CGI Gulf Insights of the Week (148)

ByCGI Gulf Insights of the Week
Monday, 09 December 2019
Published inDecember 2019

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CRIF GULF WEEKLY INSIGHTS

Country Risk Update - Egypt

Risk Indicator - DB5d
Risk Level - High
Ratings Trend - Stable

Egypt's prime location as a base for exports to the Middle East, Asia and Africa creates a potential for long-term economic growth, as does its large population of almost 100m. Economic reforms enacted since late 2016 have sought to address deep-seated weaknesses and create the basis for sustainable high rates of growth over the medium term. Dun & Bradstreet upgrades its rating outlook for Egypt in response to a cluster of positive economic indicators.

Market Overview

Prime Dubai property prices 'set for Expo 2020 boost'
Prime property prices in Dubai are forecast to stabilize during 2020 as the market receives a boost in demand from the Expo 2020 mega event, according to new research. Knight Frank said prices are forecast to fall by just two percent next year compared to a 3.7 percent drop this year. The figures come as prime property prices in Dubai have registered a small rise for the second consecutive quarter, as the market shows more signs of being close to bottoming out after a sustained downturn. According to previous research by Knight Frank, prime property values rose by 0.2 percent in the third quarter, building on a 0.3 percent increase seen during the previous three months. It added that sales and demand for prime property in the emirate are set to rise slightly in 2020 while supply is forecast to increase significantly. The consultancy said in a new report: "2020 marks a landmark year when it will host Expo 2020. Forecast to attract 25 million visitors, the city has seen significant investment in new infrastructure in the lead up to the event, such as the expansion of the metro line. These changes, along with the introduction of long-term visas of up to 10 years, will boost prime demand." The report also revealed that prime prices in Dubai over the previous 10 years have slumped by nearly eight percent compared to Vancouver in Canada where prices rocketed by 85 percent over the same period. Out of 14 key cities analyzed since 2009, Dubai was the only one to post a decline in prime prices, Knight Frank noted.

Middle East airlines forecast to make $1bn losses in 2020
Middle Eastern airlines are set to cut losses to $1 billion next year, down from $1.5 billion in 2019, as they continue a restructuring process, according to the International Air Transport Association (IATA). IATA said announced schedules point to a substantial slowdown in regional capacity growth for 2020. "After very weak economic growth in 2019, which limited local traffic, some rebound is expected in 2020. Restructuring and stronger growth will boost performance," the aviation authority said in a statement, adding: "But this will take time and a loss is expected for a third consecutive year." Middle East carriers are forecast to make a $4.48 loss per departing passenger compared to the average net profit globally of $6.20. Globally, IATA forecast that the global airline industry will produce a net profit of $29.3 billion in 2020, improved over a net profit of $25.9 billion expected in 2019. If achieved, 2020 will mark the industry’s 11th consecutive year in the black. Net profit margins are forecast at 3.4 percent while overall industry revenues are forecast to reach $872 billion, up 4 percent on $838 billion in 2019. Passenger numbers are expected to reach 4.72 billion, up 4 percent, while freight tonnes carried are expected to recover to 62.4 million, a 2 percent increase over 61.2 million tonnes carried in 2019, which was the lowest figure in three years.

Abu Dhabi fund contributes $52m to Maldives airport project
Abu Dhabi Fund for Development (ADFD), the national entity for economic development aid, has contributed AED91 million ($52 million) to the opening of Maafaru International Airport, located on one of the islands of the Noonu Atoll in the Maldives. Serving the northern and eastern regions of the archipelago, the airport was officially inaugurated by the Government of the Maldives. ADFD’s scope of the project comprised the construction of a runway approximately 2,200 metres long, hangars, and service roads to accommodate Airbus A320-200 and Boeing 737 aircrafts. Works also included the construction of the airport’s main and office buildings, a firefighting station, a control tower, and a desalination plant. A marina for boats that serve neighboring islands, the installation of a generator, and the provision of maintenance equipment are some of the other important achievements. In addition, the funding supported infrastructure works and the establishment of power, communication, and water networks. Mohammed Saif Al Suwaidi, director-general of ADFD, said: “ADFD contributed to the financing of the Maafaru International Airport project that reflects its keenness to advance continued, comprehensive, and sustainable economic development. Our nine key ventures in the island country fall within the framework of priorities outlined by the Government of the Maldives and support international efforts to achieve the UN’s Sustainable Development Goals.”

Saudi Aramco said to pay banks only $64m for IPO
Saudi Aramco is poised to pay a combined $64 million to the banks that arranged the world’s largest initial public offering, a letdown for the Wall Street firms that pitched aggressively for a spot on the deal, people with knowledge of the matter said. The state oil giant plans to pay the top local banks on the deal - known as joint global coordinators - SR39 million ($10.4 million) apiece, according to the people. The top foreign banks on the deal are set to each get SR13 million, or the equivalent of $3.5 million, the people said. Aramco raised $25.6 billion in its share sale, which became a local affair after foreign fund managers shunned its premium valuation. The total fee amount, which represents 0.25 percent of the funds raised, pales in comparison to other large deals. Chinese internet giant Alibaba Group Holding, which raised $25 billion in its 2014 IPO, paid about $300 million to its underwriters. IPO banks globally earned average fees equal to 4.1 percent of the deal size this year, up from 3.6 percent last year, according to data compiled by Bloomberg. Aramco will pay local banks serving as book-runners, a more junior role, about SR5 million each while foreign banks in that position will be paid about SR2 million apiece, the people said. The company declined to comment.

Unemployment in Saudi Arabia expected to fall further, says government minister
Unemployment in Saudi Arabia currently stands at 12.3 percent, down from 12.9 percent last year, and Mohammed Al-Tuwaijri, the minister of economy and planning, expects it to fall further by the end of the year, according to reports. Al-Jadaan was speaking at the 2020 Budget Meeting Sessions in Riyadh, where he said great efforts were taking place between his ministry and the Ministry of Labour and Social Development to tackle unemployment in the kingdom. He said plans were in place to create jobs in tourism, culture, entertainment, and hospitality as part of the government’s Vision 2030, to diversify the country’s economy away from a dependence on hydrocarbons. Ahmed Al-Rajhi, the minister of labour and social development, said the ministry aims to create 1.5 million jobs by 2030. He added that the value of social financing offered to more than 60,000 citizens reached SR3.5 billion ($933 million) this year, and 2,462 small and medium-size enterprises benefited from SR526 million ($140m). In addition, 2,843 non-profit organizations were founded, a 26 percent increase on last year. It was also revealed that the proportion of women in the workforce reached 25.3 percent this year, while more than 175,500 jobs were Saudized.

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