Wars and low crude oil prices have diminished growth prospects for the Middle East, the International Monetary Fund (IMF) said Tuesday in a new paper, Avoiding the New Mediocre: Raising Long-Term Growth in the Middle East and Central Asia.
The IMF said that all emerging markets are facing diminished growth prospects over the next five years, but those of the Middle East and Central Asian countries are expected to be 1.25 percentage points below the emerging market and developing country average. IMF Middle East Director Masood Ahmed said conflict in the Middle East is increasingly weighing on economic activity. “The new ‘lower for longer’ oil price reality has dampened oil-exporting countries’ longer-term growth prospects and rendered their oil-centered economic growth models untenable,” he said. The IMF called for fostering a more competitive business environment to boost productivity by streamlining regulations and tax codes and reducing the dominance of state-owned enterprises. It said boosting worker education, skills, and professional networks is also critical for raising productivity. [Reuters, 3/22/2016]
Foreign workers may be forced to leave Saudi Arabia as the government seeks to boost job opportunities for Saudi citizens. In early March, the Ministry of Labor announced that within six months foreigners would be banned from selling and maintaining mobile phones and accessories, in an effort to provide more jobs for Saudi citizens. So far, layoffs have been concentrated in the construction sector, which analysts estimate employs around 45 percent of foreigners. Job losses among foreigners look likely to spread to other sectors. Labor Ministry Spokesman Khaled Abalkhail said the ban on mobile phone sellers would affect about 20,000 workers, and that similar action would eventually be taken in other industries. “The labor ministry targets aim to create jobs for around 1.3 million Saudis … There are plans for gradual nationalization of other sectors such as taxis, travel and tourism, real estate, jewelry, and vegetable markets,” he said. [Reuters, 3/23/2016]
Officials from the National Bank of Egypt (NBE) met with banks in the United Arab Emirates (UAE) as Egypt seeks to attract foreign investors to its local-currency debt market. The state-run lender also plans to meet investors in other countries, NBE’s Chief Financial Officer Hussein Refaie said, without giving details. The NBE has been offering dollar call options for up to a year to overseas investors buying Egyptian Treasury bills since March 14. Authorities hope the product will help renew interest in the local debt market. The options are sold at a premium of about 4.75 percent for one-year contracts, according to state-run Banque Misr, which is also selling the product. They allow investors to buy back dollars at the same rate at which they were sold, effectively eliminating the risk resulting from further pound weakening. By also guaranteeing the ability to expatriate funds, they address the most common concerns cited by investors for avoiding local debt. “We are explaining the product to investors and receiving feedback,” Refaie said. “It’s too early to talk about finalized deals, but there is a lot of interest in the product.” [Bloomberg, 3/23/2016]
After a sharp drop in oil prices, Algeria’s Sonatrach is shifting its strategy by offering foreign firms direct negotiations to buy stakes in 20 oil and gas fields in a bid to attract investors and increase output. “Direct negotiations are a more efficient, less expensive, a faster, and a less bureaucratic approach,” a Sonatrach source said. “Sonatrach is already in negotiations with [Italy’s] ENI and several other foreign firms.” The 20 fields include oil and gas fields across the center and south of the country. As part of the campaign, Sonatrach Chief Amine Mazouzi will travel to China at the end of the month for meetings with Chinese oil companies SINOPEC and CNPC, which are already operating in Algeria. Oil executives said bilateral contracts may offer flexibility, but Algeria’s legal framework and red tape remain a major concern for some companies. Algeria is also in talks with European Union officials on holding a summit in Algiers in May that will focus on energy investment opportunities in Algeria. Oil executives said bilateral contracts may offer flexibility. [Reuters, 3/22/2016]
Morocco’s central bank cut its benchmark interest rate on Tuesday to 2.25 percent from 2.5 percent, loosening monetary policy for the first time in more than a year to boost growth. The drop in global oil prices has revived public finances and reduced deficits in Morocco, the Middle East’s biggest energy importer, giving the country more room to maneuver. Despite inflation rising to 0.9 percent in February from 0.3 percent in January as food prices increased, the bank said it is likely to hover around 0.5 percent during 2016 and 1.4 percent in 2017. “We don’t have any concerns regarding inflationary pressures … So we can give some support to the economic activity,” Central Bank Governor Abdellatif Jouahri said. The bank also said it had also started structural reforms to move towards a more flexible currency regime, as recommended by the International Monetary Fund. [Reuters, 3/22/2016]
Also of interest
Saudi Aramco starts producing gas at offshore Hasbah field | Reuters
UAE February central bank foreign assets jump 11 percent y/y | Reuters
Oman close to cutting commercial, industrial LPG subsidies | Reuters
World Food Program says famine threatens half of Yemen | Reuters
Egypt close to EUR 1 billion French arms purchases | Reuters
Egypt’s Suez Canal revenues decline in February | Ahram Online
Solar power reflects Morocco’s energy ambitions | FT
Tripoli government introduces regulations to reduce bread prices | Libya Monitor
Turkey, Pakistan sign free trade agreement framework | Hurriyet
Syrian exports decimated by five years of war (analysis) | Al Arabiya
IMF says war, oil rout erode Middle East growth prospects
Wars and low crude oil prices have diminished growth prospects for the Middle East, the International Monetary Fund (IMF) said Tuesday in a new paper, Avoiding the New Mediocre: Raising Long-Term Growth in the Middle East and Central Asia. The IMF said that all emerging markets are facing diminished growth prospects over the next five years, but those of the Middle East and Central Asian countries are expected to be 1.25 percentage points below the emerging market and developing country average. IMF Middle East Director Masood Ahmed said conflict in the Middle East is increasingly weighing on economic activity. “The new ‘lower for longer’ oil price reality has dampened oil-exporting countries’ longer-term growth prospects and rendered their oil-centered economic growth models untenable,” he said. The IMF called for fostering a more competitive business environment to boost productivity by streamlining regulations and tax codes and reducing the dominance of state-owned enterprises. It said boosting worker education, skills, and professional networks is also critical for raising productivity. [Reuters, 3/22/2016]
Saudi Arabia loses attractiveness for foreign workers
Foreign workers may be forced to leave Saudi Arabia as the government seeks to boost job opportunities for Saudi citizens. In early March, the Ministry of Labor announced that within six months foreigners would be banned from selling and maintaining mobile phones and accessories, in an effort to provide more jobs for Saudi citizens. So far, layoffs have been concentrated in the construction sector, which analysts estimate employs around 45 percent of foreigners. Job losses among foreigners look likely to spread to other sectors. Labor Ministry Spokesman Khaled Abalkhail said the ban on mobile phone sellers would affect about 20,000 workers, and that similar action would eventually be taken in other industries. “The labor ministry targets aim to create jobs for around 1.3 million Saudis … There are plans for gradual nationalization of other sectors such as taxis, travel and tourism, real estate, jewelry, and vegetable markets,” he said. [Reuters, 3/23/2016]
Egypt approaches banks as seeks to market local debt
Officials from the National Bank of Egypt (NBE) met with banks in the United Arab Emirates (UAE) as Egypt seeks to attract foreign investors to its local-currency debt market. The state-run lender also plans to meet investors in other countries, NBE’s Chief Financial Officer Hussein Refaie said, without giving details. The NBE has been offering dollar call options for up to a year to overseas investors buying Egyptian Treasury bills since March 14. Authorities hope the product will help renew interest in the local debt market. The options are sold at a premium of about 4.75 percent for one-year contracts, according to state-run Banque Misr, which is also selling the product. They allow investors to buy back dollars at the same rate at which they were sold, effectively eliminating the risk resulting from further pound weakening. By also guaranteeing the ability to expatriate funds, they address the most common concerns cited by investors for avoiding local debt. “We are explaining the product to investors and receiving feedback,” Refaie said. “It’s too early to talk about finalized deals, but there is a lot of interest in the product.” [Bloomberg, 3/23/2016]
Algeria aims to attract energy investors amid low oil revenues
After a sharp drop in oil prices, Algeria’s Sonatrach is shifting its strategy by offering foreign firms direct negotiations to buy stakes in 20 oil and gas fields in a bid to attract investors and increase output. “Direct negotiations are a more efficient, less expensive, a faster, and a less bureaucratic approach,” a Sonatrach source said. “Sonatrach is already in negotiations with [Italy’s] ENI and several other foreign firms.” The 20 fields include oil and gas fields across the center and south of the country. As part of the campaign, Sonatrach Chief Amine Mazouzi will travel to China at the end of the month for meetings with Chinese oil companies SINOPEC and CNPC, which are already operating in Algeria. Oil executives said bilateral contracts may offer flexibility, but Algeria’s legal framework and red tape remain a major concern for some companies. Algeria is also in talks with European Union officials on holding a summit in Algiers in May that will focus on energy investment opportunities in Algeria. Oil executives said bilateral contracts may offer flexibility. [Reuters, 3/22/2016]
Morocco cuts benchmark rate to 2.25 percent to boost growth
Morocco’s central bank cut its benchmark interest rate on Tuesday to 2.25 percent from 2.5 percent, loosening monetary policy for the first time in more than a year to boost growth. The drop in global oil prices has revived public finances and reduced deficits in Morocco, the Middle East’s biggest energy importer, giving the country more room to maneuver. Despite inflation rising to 0.9 percent in February from 0.3 percent in January as food prices increased, the bank said it is likely to hover around 0.5 percent during 2016 and 1.4 percent in 2017. “We don’t have any concerns regarding inflationary pressures … So we can give some support to the economic activity,” Central Bank Governor Abdellatif Jouahri said. The bank also said it had also started structural reforms to move towards a more flexible currency regime, as recommended by the International Monetary Fund. [Reuters, 3/22/2016]
Also of interest
Saudi Aramco starts producing gas at offshore Hasbah field | Reuters
UAE February central bank foreign assets jump 11 percent y/y | Reuters
Oman close to cutting commercial, industrial LPG subsidies | Reuters
World Food Program says famine threatens half of Yemen | Reuters
Egypt close to EUR 1 billion French arms purchases | Reuters
Egypt’s Suez Canal revenues decline in February | Ahram Online
Solar power reflects Morocco’s energy ambitions | FT
Tripoli government introduces regulations to reduce bread prices | Libya Monitor
Syrian exports decimated by five years of war (analysis) | Al Arabiya
Turkey, Pakistan sign free trade agreement framework | Hurriyet