the second meeting of finance ministers and central bank governors of the G20 under the Brazilian presidency.

The meeting will discuss a number of economic and development issues as well as ways to enhance international cooperation to meet the challenges of the global economy.

The Kingdom’s delegation includes the CEO of the Saudi Fund for Development, Sultan Al-Marshad, the deputy chair of the International Monetary and Financial Committee of the IMF, Ryadh bin Mohammed Al-Khareif, and Assistant Minister of Finance for the Macro Fiscal Policies and International Relations Abdulmohsen Al-Khalaf.