Riyad Bank has been one of the early investors in the kingdom's FinTech sector, with a 100 million riyal fund announced last year. Reuters
Riyad Bank has been one of the early investors in the kingdom's FinTech sector, with a 100 million riyal fund announced last year. Reuters
Riyad Bank has been one of the early investors in the kingdom's FinTech sector, with a 100 million riyal fund announced last year. Reuters
Riyad Bank has been one of the early investors in the kingdom's FinTech sector, with a 100 million riyal fund announced last year. Reuters

Middle East and Central Asia acted fast to support economies in face of twin shocks, IMF says


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Middle East and Central Asia countries face twin shocks from the coronavirus pandemic and plunging oil prices, but policymakers have been quick in rolling out necessary monetary and fiscal stimulus to support their economies.

The economic impact "will be substantial" the International Monetary Fund (IMF) said in its Middle East and Central Asia Economic Outlook report released on Wednesday. While MECA economies are projected to contract 2.8 per cent in 2020, most countries will shrink by an average of 3.1 per cent.

Oil price have slumped more than 50 per cent since the beginning of the year and most countries have revised growth down by more than 4 percentage points in one year. This equates to removing $425 billion (Dh1.56 trillion) from the region’s total output. For nearly all countries, these revisions are higher than those seen during the global financial crisis in 2008 and the oil price shock of 2015, according to the IMF report.

"This is a complex multi-layered crisis in this part of the world and while there is uncertainty on the health crisis part and how long that will play out, I think there is tremendous uncertainty about what is going to happen with oil prices now and going forward," IMF chief economist Gita Gopinath told The National.

“Our assumption is that it will be at $35 per barrel for 2020 and 2021 and then go up to about $45," she added.

"It is going to change the economic landscape and it shows the urgency and the need to diversify one’s economy. There were many countries that were already doing the diversification and I think this will accelerate that.”

Countries in the region were swift in their responses to the crisis, taking measures to contain the outbreak and support hard-hit sectors of their economies. Many countries announced fiscal support packages, comprising both revenue and expenditure measures, of an average size of 3.8 per cent of gross domestic product, the IMF said.

Regional central banks were also quick to provide relief to blunt the impact of the outbreak on the financial sector. Liquidity support measures were announced in seven countries averaging 3.4 per cent of gross domestic product. Financial regulators across the region have also eased monetary policy and used the exchange rate as a buffer where appropriate.

The global economy is facing its greatest crisis since the Great Depression in the 1930s and is projected to shrink 3 per cent in 2020, the IMF said on Tuesday. The economy will slide into the deepest recession since the end of World War I. The growth forecast for this year is marked down by more than 6 percentage points relative to the fund's October 2019 estimates and the updated January 2020 projections.

"This is a complex multi-layered crisis in this part of the world and while there is uncertainty on the health crisis part and how long that will play out, I think there is tremendous uncertainty about what is going to happen with oil prices now and going forward," IMF chief economist Gita Gopinath

The downward revision for this year is largely a result of advanced economies shrinking 6.1 per cent this year after expanding 1.7 per cent in 2019. In the Middle East, Saudi Arabia, the Arab world’s largest economy, is forecast to shrink 2.3 per cent. The UAE's economy is projected to contract 3.5 per cent but forecast to expand 3.3 per cent in 2021. Iran’s economy is projected to contract 6 per cent with inflation estimated at 34.2 per cent this year.

The UAE was the first to roll out Dh282bn in fiscal and monetary support, providing zero interest funding to banks in addition to a variety of other initiatives that range from discounted utility bills to waivers of government fees.

Oil-exporting countries are facing a double whammy of reduced demand for crude and lower oil prices, with oil exports expected to drop by more than $250bn across the region, the IMF said.

“As a result, fiscal balances are expected to turn negative, exceeding 10 per cent of GDP in most countries,” the Washington-based lender said.

Oil-importing nations in the region would be adversely affected by a large decline in remittances and investment and capital flows they get from the region’s oil exporters.

“The large deterioration in their fiscal deficit – due to the impact of lower growth on tax revenues and scaled-up spending –is expected to raise public debt to almost 95 per cent of GDP in the Menap [Middle East North Africa and Pakistan] region,” according to the report.

Vulnerabilities, the IMF said, are rising in line with global trends and forthcoming maturing debt presents financing risks in current market conditions. High public debt levels in the region may also limit the fiscal space available to undertake additional measures, it noted.

The IMF, which has already received financial assistance requests from 11 countries in the region, said the objective for every country should be to put its economy back on track. This would require broad-based fiscal and monetary support where policy space is available and seeking external assistance where space is limited.

“The countries that are coming into this with pre-existing vulnerabilities ... they are going to be deeply affected at this time. What will help countries like that is international support,” Ms Gopinath said.

While you're here
What is graphene?

Graphene is a single layer of carbon atoms arranged like honeycomb.

It was discovered in 2004, when Russian-born Manchester scientists Andrei Geim and Kostya Novoselov were "playing about" with sticky tape and graphite - the material used as "lead" in pencils.

Placing the tape on the graphite and peeling it, they managed to rip off thin flakes of carbon. In the beginning they got flakes consisting of many layers of graphene. But as they repeated the process many times, the flakes got thinner.

By separating the graphite fragments repeatedly, they managed to create flakes that were just one atom thick. Their experiment had led to graphene being isolated for the very first time.

At the time, many believed it was impossible for such thin crystalline materials to be stable. But examined under a microscope, the material remained stable, and when tested was found to have incredible properties.

It is many times times stronger than steel, yet incredibly lightweight and flexible. It is electrically and thermally conductive but also transparent. The world's first 2D material, it is one million times thinner than the diameter of a single human hair.

But the 'sticky tape' method would not work on an industrial scale. Since then, scientists have been working on manufacturing graphene, to make use of its incredible properties.

In 2010, Geim and Novoselov were awarded the Nobel Prize for Physics. Their discovery meant physicists could study a new class of two-dimensional materials with unique properties. 

 

Milestones on the road to union

1970

October 26: Bahrain withdraws from a proposal to create a federation of nine with the seven Trucial States and Qatar. 

December: Ahmed Al Suwaidi visits New York to discuss potential UN membership.

1971

March 1:  Alex Douglas Hume, Conservative foreign secretary confirms that Britain will leave the Gulf and “strongly supports” the creation of a Union of Arab Emirates.

July 12: Historic meeting at which Sheikh Zayed and Sheikh Rashid make a binding agreement to create what will become the UAE.

July 18: It is announced that the UAE will be formed from six emirates, with a proposed constitution signed. RAK is not yet part of the agreement.

August 6:  The fifth anniversary of Sheikh Zayed becoming Ruler of Abu Dhabi, with official celebrations deferred until later in the year.

August 15: Bahrain becomes independent.

September 3: Qatar becomes independent.

November 23-25: Meeting with Sheikh Zayed and Sheikh Rashid and senior British officials to fix December 2 as date of creation of the UAE.

November 29:  At 5.30pm Iranian forces seize the Greater and Lesser Tunbs by force.

November 30: Despite  a power sharing agreement, Tehran takes full control of Abu Musa. 

November 31: UK officials visit all six participating Emirates to formally end the Trucial States treaties

December 2: 11am, Dubai. New Supreme Council formally elects Sheikh Zayed as President. Treaty of Friendship signed with the UK. 11.30am. Flag raising ceremony at Union House and Al Manhal Palace in Abu Dhabi witnessed by Sheikh Khalifa, then Crown Prince of Abu Dhabi.

December 6: Arab League formally admits the UAE. The first British Ambassador presents his credentials to Sheikh Zayed.

December 9: UAE joins the United Nations.