Clean energy tech investments fueling global economic growth: IEA 

Clean energy tech investments fueling global economic growth: IEA 
Clean energy investments in 2023 accounted for around 0.7 percent of worldwide investment across all sectors of the economy. Shutterstock
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Updated 31 May 2024

Clean energy tech investments fueling global economic growth: IEA 

Clean energy tech investments fueling global economic growth: IEA 

RIYADH: Booming investments in clean energy technology are strengthening the global economy by creating new industrial and employment opportunities, a report has outlined.

According to the International Energy Agency, global investment in the manufacturing of five key clean energy technologies – solar photovoltaic, wind, batteries, electrolyzers, and heat pumps – surged by 70 percent year-on-year in 2023 to $200 billion. 

The IEA added that investments in clean technology manufacturing are becoming increasingly significant and are beginning to register in broader macroeconomic data. 

According to the report, such investments in 2023 accounted for around 0.7 percent of worldwide investment across all sectors of the economy. 

“In growth terms, the contribution is even starker — in 2023, clean technology manufacturing alone accounted for around 4 percent of global GDP (gross domestic product) growth and nearly 10 percent of global investment growth,” said the IEA.  

Solar PV meets 2030 targets

The analysis revealed that investments in solar PV manufacturing more than doubled last year to $80 billion, while funding in battery production rose by around 60 percent to $100 billion. 

Due to the surge in investments, solar PV module manufacturing capacity today is already in line with what is needed in 2030 based on the IEA’s net zero emissions scenario. 

Similarly, for battery cells, if announced projects are included, manufacturing capacity is 90 percent of the way toward meeting net zero demand by the end of this decade, the report highlighted. 

“Record output from solar PV and battery plants is propelling clean energy transitions — and the strong investment pipeline in new facilities and factory expansions is set to add further momentum in the years ahead,” said IEA Executive Director Fatih Birol.  

He added: ‘While greater investment is still needed for some technologies — and clean energy manufacturing could be spread more widely around the globe — the direction of travel is clear. 

“Policymakers have a huge opportunity to design industrial strategies with clean energy transitions at their core.”  

The IEA also stated that around 40 percent of investments in clean energy manufacturing in 2023 were in facilities that are due to come online in 2024. For batteries, this share rises to 70 percent.  

Battery manufacturing grows

Battery manufacturing also had a record year in 2023, with production totaling more than 800 gigawatt-hours, representing a rise of 45 percent from 2022. 

The report highlighted that battery capacity additions also surged, with almost 780 GWh of cell manufacturing capacity added in 2023, around a quarter more than the previous year. 

“Globally, battery manufacturing capacity could exceed 9 terawatt-hours by 2030 if all announcements are realized. Battery manufacturing deployment needs in 2030,” added the IEA report.  

Similarly, new manufacturing capacity for wind and electrolyzers also grew faster in 2023. 

According to the agency, the existing capacity for wind could deliver nearly 50 percent of the needs in 2030, while announced projects could meet a further 12 percent. 

Meanwhile, capacity additions for heat pump manufacturing slowed due to stagnation in the majority of leading markets. The report added that the existing capacity could deliver only around one-third of the needs required in 2030. 

China dominates clean energy 

Clean energy manufacturing is still dominated by a few regions, with China home to 80 percent of the global solar PV module production capacity. 

The report highlighted that the manufacturing of battery cells could become less geographically concentrated by the end of this decade if all announced projects are materialized. 

After conducting plant-level assessments of more than 750 facilities, the IEA found that China remains the lowest-cost producer of all clean energy technologies. 

“Battery, wind and solar PV manufacturing facilities are typically 20 percent to 30 percent more expensive to build in India than in China, and 70 percent to 130 percent more in the US and Europe,” the IEA said.  

It added: “However, the vast majority of total production costs for these technologies; 70 percent to 98 percent, is estimated to come from operational costs, which include inputs such as energy, labor and materials — implying that production cost gaps seen today are not immutable and can be influenced by policy.”   

Apart from China, the US, and the EU, other countries that heavily invested in clean energy technologies in recent years were India, Japan, and South Korea. 

The report also highlighted that similar investments in Africa, Central America, and South America were negligible. 

Multiple factors shape investments

The IEA revealed that cost is not the only factor that draws investments in the clean energy technology sector. 

According to the think tank, several other factors, including the size of the domestic market, availability of skilled workers, and infrastructure readiness, are other crucial elements that shape the decisions of firms to invest in the sector. 

“Policy interventions can therefore raise the attractiveness of investing in a given region without directly subsidizing the costs of manufacturing,” said the IEA. 

It added: “Training and certification schemes for workers, compressing project lead times while maintaining environmental standards, enlarging domestic markets and reducing uncertainty with robust, stable climate policies are some key ‘low regret’ measures that can increase incentives to invest, irrespective of the role of direct incentives in industrial strategies.”  

The report also underscored the vitality of research and development to increase the growth of clean energy manufacturing globally.  

“While private-sector R&D can be stimulated by policies that promote manufacturing investment and experience, direct innovation support is also needed,” said the IEA.  

The agency also noted that government initiatives, including R&D grants or loans, project finance, support for rapid prototyping, and promoting startups, will accelerate advancements in clean energy manufacturing.

Moody’s affirms Islamic Development Bank’s AAA rating

Moody’s affirms Islamic Development Bank’s AAA rating
Updated 22 sec ago

Moody’s affirms Islamic Development Bank’s AAA rating

Moody’s affirms Islamic Development Bank’s AAA rating

RIYADH: Moody’s Investor Services has affirmed its AAA credit rating with a stable outlook for the Islamic Development Bank, driven by the financial institution’s robust asset performance. 

In a press release, IsDB said that its short-term issuer rating has been affirmed at Prime-1 by the US-based agency, the highest tier on offer. 

IsDB has been rated AAA by Moody’s since 2006, the statement added. 

According to the agency, obligations rated AAA are judged to be of the highest quality and are subject to the lowest level of credit risk, while Prime-1 denotes the best ability to repay short-term debts. 

Founded in 1973 and headquartered in Jeddah, IsDB is a multilateral development finance institution focused on Islamic finance for infrastructure development. 

“The affirmation reflects Moody’s expectation that IsDB’s capital position and asset performance will remain robust, supported by the strong liquidity and funding position, low funding costs, and the bank’s preeminent position as one of few regular issuers of highly-rated benchmark-size sukuk in the international capital markets,” said IsDB in the press statement. 

The financial institution added that its strong credit profile also benefits from the track record of member country support demonstrated through a series of general capital increases. 

IsDB also noted that its leverage ratio is expected to remain significantly below the median for AAA-rated multilateral development banks, driven by such capital increases. 

The institution currently has 57 members, with the largest single shareholder being Saudi Arabia with 22.5 percent of the financial institution’s total capital. 

Libya and Indonesia follow, holding a capital of 9.03 percent and 7.04 percent, respectively. 

Since its inception, IsDB has provided long-term sustainable and ethical financing structures to its member nations to achieve development and economic growth. 

“IsDB remains committed to supporting its member countries in achieving sustainable development and economic growth through these strategic projects. These investments not only address immediate needs but also lay the foundation for long-term resilience and prosperity,” according to its website. 

In June, IsDB allocated $165 million for the construction and operationalization of green, resilient, and sustainable schools in earthquake-affected and earthquake-prone areas in Turkiye. 

In the same month, it also provided $156.3 million to Turkmenistan to develop three oncology centers and training of health care providers. 

In June, IsDB also allocated $47.68 million to Suriname to enhance the country’s power transmission and distribution network.

Oil Updates – crude falls on weak China demand concerns, Mideast ceasefire talks

Oil Updates – crude falls on weak China demand concerns, Mideast ceasefire talks
Updated 25 July 2024

Oil Updates – crude falls on weak China demand concerns, Mideast ceasefire talks

Oil Updates – crude falls on weak China demand concerns, Mideast ceasefire talks

TOKYO/SINGAPORE: Oil prices eased on Thursday as concerns over weak demand in China, the world’s largest crude importer, and expectations of a nearing ceasefire deal in the Middle East overcame gains in the previous session after draws in US inventories.

Brent crude futures for September fell 59 cents, or 0.7 percent, to $81.12 a barrel by 8:30 a.m. Saudi time. US West Texas Intermediate crude for September slid 61 cents, or 0.8 percent, to $76.98 per barrel.

Both benchmarks settled higher on Wednesday, snapping consecutive sessions of declines after the Energy Information Administration said US crude inventories fell by 3.7 million barrels last week. That compared with analysts’ expectations in a Reuters poll for a 1.6-million-barrel draw.

US gasoline stocks dropped by 5.6 million barrels, compared with analysts’ expectations for a 400,000 draw. Distillate stockpiles fell by 2.8 million barrels versus expectations for a 250,000-barrel increase, the EIA data showed.

“Despite draws in US crude and gasoline stocks, investors remained wary about weakening demand in China and expectations of advancing ceasefire talks between Israel and Hamas added to pressure,” said Hiroyuki Kikukawa, president of NS Trading, a unit of Nissan Securities.

This year, China’s oil imports and refinery runs have trended lower than in 2023 on weaker fuel demand amid sluggish economic growth, according to government data.

Slumping US stock markets also reduced traders’ risk appetite, Kikukawa added. All three main indexes on Wall Street ended lower on Wednesday.

In the Middle East, efforts to reach a ceasefire deal to end the war in the Gaza Strip between Israel and militant group Hamas under a plan outlined by US President Joe Biden in May and mediated by Egypt and Qatar have gained momentum over the past month.

On Wednesday, Israeli Prime Minister Benjamin Netanyahu sketched a vague outline of a plan for a “deradicalized” post-war Gaza in a speech to US Congress and touted a potential future alliance between Israel and America’s Arab allies.

“If Middle East ceasefire talks progress, US equities continue to slide, and China’s economy remains sluggish, oil prices could fall to early June levels,” said Satoru Yoshida, a commodity analyst with Rakuten Securities.

Additionally, clarity on US interest rate cuts is missing, said Phillip Nova analyst Priyanka Sachdeva, who does not expect robust demand given China’s economic recovery has been poor.

The US Federal Reserve is expected to cut rates just twice this year, in September and December, according to a Reuters poll of economists, as resilient US consumer demand warrants a cautious approach despite easing inflation.

Lower interest rates should spur economic growth, leading to more oil consumption.

In Canada, hundreds of wildfires are burning in the western provinces of British Columbia and Alberta, including in the area of oil sands hub Fort McMurray.

Saudi Arabia’s non-oil exports hit 2-year high at $7.70bn in May: GASTAT 

Saudi Arabia’s non-oil exports hit 2-year high at $7.70bn in May: GASTAT 
Updated 25 July 2024

Saudi Arabia’s non-oil exports hit 2-year high at $7.70bn in May: GASTAT 

Saudi Arabia’s non-oil exports hit 2-year high at $7.70bn in May: GASTAT 

RIYADH: Saudi Arabia’s non-oil exports hit a two-year high in May, reaching SR28.89 billion ($7.70 billion), an 8.2 percent increase compared to the same month in 2023. 

According to the General Authority for Statistics, this also represented a 26.93 percent growth from April. 

Strengthening the non-oil private sector remains a pivotal goal for Saudi Arabia as the Kingdom continues its efforts to diversify its economy and reduce its reliance on oil revenues. 

Merchandise exports also saw growth, with a 5.8 percent increase in May compared to the same period last year, driven by a 4.9 percent rise in oil shipments. 

Month-over-month, merchandise exports increased by 3.3 percent from April to May. 

The share of oil trade in total exports decreased slightly, dropping to 72.4 percent in May from 73 percent in the same month the previous year. 

“Ratio of non-oil exports (including re-exports) to imports increased to 41.1 percent in May 2024 from 39 percent in May 2023. This was due to an 8.2 percent increase in non-oil exports and a 2.6 percent increase in imports over that period,” stated GASTAT. 

The report revealed that chemical and allied products dominated the non-oil exports, accounting for 23.8 percent of total shipments in May. 

The Kingdom’s imports rose by 2.6 percent year-on-year in May, reaching SR70.24 billion. 

According to GASTAT, machinery, electrical equipment, and parts dominated this sphere, constituting 26.7 percent of the total incoming shipments. 

China was Saudi Arabia’s primary trading partner in May, with exports to the Asian nation amounting to SR15.91 billion, or 15.2 percent of the total. 

South Korea and India followed, with the Kingdom exporting goods worth SR10.31 billion and SR8.03 billion, respectively, to these countries. 

The UAE, Japan, and Bahrain were also among the top 10 destinations for Saudi exports, along with the US, Poland, Taiwan, and Malta. 

On the import side, China held the lead, accounting for 25 percent or SR17.55 billion of incoming shipments in May 2023. 

King Abdulaziz Sea Port in Dammam was the highest entry point for goods into Saudi Arabia in May, with a value of SR16.56 billion, constituting 23.6 percent of the overall imports. 

GCC banks eye Turkiye, Egypt and India for growth prospects

GCC banks eye Turkiye, Egypt and India for growth prospects
Updated 24 July 2024

GCC banks eye Turkiye, Egypt and India for growth prospects

GCC banks eye Turkiye, Egypt and India for growth prospects
  • Favorable economic conditions and opportunities draw interest

RIYADH: Gulf Cooperation Council banks aim to diversify their business models and enhance profitability by entering high-growth markets such as Turkiye, Egypt and India, a new report has revealed. 

Fitch Ratings noted that this growing interest was due to favorable economic conditions and attractive growth opportunities in these countries. 

Notably, the appetite for expansion in Turkiye has increased following macroeconomic policy shifts, while interest in Egypt is fueled by enhanced stability and privatization opportunities.

Despite higher acquisition costs in these regions, the report said that GCC banks remain focused on leveraging the potential of these markets to offset slower growth at home. 

The GCC banking sector has consistently delivered high returns on equity and impressive valuation multiples compared to global standards, according to a McKinsey June report.

The strategic diversification of GCC economies beyond oil, coupled with prudent regulatory frameworks, has bolstered banking stability and profitability.

Elevated interest rates have further enhanced bank profits, contributing to their returns. Over the past decade, the region’s banks have outperformed the global average in return on equity, or ROE, maintaining an advantage of three to four percentage points during 2022 to 2023.

Although global banking valuations are historically low, GCC banks continue to generate value with ROE surpassing their cost of equity. 

Despite record profits driven by elevated interest rates for banks globally and in the GCC, McKinsey cautions executives to balance short-term gains with long-term strategic objectives.

Investing in transformative change and efficiency is essential for sustaining a competitive edge when interest rates eventually decline. 

GCC banks’ primary exposure outside their home region was concentrated in Turkiye and Egypt, where they collectively held about $150 billion in assets by the end of the first quarter of 2024, according to Fitch Rating. 

This significant presence underscores the strategic importance of these markets for GCC banks’ growth ambitions.

Additionally, there is growing interest in India, particularly from UAE-based banks, driven by the strong and expanding financial and trade links between the two countries.

Turkiye, Egypt and India each boast significantly larger populations compared to GCC countries, presenting greater potential for banking sector growth due to their robust real gross domestic product growth prospects and comparatively smaller banking systems. 

For instance, the banking system assets to GDP ratios in these countries are below 100 percent, whereas in the largest GCC markets, this ratio exceeds 200 percent, according to the report. 

Furthermore, the private credit to GDP ratios were notably lower in 2023, standing at 27 percent in Egypt, 43 percent in Turkiye, and 60 percent in India, highlighting substantial room for expansion in these banking sectors. 

GCC banks are increasingly looking to expand in Turkiye due to a favorable shift in the country’s macroeconomic policies following the presidential election last year, according to Fitch. 

These changes have reduced external financing pressures and improved macroeconomic and financial stability, prompting Fitch to upgrade its outlook for the Turkish banking sector to “improving.” 

Fitch projects Turkish inflation to drop from 65 percent in 2023 to an average of 23 percent in 2025, with expectations that GCC banks will cease using hyperinflation reporting for their Turkish subsidiaries by 2027.

The enhanced stability of the Turkish lira is likely to bolster returns on GCC banks’ Turkish operations. 

Simultaneously, GCC banks are showing growing interest in Egypt, driven by a better macroeconomic environment, opportunities from the authorities’ privatization program, and the expansion of GCC corporations in the country. 

Fitch has recently upgraded its outlook on the operating environment score for Egyptian banks to positive, anticipating greater macroeconomic stability.

This improvement is attributed to Egypt’s substantial foreign direct investment deal with the UAE, a strengthened International Monetary Fund deal, increased foreign exchange rate flexibility, and a stronger commitment to structural reforms. 

Fitch expects the Egyptian banking sector’s net foreign assets position to improve significantly this year, supported by robust portfolio inflows, remittances, and tourism receipts.

Egyptian inflation is forecasted to decrease from 27.5 percent in June 2024 to 12.3 percent in June 2025, potentially leading to policy interest rate cuts starting from the fourth quarter of 2024. 

Fitch noted that while the Egyptian banking market presents high entry barriers, GCC banks might find opportunities to acquire stakes in three banks through the authorities’ privatization program.

The expansion of GCC companies, especially those from the UAE, could also drive increased GCC bank presence in Egypt. 

However, the rising cost of acquiring banks in Turkiye, Egypt and India might pose challenges for GCC banks’ acquisition plans.

Price-to-book ratios have risen, particularly in Turkiye and India, reflecting better macroeconomic prospects and reduced operational risks. Acquisitions in these lower-rated markets could potentially weaken GCC banks’ viability ratings, depending on the size of the acquired entity and the resulting financial profile.

Nevertheless, nearly all GCC banks’ long-term issuer default ratings are supported by government backing and are unlikely to be affected by these acquisitions. In this context, economic forecasts play a crucial role in shaping these expansion strategies.

The World Bank has updated its growth projections in April for various countries, reflecting significant opportunities and risks. 

For instance, Saudi Arabia’s economic growth forecast for 2025 has been raised to 5.9 percent, up from the previous estimate of 4.2 percent, signaling robust long-term prospects. 

For the UAE it is now 3.9 percent for 2024, up from 3.7 percent, with a further rise to 4.1 percent in 2025.

Kuwait and Bahrain are also expected to see modest growth increases, while Qatar’s 2024 forecast has been reduced to 2.1 percent but adjusted upward to 3.2 percent for 2025.

Saudi finance minister heads Kingdom’s delegation to G20 ministerial meeting in Brazil

Saudi finance minister heads Kingdom’s delegation to G20 ministerial meeting in Brazil
Updated 24 July 2024

Saudi finance minister heads Kingdom’s delegation to G20 ministerial meeting in Brazil

Saudi finance minister heads Kingdom’s delegation to G20 ministerial meeting in Brazil
  • Delegation includes Governor of the Saudi Central Bank Ayman Al-Sayari

RIYADH: Ongoing global challenges, financial sector issues, and the international economic outlook will be key topics as Saudi Arabia participates in a meeting of G20 finance ministers and central banks in Brazil this week.

Finance Minister Mohammed Al-Jadaan will head the Kingdom’s delegation at the third Finance Ministers and Central Bank Governors meeting in Rio de Janeiro from July 25 to 26 under the Brazilian G20 Presidency, according to a ministry statement.

Other topics on the agenda include financial inclusion, international taxation cooperation, climate change, and financing sustainable development as well as capital flows, global debt, and reform of Multilateral Development Banks.

This falls in line with the Ministry of Finance’s goal of doubling the size of the financial sector and boosting gross domestic product growth.

It also cements the ministry’s aim to align the financial market’s size with that of the banking sector, while establishing an inclusive system benefitting most Saudi citizens.

According to the 2023 Financial Sector Development Program document, the Saudi Capital Market Authority plans to boost assets under management to 29.4 percent of the gross domestic product this year by increasing the investment environment and attracting more investors.

The Saudi delegation includes the Governor of the Saudi Central Bank Ayman Al-Sayari, along with other senior officials from the Saudi Ministry of Finance and SAMA.

The meeting convenes G20 ministers and central bank governors, several representatives of invited countries, and heads of global and regional financial organizations.

In June, the Riyadh-based Financial Academy unveiled its new strategy for 2024-2026, focusing on enhancing human capabilities in the sector through training programs and professional certifications.  

The academy aims to increase the number of trainees and improve the quality of its services to meet the evolving needs of the industry.