Gaza war a threat to fragile world economy, analysts warn

Gaza war a threat to fragile world economy, analysts warn
According to the World Bank’s latest Commodity Markets Outlook, the conflict’s effects on global commodity markets have been limited so far. Overall oil prices have risen about 6 percent since the start of the conflict. (Reuters)
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Updated 19 November 2023
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Gaza war a threat to fragile world economy, analysts warn

Gaza war a threat to fragile world economy, analysts warn
  • World Bank report forecasts an economic ‘shock’ could push oil prices soaring to $150 per barrel

RIYADH: In a worrying report issued on Oct. 30, the World Bank warned that the war in Gaza between Israel and Hamas could trigger an economic “shock” that would include oil prices soaring up to $150 a barrel and millions around the world going hungry due to the result of higher food prices.

Just as the world economy emerges from the disruption of the pandemic and the shockwaves of the Ukraine war, economists and risk analysts are mindful of how an escalation of the Israel-Hamas conflict into a wider regional war involving Lebanon, Syria, Iraq, and even Iran, might impact the global economic recovery and the price of commodities for rich and poor countries alike.

In its latest Commodity Markets Outlook, the World Bank stresses that while the global economy is in a much better position than it was during the 1970s to “cope” with a major oil-price shock, it did state that “an escalation of the latest conflict in the Middle East – which comes on top of disruptions caused by the Russian invasion of Ukraine – could push global commodity markets into unchartered waters.”

In 1973 members of the Organization of Arab Petroleum Exporting Countries, led by Saudi Arabia’s King Faisal, proclaimed an oil embargo of nations that had supported Israel during the Yom Kippur War. At the time, the embargo acutely strained the US economy, which had grown increasingly dependent on foreign oil under the Nixon Administration.

“At the moment, the situation is fluid,” Dr. Nasser Saidi, former Lebanese economy and trade minister and founder of Nasser Saidi & Associates, an economic and business advisory consultancy, told Arab News, adding: “The impact of the Israel-Hamas war will depend on the length and depth of the conflict as well as if it spills over into the wider region, thus drawing in other parties, resulting in international ramifications that would then have an effect on global supply chains.”

In his presentation “The Middle East in a Fragmented, Multi-Polar World” at the 19th Korea Middle East Cooperation Forum in Doha from Nov. 5-8 this year, Saidi stated how “global growth momentum has already slowed significantly this year; the war has the potential to further slow growth rates, raise already record-high public debt levels into crisis.”

According to the bank’s report, the conflict’s effects on global commodity markets have been limited so far. Overall oil prices have risen about 6 percent since the start of the conflict. Prices of agricultural commodities, most metals, and other commodities have barely budged.

“The global economic impacts of the war between Israel and Hamas have remained relatively muted,” Robert Mogielnicki, senior resident scholar at the Arab Gulf States Institute in Washington, told Arab News. 

The impact of the Israel-Hamas war will depend on the length and depth of the conflict as well as if it spills over into the wider region, thus drawing in other parties, resulting in international ramifications that would then have an effect on global supply chains.

Dr. Nasser Saidi, former Lebanese economy and trade minister and founder of Nasser Saidi & Associates

“Unless we see this conflict ignite the region, there is unlikely to be a major shock to global markets,” he added. “This war of course raises the geopolitical stakes within the region, but in many cases the impact of geopolitical developments on markets tends to be limited and short-lived.”

However, some analysts take a different view, and warn that ongoing fighting between Israel and Hamas could severely threaten the world’s already fragile economic outlook.

The war in Gaza, now in its sixth week, has resulted in the displacement of around 1.5 million Palestinians, 21 hospitals that have gone out of service and dozens more that had been severely damaged, over 11,000 deaths and tens of thousands more injured, according to the Health Ministry in Hamas-run Gaza.

“We are meeting at a very dangerous time for our part of the world,” said Saidi during his presentation in Doha. “The timing of this conference is very opportune at a personal level, and I think it reflects many of us. I have known nothing but war during my own lifetime as a professional, as a minister, as a public official, as an academic. My message is it must end and maybe what is happening today in Gaza and Palestine more generally may be a moment of change. We don’t know yet. We’re still living the fog war.”

As Saidi underlined, the Middle East is home to 60 percent of the world’s refugees – the highest number in the world.

Palestinian refugees won’t just stay in neighboring countries, they will be pushed to move to other regions, including Europe, he added.

“The impact of the war on oil and gas prices could be huge,” said Saidi, further noting that if oil prices jump to a record $150 per barrel as the World Bank warns, “it will affect world economic growth, which has already been slowing during 2023. The more inflation affects commodity prices, the lower economic growth and the increase in debt crises for many countries because you are also having a period of high interest rates.”

“Destruction and violence beget violence,” added Saidi in his presentation. “There are no military solutions in Gaza.”

The countries most vulnerable in the Middle East include Lebanon, Egypt, Jordan and Iran. These countries are already facing a decline in growth, have current account and fiscal deficits and a fall in international reserves. According to Saidi, the sectors that will be most impacted in these countries are tourism, hospitality, construction and real estate, as well as capital outflows and lower foreign direct investment inflows.

“Neighboring Middle Eastern states dealing with significant economic challenges of their own, like Egypt and Lebanon, are especially vulnerable here,” said Mogielnicki. “Any spillover of violence or refugees will immediately impact these neighboring states, which do not necessarily have the absorptive capacity.”

A lot clearly depends on oil.

“Any escalation of violence or major attacks in the oil- and gas-producing countries of the Gulf would affect energy markets in a consequential manner,” said Mogielnicki. “Thus far, key actors in the Gulf have demonstrated a strong desire to prevent this war from turning into a broader regional conflict.”

On Nov. 11, Saudi Arabia called an emergency Arab-Islamic Summit to address concerns over the humanitarian crisis in Gaza. All leaders agreed on the need for a ceasefire. The joint summit concluded by calling for an Israeli arms embargo. 

HIGHLIGHT

The World Bank stresses that while the global economy is in a much better position than it was during the 1970s to cope with a major oil-price shock, it did state that an escalation of the latest conflict in the Middle East could push global commodity markets into unchartered waters.

“The world is becoming increasingly fragmented,” said Saidi.

It has also experienced great economic shifts in recent years – shifts that see the global economy looking eastward rather than westward.

In 1993, the G7 countries produced close to 50 percent of the world’s gross domestic product. Today, that group accounts for 30 percent, while Asia, in particular China, produces close to 20 percent.

“The implications for this part of the world are very clear,” said Saidi. “Our economic relations, politics, defense and other ties have always been with the West, but economic geography dictates that we need to shift those relations towards Asia.”

Saidi argued in his presentation that one way to solve some of the dire economic prospects facing the Middle East, especially with the war in Gaza, is the creation of a regional development bank. The focus now needs to be on “post-war stabilization, reconstruction, recovery and a return to pre-war economic legacy.”

“The GCC (Gulf Cooperation Council) have got to be the main engine for economic stability across the Middle East because they’re capable of doing that,” said Saidi. “In order to do so, we must reinvigorate the GCC common market and the GCC customs union. We need trade agreements as a block for the GCC countries. Secondly, we need to establish an Arab bank for reconstruction and development. We are the only region in the world.”

"We are the only region in the world without a development bank," said Saidi.

When asked why the Middle East needs a development bank, Saidi said: "Because many of our countries have been destroyed."

“We need to help rebuild them. The cost is easily $1.4 to $1.6 trillion, and the list of countries is increasing. We now have Gaza and Palestine added to them.”

This, he said, could be one area for cooperation between the Middle East and Asia.

“The big tectonic shift is moving towards Asia,” added Saidi. “All our trade agreements are with Europe and the United States. That must change. We must shift.”


AI can bridge North-South divides, Accenture CEO tells FII summit

AI can bridge North-South divides, Accenture CEO tells FII summit
Updated 23 February 2024
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AI can bridge North-South divides, Accenture CEO tells FII summit

AI can bridge North-South divides, Accenture CEO tells FII summit
  • Julie Sweet: ‘One of the things that’s been great to see is Saudi Arabia taking the lead in many places’
  • ‘It’s really important to always stay focused on what are the opportunities with AI to solve the world’s problems’

MIAMI: Artificial intelligence has the potential to bridge North-South divides, Accenture’s CEO told the Future Investment Initiative Priority summit in Miami on Thursday.

Julie Sweet explored the far-reaching impact of AI on addressing global challenges in a panel discussion titled “FII Priority Compass: What matters most to citizens?”

She said: “The question is how much AI can actually help the Global South and the countries that need help through precision farming, through telemedicine and better healthcare.”

Highlighting Saudi Arabia’s proactive stance in leveraging AI for societal advancement, Sweet stressed the importance of global collaboration in harnessing AI’s potential to tackle complex issues.

“One of the things that’s been great to see is Saudi Arabia taking the lead in many places to think through how can AI help and how can they be a leader.

“So I think it’s really important to always stay focused on what are the opportunities with AI to solve the world’s problems.”

However, Sweet acknowledged that the definitive solution to utilizing AI to close existing divides is not currently available.

Highlighting the vital efforts of organizations such as the UN, she emphasized the urgency of understanding how technology can be harnessed to avoid widening disparities.

Since the increased accessibility of AI in the public market and its “democratization,” experts have emphasized the need to regulate the technology.

“Regulation needs to be the outcome of a very strong public-private partnership, because most governments in the world don’t have the access or the talent inside to know it,” Sweet said, adding that there have been a few successful examples of governments balancing innovation and safety.

“That’s one of the most important things that governments need to do, particularly because the technology is changing rapidly. And I think the good news is that everyone has agreed that some regulation is needed.”

Regarding AI-related risks in the upcoming US election, Sweet cautioned against relying solely on government regulation. Instead, she advocated for increased collaboration among private entities.

“That’s as important as government regulation,” she said. “It’s responsible companies coming together in an agile fashion to solve the risks.”

Addressing concerns about job displacement due to AI, Sweet said while her role as a lawyer would persist, the nature of the job would evolve. She emphasized the need to reskill workforces and prepare the new generation to use AI.

Sweet highlighted Accenture’s annual investment of $1.1 billion in staff training, and stressed the importance of adapting school curricula to future-proof the younger generation through enhanced communication skills and basic technology education.

“All of us will have to continue to adapt and learn … because our skills have to constantly be improved and there’s so much change,” she concluded.


Oman opens its market to Brazilian live cattle

Oman opens its market to Brazilian live cattle
Updated 23 February 2024
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Oman opens its market to Brazilian live cattle

Oman opens its market to Brazilian live cattle
  • Announcement made following meeting of officials from both countries in Muscat
  • Both sides emphasized interest in expanding governmental cooperation, commercial partnerships

SAO PAULO: The Brazilian livestock sector is now authorized to export live cattle for slaughter and fattening to Oman.

The announcement was made after a meeting between Roberto Perosa, Brazil’s secretary for trade and international relations, and Ahmed Nasir Al-Bakri, undersecretary at Oman’s Agriculture Ministry. There were other members of the Omani government at the meeting.

“This new market adds to the other 14 opened this year, totaling 93 since the beginning of last year, during President Lula’s third term,” Perosa said.

“At the request of (Agriculture) Minister Carlos Favaro, we continue our mission in the Middle East, visiting countries aiming to expand Brazilian agricultural trade, opening new markets, obtaining approvals for plants through the pre-listing system (eliminating the need for local audits), and negotiating the import of nitrogen fertilizers.”

The Brazilian delegation visiting Oman also includes Julio Ramos, deputy secretary for trade and international relations, and Marcel Moreira, director of trade promotion and investments.

These new markets are the result of joint work by Brazil’s ministries of agriculture and livestock, and foreign affairs.

Representatives of both countries’ agriculture ministries emphasized their interest in expanding governmental cooperation and commercial partnerships.

They identified synergies between Oman’s Vision 2040 plan, which includes food security, and the Brazilian program to convert degraded pastures into agricultural areas.

They also discussed the possibility of partnerships in areas such as fertilizers, sugar, grains for animal feed, live animals, chicken meat and fish.

The Brazilian delegation also met with Ibtisam Ahmed Said Al-Farooji, undersecretary for investment promotion at Oman’s Ministry of Commerce, Industry and Investment.

She presented an Omani program that aims to increase investments in her country and abroad, focusing on food security and Oman’s interest in becoming a hub for the Gulf region.

Al-Farooji also underlined Oman’s neutrality and stability, adding that Brazil could be a great partner.

During the meeting, Perosa emphasized the good relations and complementarity between the two countries, saying Brazil could contribute even more to Oman’s food security and encourage Brazilian companies to process their products in Oman, as is the case with chicken and beef.

He added that the program to convert degraded pastures into agricultural areas represents a great opportunity to strengthen this partnership, including the possibility of acquiring nitrogen fertilizers from Oman.

The Omani side welcomed the idea and said that along with the Oman Investment Authority and Nitaj, the government arm for promoting food security, it will help build the partnership strategy between the two countries.


Transformation of Saudi economy creates opportunities, Public Investment Fund official tells investors

Transformation of Saudi economy creates opportunities, Public Investment Fund official tells investors
Updated 23 February 2024
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Transformation of Saudi economy creates opportunities, Public Investment Fund official tells investors

Transformation of Saudi economy creates opportunities, Public Investment Fund official tells investors
  • Jerry Todd tells Future Investment Initiative Priority forum in Miami that structural economic changes in the Kingdom require global resources and talent, capital and operating capacity
  • Former US Treasury Secretary Steven Mnuchin highlights opportunities for investment in clean energy and energy transformation in the wider Middle East

LONDON: It is important that investors understand the long-term structural changes to the Saudi economy that are taking place and the opportunities they offer, the head of the National Development Division at the Saudi Public Investment Fund said on Thursday.

Speaking at the Future Investment Initiative Priority forum in Miami, Jerry Todd said the three pillars of this transformation are industrialization of the economy, the development and expansion of service sectors, and the building-up of green energy capacity.

“Vision 2030 is the blueprint for this economic transformation, and it is a national project but it requires global resources, global talent, capital and operating capacity,” he said. “The attraction of those into the Kingdom is embedded into that blueprint.

“The question of what happens next is really a function of whether people in this room, and people in rooms like this, are learning more and trying to understand what’s happening (in the Kingdom). Personally, I’m optimistic, I think there’s a growing awareness of the opportunities being created.

“(Another thing that is changing) is the ability of the domestic economy to absorb longer-term investment, in large part through the industry-building that’s happening as part of Vision 2030. It’s creating chances for people to come in and capture asset-level opportunities.”

Former US Treasury Secretary Steven Mnuchin said there are a lot of opportunities for investment in the wider Middle East region in relation to clean energy and energy transformation. (Screenshot/FII Priority)

Former US Treasury Secretary Steven Mnuchin echoed that sentiment and said there are a lot of opportunities for investment in the wider Middle East region in relation to clean energy and energy transformation.

He warned, however, that if the region is to remain an attractive investment hub, the threat Iran poses to regional stability and security must be addressed, primarily through tougher and more rigidly enforced sanctions on the regime in Tehran.


AI will drive efficiency amid global economic slowdown, leading financiers tell FII Priority Summit

AI will drive efficiency amid global economic slowdown, leading financiers tell FII Priority Summit
Updated 23 February 2024
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AI will drive efficiency amid global economic slowdown, leading financiers tell FII Priority Summit

AI will drive efficiency amid global economic slowdown, leading financiers tell FII Priority Summit
  • 'AI is the bicycle of the minds — we are all going to have to learn how to ride it,' said the head of Claure Group
  • Johnson of Franklin Templeton noted that the supply chain was shifting

MIAMI: The chiefs of four of the world’s leading corporations stressed on Thursday, during the first day of the Future Investment Initiative Miami Summit, that while artificial intelligence has the potential to drive higher investment and economic growth across the world despite the current slowdown, it can cause significant harm if not regulated at the right pace.

Marcelo Claure, founder and CEO of Claure Group, told the “Board of Changemakers” panel that when it comes to AI, it is hard in many cases “to differentiate (between) what is hype versus what is reality,” but regardless, all businesses would have to incorporate the technology into their work if they wanted to succeed in the next few decades.

“AI is the bicycle of the minds — we are all going to have to learn how to ride it,” he said.

Claure pointed out that when the browser was invented 30 years ago, it “made the cost of information zero,” which led to the creation of global companies like Google.

He added that AI is going to “reduce the cost of three very important things to basically zero: cognition, creativity, and problem-solving.”

He said: “In our companies, we hire thousands of people, we pay them to do what? We pay them to think, we pay them to problem solve, we pay them to be creative, and AI is going to enhance that.”

As an example of how Claure’s company utilized AI for higher efficiency, he mentioned that his teams used to require about 100 hours to manage a marketing campaign. However, after employing AI, the same process took less than an hour.

“So, think about a 99 percent efficiency,” he said.

Highlighting that generative AI, such as ChatGPT, will develop an IQ level of 12,000 in the next three to four years, Stephen Schwarzman, chairman and CEO of Blackstone Group, stressed the importance of “ethics in AI.”

He told the panel of CEOs: “In terms of the downsides of the technology, that in the hands of bad actors, call them rogue states, will have the use of this very powerful technology — that is a bad thing.”

Schwarzman highlighted that AI technologies are “moving so quickly,” making it more of a challenge to “catch up” and “protect systems.”

He added that experts in the field, such as MIT (Massachusetts Institute of Technology) scientists, “are really cautious about this technology.”

He said: “In other words, they love it. It can do marvelous things, but unlike most of the business community, they are not against regulation. In fact, they are pretty enthusiastic about regulation because they see the downsides, and they want those downsides addressed.

“And one of the things I have tried to do with both AI ethics centers at MIT and at Oxford, is try and be part of that dialogue, encourage people to be thinking about this — there is a lot of stuff going on in the regulatory world.”

Echoing Claure’s observation that AI is advancing rapidly, Schwarzman emphasized the importance of responding with the appropriate regulations at a fast pace.

“This is moving so fast, whatever you come up with, it’ll be obsolete pretty quickly,” he said.

In addition to AI, Jennifer Johnson, president and CEO of Franklin Templeton, identified five broad trends that may define the next decade in investments: demographics, deglobalization, digitization, decarbonization, and debt.

Like the rest of the speakers, Johnson stressed the importance of regulating AI.

“The problem is, it is scary,” she said. “But on the other hand, if we do not create environments where the good folks are learning how to use AI, the bad guys become the experts on it.

“And, so, you have to create and allow for innovation to happen.”

Speaking about deglobalization, Johnson highlighted that the supply chain was shifting.

She said: “It’s the China plus one, the nearshoring, the French shoring. But the key is that capital is moving.”

She added that “capital goes where capital is treated well — where there is a political will to create policies like the Kingdom (of Saudi Arabia) is doing to create opportunities for investment.”

Johnson referred to the shifting of supply chains as “disinflation,” but she also noted that “the raising of interest rates to slow down the economy” means that while there is a global growth slowdown, there are also “pockets of strength … like (in) India.”

Alongside Claure, Johnson and Schwarzman, panelists partaking in the roundtable discussion also included Pierre Beaudoin, chairman of the board of Bombardier, and Pam Liebman, president and CEO of The Corcoran Group.


Saudi Arabia set to be global leader in ‘positive’ use of AI, Public Investment Fund chief predicts

Saudi Arabia set to be global leader in ‘positive’ use of AI, Public Investment Fund chief predicts
Updated 22 February 2024
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Saudi Arabia set to be global leader in ‘positive’ use of AI, Public Investment Fund chief predicts

Saudi Arabia set to be global leader in ‘positive’ use of AI, Public Investment Fund chief predicts
  • Yasir Al-Rumayyan tells Future Investment Initiative Priority forum in Miami the focus should be on harnessing the benefits the technology can offer the global economy
  • Kingdom ‘well positioned to become an AI hub outside of the US’ thanks to its energy supplies, and the political will and financial resources to develop the technology

LONDON: Artificial intelligence will dominate the global investment conversation for the foreseeable future, the governor of the Saudi Public Investment Fund predicted.

Speaking on the opening day of the Future Investment Initiative Priority forum in Miami on Thursday, Yasir Al-Rumayyan said the focus should be on harnessing the benefits AI can offer the global economy, including its potentially game-changing effects on global gross domestic product.

“I think AI is coming, it’s going to come in a big way, and I think the impact will be very positive once we have the right set of regulations that will monitor, control and enable the AI ecosystem,” he said.

Saudi Arabia is on course to become a world leader in AI, in terms of innovation and development, he added.

“We are very well positioned to become an AI hub outside of the US for many reasons,” said Al-Rumayyan.

“Number one … nobody talks about energy; AI (development) will consume a lot of energy. We are the global leaders when it comes to fossil-fuel energy and when it comes to renewable energy. But we also have the political will and we have the funds needed for deployment in this initiative.”

As boss of Public Investment Fund, the main economic engine for Saudi Arabia’s Vision 2030 reforms agenda, Al-Rumayyan also updated delegates on the progress of the economic reforms in the Kingdom.

“The difference between (Saudi Vision 2030) and the visions presented by other countries is we are achieving a lot of the KPIs (key performance indicators) ahead of schedule,” he said.

“One of the numbers I really like to reference is the women in the workplace in the Kingdom; our target was 20 percent by 2030, we achieved 30-plus percent by the year 2020.”

Al-Rumayyan also confirmed that the FII is launching two new forums, in Brazil and the Kenyan capital Nairobi. The potential for investment in Latin America and Africa is huge, he said, but not enough focus was being placed on it.

The Brazil forum will focus on the issues of deforestation and the transition from fossil fuels to renewable energies, which are vital to the development of South America, Al-Rumayyan said. In Nairobi, the discussions will center around the massive opportunities offered by Africa’s expected population growth over the next decade.