Those pesky green shoots of recovery keep popping up, long before the spring thaw. The latest sprouts come from Singapore. The little trade-dependent island state reported this week that its economy, after falling 12.7 per cent in the first quarter, rocketed 20.4 per cent in the second quarter. Hooray, global trade has recovered! The recession must be over!
Not so fast. Those numbers are exaggerated by several factors. First, there is the way Singapore calculates them. Instead of just saying the economy grew by a certain percentage in one quarter, Singapore annualises the growth rate, reporting it as though the growth was sustained for an entire year. If the economy expands about 5 per cent in one quarter, that is equivalent to an annualised growth rate of about 20.4 per cent.
Singapore's roughly 5 per cent expansion in the second quarter is still pretty good and does technically mean Singapore has managed to pull out of recession. But its economy was nonetheless 3.7 per cent smaller than it was in the same three months last year.
That would not matter for most developed economies such as the US. They report economic growth on a quarter-on-quarter basis to give a sense of the more immediate trajectory of the economy. Developing nations, on the other hand, typically report growth on a year-on-year basis. That is partly because they do not have the ability to produce timely and reliable data and partly because seasonal factors, such as agricultural output, tend to skew results widely from one quarter to the next.
Singapore is a developed nation, but it has a small economy. And while its GDP data in the past were a fairly reliable gauge of the trend, the data have in recent years become volatile and less predictable. That is because Singapore, faced with increasing competition in electronics manufacturing from China, managed several years ago to lure in major pharmaceutical manufacturers, the likes of Merck and Pfizer and GlaxoSmithKline.
The drug manufacturing plants have proved a double-edged sword: while they have boosted overall economic output, they are highly automated, meaning they have not created a lot of jobs. And to the chagrin of economists, they have also turned out to be highly sporadic. For one quarter, they churn out lots of drugs. But when the batch is done, they go quiet while technicians clean them out and prepare them to produce something else. So Singapore's GDP has become somewhat drug-dependent; zooming upwards as the drug production kicks in, and crashing when the dose wears off.
So it was in the second quarter: a surge in pharmaceutical production accounted for much of a rebound in manufacturing. The sudden bounce was enough to convince Singapore to reduce how much it predicts the economy will shrink this year to between 4 per cent and 6 per cent, up from a forecast of a 9 per cent contraction. Singapore also cautioned that the outlook remained clouded by the situation in the US and Europe, where unemployment is still rising and consumer spending remains weak. Almost one of every 10 American working-age consumers is now jobless.
As a result, the trade that is the lifeblood for Singapore, the rest of Asia and for other emerging markets such as those here in the Gulf has yet to recover. According to statistics from Singapore's maritime and port authority, container traffic through Singapore's port, one of the world's largest, was down almost 20 per cent in the second quarter compared with the same period last year.
That is consistent with another indicator of global trade that some economists say still bodes ill for the global economy, the Baltic Dry Index. This index tracks the average price of shipping coal, grain and other major raw materials, or "dry" bulk cargoes, by ship. Because ships take a long time to build and cannot be broken up easily, their supply stays fairly constant. Thus the price of shipping tends to depend more on demand, and so economists use the Baltic Dry index as a leading indicator of trends in global trade.
After peaking in May last year at a record 11,974, the Baltic Dry Index began falling as exports collapsed and credit evaporated. By December, it had fallen 94 per cent to its lowest level since 1986. Bad days for shipping, yes. Dark days for the global economy, too.
The good news is that the Baltic Dry Index has been recovering, rising to 4,291 by early last month as credit eases and trade resumes. In recent weeks, however, it began slipping again back below 3,000, indicating that things are not yet back to normal.
But it seems safe now to say that the worst is over and that a fragile, feeble, patchy global recovery is getting underway. As Standard Chartered's economists in Singapore conclude in their latest report, this is the end of the beginning of the crisis. "The absolute worst is over and in that context a 'victory' has been achieved, but there is still a long way to go," they wrote.
Asia, it is clear, will lead the recovery. Singapore's numbers may exaggerate the trend, but the outlook for Asia's emerging economies is brightening faster than those for the heavily indebted US and Europe. While the export demand from the West they had depended on for much of their growth has yet to recover, domestic consumers and government spending are buoying home-grown consumption.
Demand from China, in particular, is helping to arrest declining exports elsewhere in Asia. Some are helped more than others. Those, such as Taiwan, that depend on shipping components to China for assembly and re-export to markets in the West, are not getting as much help from Chinese demand as, say, South Korea, which exports primarily finished goods.
And since Asia is the UAE's largest importer of oil, what happens there matters a lot to us here. But much, as you can probably tell, will depend on how things go in China, which is due to release its own second-quarter economic data today. Economists predict that, thanks to massive government stimulus and compulsory lending, China's economy will manage to overcome still-slumping exports to post growth near 8 per cent in the second quarter. That may produce a modicum of warmth in China, but not enough to ignite a recovery globally. Whether it will protect green shoots elsewhere from the continued chill from Europe and the US may depend on how close they are sprouting to the source.
warnold@thenational.ae
MO
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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.”
ASSASSIN'S%20CREED%20MIRAGE
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The%20Little%20Mermaid%20
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The rules on fostering in the UAE
A foster couple or family must:
- be Muslim, Emirati and be residing in the UAE
- not be younger than 25 years old
- not have been convicted of offences or crimes involving moral turpitude
- be free of infectious diseases or psychological and mental disorders
- have the ability to support its members and the foster child financially
- undertake to treat and raise the child in a proper manner and take care of his or her health and well-being
- A single, divorced or widowed Muslim Emirati female, residing in the UAE may apply to foster a child if she is at least 30 years old and able to support the child financially
From Zero
Artist: Linkin Park
Label: Warner Records
Number of tracks: 11
Rating: 4/5
Sri Lanka-India Test series schedule
- 1st Test India won by 304 runs at Galle
- 2nd Test India won by innings and 53 runs at Colombo
- 3rd Test August 12-16 at Pallekele
hall of shame
SUNDERLAND 2002-03
No one has ended a Premier League season quite like Sunderland. They lost each of their final 15 games, taking no points after January. They ended up with 19 in total, sacking managers Peter Reid and Howard Wilkinson and losing 3-1 to Charlton when they scored three own goals in eight minutes.
SUNDERLAND 2005-06
Until Derby came along, Sunderland’s total of 15 points was the Premier League’s record low. They made it until May and their final home game before winning at the Stadium of Light while they lost a joint record 29 of their 38 league games.
HUDDERSFIELD 2018-19
Joined Derby as the only team to be relegated in March. No striker scored until January, while only two players got more assists than goalkeeper Jonas Lossl. The mid-season appointment Jan Siewert was to end his time as Huddersfield manager with a 5.3 per cent win rate.
ASTON VILLA 2015-16
Perhaps the most inexplicably bad season, considering they signed Idrissa Gueye and Adama Traore and still only got 17 points. Villa won their first league game, but none of the next 19. They ended an abominable campaign by taking one point from the last 39 available.
FULHAM 2018-19
Terrible in different ways. Fulham’s total of 26 points is not among the lowest ever but they contrived to get relegated after spending over £100 million (Dh457m) in the transfer market. Much of it went on defenders but they only kept two clean sheets in their first 33 games.
LA LIGA: Sporting Gijon, 13 points in 1997-98.
BUNDESLIGA: Tasmania Berlin, 10 points in 1965-66
UAE currency: the story behind the money in your pockets
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.
Barbie
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Real estate tokenisation project
Dubai launched the pilot phase of its real estate tokenisation project last month.
The initiative focuses on converting real estate assets into digital tokens recorded on blockchain technology and helps in streamlining the process of buying, selling and investing, the Dubai Land Department said.
Dubai’s real estate tokenisation market is projected to reach Dh60 billion ($16.33 billion) by 2033, representing 7 per cent of the emirate’s total property transactions, according to the DLD.
Bridgerton%20season%20three%20-%20part%20one
%3Cp%3E%3Cstrong%3EDirectors%3A%20%3C%2Fstrong%3EVarious%3C%2Fp%3E%0A%3Cp%3E%3Cstrong%3EStarring%3A%3C%2Fstrong%3E%20Nicola%20Coughlan%2C%20Luke%20Newton%2C%20Jonathan%20Bailey%3C%2Fp%3E%0A%3Cp%3E%3Cstrong%3ERating%3A%20%3C%2Fstrong%3E3%2F5%3C%2Fp%3E%0A
The%20specs
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NO OTHER LAND
Director: Basel Adra, Yuval Abraham, Rachel Szor, Hamdan Ballal
Stars: Basel Adra, Yuval Abraham
Rating: 3.5/5
The%20Hunger%20Games%3A%20The%20Ballad%20of%20Songbirds%20%26%20Snakes
%3Cp%3E%3Cstrong%3EDirector%3A%3C%2Fstrong%3E%C2%A0Francis%20Lawrence%3C%2Fp%3E%0A%3Cp%3E%3Cstrong%3EStars%3A%C2%A0%3C%2Fstrong%3ERachel%20Zegler%2C%20Peter%20Dinklage%2C%20Viola%20Davis%2C%20Tom%20Blyth%3C%2Fp%3E%0A%3Cp%3E%3Cstrong%3ERating%3A%20%3C%2Fstrong%3E3%2F5%3C%2Fp%3E%0A