Saudi Arabia, the world’s biggest oil exporter, is pursuing an “appropriate” policy by pushing back its deadline of achieving a balanced budget to 2023, giving the economy a breather as it slows down fiscal reforms to propel growth that stagnated in 2017, the IMF mission chief to Saudi Arabia said.
“We are happy to see that the government has now set a later date for returning the budget to balance and we think that is entirely appropriate. If they can achieve a budget balance by 2023 that would be fine,” said Tim Callen.
The kingdom revealed last year its biggest budget ever for 2018, allocated 200 billion riyal to a four-year stimulus programme and approved bonuses for public sector employees, measures that are aimed at accelerating growth hurt by austerity and low oil prices.
The IMF had called last year on the kingdom to ease the pace of fiscal consolidation that led to a 0.5 per cent economic contraction in 2017, compared with 1.7 per cent growth in 2016.
“This is not a call to stop the fiscal reforms that are going on," said Mr Callen. "This is a call to implement them at a slower pace than the government had previously planned.”
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Saudi Arabia unveils biggest ever budget to propel growth
Saudi Arabia approves 72bn riyals stimulus package for next year
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The Arab world’s largest economy began tightening its purse strings in 2016 to help narrow its fiscal deficit, which reached a record 367bn riyals in 2015 in the wake of plunging oil prices. But fiscal consolidation efforts, which included increasing energy prices and freezing public sector salary hikes, have curbed Saudi Arabia's economic growth. Government revenues have been further impacted by a global oil pact to curb oil production that began in January 2017 and subsequently extended until the end of 2018. The agreement to trim 1.8 million barrels of oil a day is intended to shore up oil prices that have risen to around $70 a barrel.
But last year the kingdom unveiled an expansionary budget for 2018 with 978bn riyals in expenditures, a 5.6 per cent increase from 2017.
The kingdom is also implementing an economic overhaul plan and various reforms under the 2020 National Transformation Programme and its over-arching Vision 2030 agenda to help wean the country off oil income and create new revenue streams.
In January the fund revised up its growth projections for Saudi Arabia where growth will reach 1.6 per cent in 2018 and 2.2 in 2019, 0.5 and 0.6 percentage points higher than its October forecasts.
Mr Callen said the upgrade in forecasts is mainly due to higher projections for non-oil growth, which will reach 2.1 per cent this year. The oil sector will expand 0.9 per cent this year.
“The government spent a lot of money at the end of 2017 and it also is planning a higher level of spending in 2018 than we previously expected so that should provide for non-oil growth,” said Mr Callen.
“Oil prices have increased and higher oil prices are generally good for confidence in the economy and the private sector.”
Saudi Arabia is even more bullish, forecasting growth of 2.7 per cent in 2018 and 2019, thanks to its new spending measures.
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BIO
Favourite holiday destination: Turkey - because the government look after animals so well there.
Favourite film: I love scary movies. I have so many favourites but The Ring stands out.
Favourite book: The Lord of the Rings. I didn’t like the movies but I loved the books.
Favourite colour: Black.
Favourite music: Hard rock. I actually also perform as a rock DJ in Dubai.
Formula Middle East Calendar (Formula Regional and Formula 4)
Round 1: January 17-19, Yas Marina Circuit – Abu Dhabi
Round 2: January 22-23, Yas Marina Circuit – Abu Dhabi
Round 3: February 7-9, Dubai Autodrome – Dubai
Round 4: February 14-16, Yas Marina Circuit – Abu Dhabi
Round 5: February 25-27, Jeddah Corniche Circuit – Saudi Arabia
COMPANY%20PROFILE%20
%3Cp%3EName%3A%20DarDoc%3Cbr%3EBased%3A%20Abu%20Dhabi%3Cbr%3EFounders%3A%20Samer%20Masri%2C%20Keswin%20Suresh%3Cbr%3ESector%3A%20HealthTech%3Cbr%3ETotal%20funding%3A%20%24800%2C000%3Cbr%3EInvestors%3A%20Flat6Labs%2C%20angel%20investors%20%2B%20Incubated%20by%20Hub71%2C%20Abu%20Dhabi's%20Department%20of%20Health%3Cbr%3ENumber%20of%20employees%3A%2010%3C%2Fp%3E%0A
At Eternity’s Gate
Director: Julian Schnabel
Starring: Willem Dafoe, Oscar Isaacs, Mads Mikkelsen
Three stars
Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.
Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.
“Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.
Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.
“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.
Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.
From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.
Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.
BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.
Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.
Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.
“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.
Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.
“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.
“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”
The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”
Test
Director: S Sashikanth
Cast: Nayanthara, Siddharth, Meera Jasmine, R Madhavan
Star rating: 2/5
In numbers: PKK’s money network in Europe
Germany: PKK collectors typically bring in $18 million in cash a year – amount has trebled since 2010
Revolutionary tax: Investigators say about $2 million a year raised from ‘tax collection’ around Marseille
Extortion: Gunman convicted in 2023 of demanding $10,000 from Kurdish businessman in Stockholm
Drug trade: PKK income claimed by Turkish anti-drugs force in 2024 to be as high as $500 million a year
Denmark: PKK one of two terrorist groups along with Iranian separatists ASMLA to raise “two-digit million amounts”
Contributions: Hundreds of euros expected from typical Kurdish families and thousands from business owners
TV channel: Kurdish Roj TV accounts frozen and went bankrupt after Denmark fined it more than $1 million over PKK links in 2013
