Top marks for economic reforms as Vision 2030 boosts confidence

Updated 08 August 2016

Top marks for economic reforms as Vision 2030 boosts confidence

JEDDAH: The International Monetary Fund’s (IMF) encouraging assessment underscores the Saudi government's commitment to fiscal discipline and comes two years after it warned of the Kingdom's fiscal ruin, a top economist told Arab News Sunday.
“It's encouraging that the IMF sees a lower fiscal deficit albeit low growth for 2016 and 2017,” said John Sfakianakis, director of economic research at the Gulf Research Center.
“Saudi Arabia has embarked on the largest economic reform project over the last decades which the IMF acknowledges undoubtedly given its depth and breadth for an oil dominant economy,” Sfakianakis said.
A senior Saudi economist added that the Kingdom’s economy is stabilizing after the government implemented pivotal reforms.
Saudi Vision 2030 and the National Transformation Program (NTP) 2020 have made international financial institutions such as the IMF to change their views of the Kingdom’s economic progress, Said Al-Shaikh, chief economist at the National Commercial Bank, told Arab News.
“Over the course of 2016, several initiatives have been introduced, such as establishing of an SME commission and a venture capital fund besides passing of several laws including commercial laws,” the economist added.
In a recent report, Al-Rajhi Capital Research said the IMF expects the Saudi economy to stabilize its GDP growth to 2.25 percent, implying steady improvement over the next couple of years (1.2 percent in 2016).
Speaking to Bloomberg recently, Tim Callen, the IMF’s Saudi mission chief, commented: “The fiscal adjustment is under way. The government is very serious in bringing about that fiscal adjustment.
Callen added: “We’re happy with the progress that’s being made.”
In a related development, economists said that second-quarter earnings in Saudi Arabia’s petrochemical industry beat expectations as producers reaped the benefits of volatile oil prices.


Israel cenbank’s Abir says buying corporate bonds to prevent layoffs

Updated 08 July 2020

Israel cenbank’s Abir says buying corporate bonds to prevent layoffs

JERUSALEM: The Bank of Israel’s decision to start buying corporate bonds should enable companies to issue debt and prevent further layoffs as a result of the coronavirus pandemic, deputy governor Andrew Abir said.
On Monday, the bank held its benchmark interest rate at 0.1 percent but said it would buy 15 billion shekels ($4 billion) of higher-rated corporate bonds in the secondary market.
“It’s not that the corporate bond market was not functioning or because spreads have widened dramatically, but rather the understanding that over the next 6-12 months, there’s going to be a need for issuance in that market,” Abir told Reuters.
The central bank began purchases on March 15 of up to 50 billion shekels of government bonds, which has helped reverse a spike in government and corporate yields.
The index of bonds issued by Israel’s 20 largest firms has gained 1.4 percent following the central bank’s announcement, following three weeks of declines.
Noting that more than 40 percent of corporate credit comes from the bond market, Abir said that fear of being frozen out the market could lead to cash hoarding and cost-cutting, including jobs.
“We want to prevent a situation where a company is having question marks in its ability to fund themselves (and) lays off another 1,000 workers.”
Unemployment is already more than 20 percent and could worsen after some COVID-19 restrictions were reimposed.
Abir said risks to the central bank’s scenario of a record six percent economic contraction in 2020 will be “to the downside” if the infection rate stays high.
Analysts are split over whether the central bank will lower its key rate to zero percent or negative. The Bank of Israel has indicated it is reluctant to do so.
“We still have more measures that we can do. QE can be increased. We haven’t run out of our policy options,” Abir said.