CGI Gulf Insights of the Week (158)

ByCGI Gulf Insights of the Week
Monday, 23 September 2019
Published inSeptember 2019

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CRIF GULF WEEKLY INSIGHTS

Country Risk Update - Egypt

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

The latest household income survey in Egypt shows a sharp increase in the poverty rate, reﬂecting the harsh impact of the IMF-backed reforms. Economic reforms enacted since late 2016 provide an opportunity to resolve deep-seated weaknesses and create the basis for sustainable high rates of growth over the medium term.

Market Overview

UAE economy to grow 2.4% this year, says the central bank
The UAE expects its economy to grow 2.4 percent in 2019, compared to 1.7 percent growth in 2018, according to data released by the UAE’s central bank. The central bank’s figures are lower than forecasts from the International Monetary Fund (IMF), which predicted that the UAE’s economy would grow by 2.8 percent in 2019. According to the CBUAE, the oil sector will grow 5 percent, compared with 2.8 percent the previous year. The non-oil sector is forecast to grow by 1.4 percent, faster than in 2019. Growth was recorded as 2.2 percent in the second quarter, with non-oil real GDP rising 1.5 percent. In a statement, the central bank said that “the improved outlook for growth is due to expected rising public and private spending at the federal and emirate levels, higher investment ahead of the highly anticipated Expo 2020 and continued regional economic recovery, in light of the monetary easing in the US.” Total government expenditure totaled AED 119 billion ($32.4bn) in Q1. The IMF predicts global growth will be approximately 3.2 percent in 2019 and 3.5 percent in 2020, partially due to sluggish growth in developed economies, low productivity growth, and rising market volatility. In the US, growth is expected to decline to 2.6 percent this year, compared to 1.3 percent in the Eurozone and UK and 4.1 percent in emerging and developing countries. Growth in China is forecast at 6.2 percent and in India at 7 percent.

UK travel giant Thomas Cook files for bankruptcy after bailout talks fail
British travel group Thomas Cook on 23 September, 2019 declared bankruptcy after failing to reach a last-ditch rescue deal, triggering the UK's biggest repatriation since World War II to bring back stranded passengers. The 178-year-old operator had been desperately seeking $250 million from private investors to save it from collapse. "Despite considerable efforts, those discussions have not resulted in an agreement between the company's stakeholders and proposed new money providers," Thomas Cook said in a statement. "The company's board has therefore concluded that it had no choice but to take steps to enter into compulsory liquidation with immediate effect." The government said it had hired planes to fly home an estimated 150,000 holidaymakers to the UK, in an operation starting on Monday. "Following the collapse of Thomas Cook and the cancellation of all its flights, Transport Secretary Grant Shapps has announced that the government and UK Civil Aviation Authority has hired dozens of charter planes to fly customers home free of charge," a separate statement said, describing it as the largest repatriation in peacetime history. "All customers currently abroad with Thomas Cook who are booked to return to the UK over the next two weeks will be brought home as close as possible to their booked return date." Thomas Cook chief executive Peter Fankhauser called it a "deeply sad day". "It is a matter of profound regret to me and the rest of the board that we were not successful," he said. "This marks a deeply sad day for the company which pioneered package holidays and made travel possible for millions of people around the world," he added in the group's statement.

Revealed: $6.8bn dividends distributed by Abu Dhabi bourse
Abu Dhabi Securities Exchange (ADX) has announced that it has distributed more than AED25 billion ($6.8 billion) in cash dividends to 572,774 eligible investors on behalf of its listed companies. In comparison to the 2018 dividends, the 6.95 percent increase demonstrates the attractiveness of the investment environment in the UAE and especially in Abu Dhabi, said Khalifa Salem Al Mansouri, acting CEO of ADX. According to latest figures, 398,220 UAE investors received their profits compared to 155,589 investors from other GCC nations, and 18,965 foreign investors, while cash dividends were distributed to 7,442 institutional investors. The figures revealed that the banking sector topped the list of the most active sectors in ADX with regards to cash dividend distribution with 52 percent of the total value of around AED13.1 billion, followed by the telecommunication sector with 28 percent (AED7.1 billion). The energy sector came third with around 9 percent of the total (AED2.31 billion), followed by the insurance sector, services sector, industrial sector, and investments and financial services. Al Mansouri said: “The increase in the size of cash dividends is a clear sign of how well ADX listed companies are performing. It also shows the attractiveness of our investment environment which is served by a supportive and efficient dual economic and legislative structure in the UAE.

Bahraini SMEs warned to register for VAT ahead of December deadline
Small and medium-sized enterprises (SMEs) in Bahrain have been urged to register for value-added tax (VAT) ahead of the December 20 deadline, according to a report. The VAT was introduced in Bahrain on January 1 this year for any companies with taxable revenues of over 5 million Bahraini dinars ($13.29 million). Businesses earning over 500,000 Bahraini dinars had until June 20 this year to register, but SMEs with revenue between 37,500 ($99,734) and 500,000 Bahraini dinars have until December 20 to register for VAT, according to a report by the Gulf Daily News (GDN) website. “I urge all SME owners to register with the National Bureau for Revenue (NBR) ahead of the deadline to avoid the costly last-minute rush as well as punishments for not registering,” Muharraq Municipal Council member Ahmed Al Muqahawi, was quoted as saying in the GDN report. “I say this because I find many businesses are either taking it lightly or are unaware of the procedures… The penalty for SMEs who do not register for VAT are three to seven years’ imprisonment and/or fines equal to that of the tax amount, which can go up to three times that amount,” he added.

UAE bank CBI said to trim the workforce by 18%
Commercial Bank International will trim as much as 18 percent of its workforce through a voluntary redundancy program as the UAE lender withdraws from some business segments, people with knowledge of the plan said. Between 80 to 100 people are expected to accept the offer, said the people, asking not to be identified because the information is private. The bank employs about 550 people across nine branches. The Dubai-based firm, 40 percent owned by Qatar National Bank, plans to exit unsecured retail lending such as personal loans and will focus on affluent clients within consumer banking and its corporate-banking business, one of the people said. It is still early in the process and no timing has been set, one person said. The voluntary redundancy program is part of the bank’s transformation strategy and will help “generate sustainable growth, improve efficiency and continue delivering high-quality services to all of our customers,” Commercial Bank said in an emailed statement. “As part of this program, we will continue to support and treat our people fairly and provide them with choices.” The reorganization is the lender’s second in two years. In 2017, Commercial Bank cut about 125 jobs and reduced the number of branches to 17 from 27. About 50 banks operate in the UAE where competitive pressures are pushing companies to cut costs and explore mergers to boost profit.

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