EconSource: Fitch Issues Negative Outlook for GCC Banks

The prospects of an extended decline in oil prices and higher US interest rates are putting fresh strain on debt markets in the Gulf Cooperation Council (GCC) countries Fitch ratings agency said, issuing negative 2016 outlooks for GCC banks. Fitch noted that oil price weakness is slowing economic growth in the region, and in turn heavily impacting bank liquidity and earnings. About 16 percent of all ratings Fitch assigned to the GCC banks were negative, the bulk of which are in Saudi Arabia. Fitch issued a negative outlook for Saudi Arabia, noting that its “commodity dependence is much higher than for peers.” Performance indicators could also come under pressure due to lower credit demand and higher funding costs, Fitch said. However the agency noted that the region’s banks will remain profitable despite the challenges outlined. Kuwait was the only country in which Fitch forecast stronger economic growth, at 3.5 percent as a result of strong public spending. [Bloomberg, Gulf Business News, 12/10/2015]

Turkish economy grows 4 percent in third quarter, beats forecasts
Turkey’s economy grew 4 percent year-on-year in the third quarter of the year, surpassing forecasts of a growth slowdown. Deputy Prime Minister Mehmet Simsek called the growth an “undeniable achievement,” that was driven by private sector demand. He said he expects growth in 2016 to be “much better” as reforms are enacted and growth potential increases. The figure means that Turkey’s gross domestic product (GDP) for 2015 will likely be stronger than predicted. Simsek said he expects Turkey’s GDP to expand by about 3.5-4 percent. Stronger GDP growth could also ease political pressure on Turkey’s central bank to support economic activity with low interest rates, analysts said. Simsek also said Turkey will reduce its current account deficit to less than 3 percent of GDP in the medium term by implementing reforms to boost competitiveness. Meanwhile, Prime Minister Ahmet Davutoglu announced a 30 percent increase in the minimum wage, saying the government will provide help to employers to adopt the wage hike. [Reuters, WSJ, AFP, Bloomberg, 12/10/2015]

Rising food prices push up Egypt’s inflation
Egypt’s urban consumer inflation jumped to 11.1 percent in November, its highest level since June, propelled by rising food prices. Egypt said in November it would control the prices of ten essential commodities and use its state grain buying agency to import a broader array of goods in an effort to curb inflation. However, November core inflation, which excludes volatile items such as fruits and vegetables, rose to 7.44 percent from 6.26 percent in October. Egypt’s annual inflation rate accelerated 11.8 percent compared to 10.3 percent in October. The higher inflation figures may influence the central bank’s decision on interest rates at a monetary policy committee meeting scheduled for next week, Capital Economics said. “There is growing risk that [the central bank] will be spooked and decide to hike rates,” the company said. [Reuters, Ahram Online, Aswat Masriya, 12/10/2015]

Tunisia, German Reconstruction Credit Institute sign loan contracts
Tunisia and the German Reconstruction Credit Institute (KFW) signed eight loan and funding contracts on Wednesday in Tunis. Secretary of State for Foreign Affairs Minister M’hamed Ezzine Chelaifa and KFW Director of the Middle East and North Africa Wolfgang Reuss signed the loan contracts at a ceremony held at the Ministry of Foreign Affairs. “These contracts, which follow the different bilateral consultations and the commitments made by the German side to support Tunisia, reflect the quality and wealth of cooperation and partnership between the two countries,” the Ministry said in a statement. Under the contracts, Tunisia will receive funding of about EUR 102 million in the form of concessional loans and grants to be allocated for regional and rural development projects in priority sectors, namely water and environment. [TAP, 12/10/2015]

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