CGI Gulf Insights of the Week

  • ByCGI Gulf Insights of the Week
  • Monday, 11 February 2019
  • Published inFebruary 2019
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CRIF GULF WEEKLY INSIGHTS
Country Risk Update - Oman

Risk Indicator  - DB4c
Risk Level       - Moderate
Ratings Trend - Stable

The government is targeting high-end tourism as an area for growth. Dun & Bradstreet upgrades Oman's country risk rating on the back of the improved outlook for oil prices and production (and consequently for oil revenues). The ports of Sohar and Salalah are emerging as regionally-competitive infrastructure facilities, soon to be joined by Al Duqm.
Market Overview
IMF lauds UAE's efforts to strengthen long-term public finances
The International Monetary Fund’s staff report on the UAE published last week has lauded the efforts of the government in fortifying the long-term public finances, while supporting short-term measures to revive economic growth. According to the IMF, the UAE’s fiscal stance has become more supportive of the recovery with higher government spending. In May 2018, the authorities announced plans for raising investment. Abu Dhabi intends to invest Dh50 billion over three years ($13 billion or 3.5per cent of the 2017 UAE GDP), augmenting Dubai government’s planned investment of $6 billion for Expo 2020 in 2018-20. Given the supportive environment, non-oil growth is projected to rise to 3.9 per cent in 2019 and 4.2 per cent in 2020 and the overall real GDP growth is projected at around 3.7 per cent for 2019-20. The IMF Staff report supported the authorities’ more accommodative short-term fiscal stance. “Spare capacity, large buffers, and tightening financial conditions warrant a fiscal easing. In Abu Dhabi, finalizing and front-loading the stimulus plans while channeling expenditure into areas with high growth multipliers, selecting projects based on rigorous cost-benefit analysis to ensure efficiency of spending,” the IMF report said. While the IMF called on UAE government to abstain from competitiveness-reducing measures, such as wage hikes, to accelerate the recovery and raise medium-term, it pointed to the need for close coordination between fiscal and monetary authorities during the implementation (and eventual phasing out) of the stimulus to mitigate any potential risks to the financial sector and economic growth.
Private business optimism in Dubai soars to six-year high 
Private businesses in Dubai are exuding greater optimism about what’s in store this year, touching levels last seen in 2012. Those sentiments were helped by new orders streaming through and improved productivity, according to the January data from Emirates NBD Economy Tracker Index. The score was 55.8 in January and an improvement on the 53.7 in December. The figure signals the “strongest overall improvement in the business climate since last June”. It was above both the trends for 2018 as a whole (which was at 55.0) and the long-run series history (55.2, since January 2010). The only detail that did not show improvement was on the job creation numbers – there was only a slight improvement in January, which suggests companies retaining their focus on productivity and cost efficiencies. The wholesale & retail sector posted the strongest overall improvement in business conditions at the start of 2018 with a score of 56.3, followed by travel & tourism (54.1). The headline index for the construction industry was 53.8, little changed from December’s nine-month low but still indicating growth.
Growth, trade worries to weigh on global equities
After a stellar start to the year, concerns on growth and trade re-negotiations have returned, sending global equities back down for the near future. The Dow Jones Industrial Average finished last week 0.25per cent lower at 25,106.33, extending losses for a third day in a row. The gauge showed a marginal gain of 0.17 per cent in the past week. The S&P 500 index closed at 2,707.88, up 0.07 per cent. “Market confidence is derailed once again as trade war concerns have become a major hurdle again. It appears that President Trump and President Xi will not be meeting before the critical deadline — the end of this month. If both countries fail to resolve the issue, the Trump administration is going to increase the tariffs on Chinese imports at the end of this month, something which was issued before the truce,” said Naeem Aslam, chief market analyst with Think Markets. “Investors were hoping that both presidents will be able to put the trade war behind them and move forward. This was one of the major factors that triggered the rally in the equity markets,” said Aslam. The Dow Jones index witnessed a strong January, gaining seven per cent, the largest one-month rise since 2015, and the biggest in 20 years. The S&P 500 index jumped nearly eight per cent in January, the best monthly performance since 1987, and its biggest monthly gain since October 2015. But that performance many slowly vanish.
Yemen aims to export about 75,000 bpd oil in 2019
The government in Yemen hopes to scale up its crude production to 110,000 barrels per day (bpd) in 2019, with exports touching about 75,000 bpd, its oil minister told journalists on 9 February 2019. The government of Abd Rabbo Mansour Hadi controls the southern port city of Aden and areas holding Yemen’s oil-and-gas fields. The Iranian-aligned Houthi group controls the capital Sana’a and the oil terminal of Ras Eisa on the western coast. Yemen’s oil output has collapsed since 2015 when the Saudi-led military coalition intervened in Yemen’s war to try to restore Hadi’s government to power. “We will maintain production from four blocks and are planning to build a pipeline to Arab Sea (Arabian Sea) to resume exports from these blocks,” Hadi’s oil minister, Aws Abdullah Al Awd, said in an interview. The conflict has choked energy output and shuttered a key export terminal and pipeline. Yemen produced an average of 50,000 bpd of crude in 2018 compared with around 127,000 bpd in 2014. Last year it exported some quantities of oil. Yemen has proven oil reserves of around 3 billion barrels, according to the US Energy Information Administration (EIA).The oil minister said Yemen also wanted to resume production of LNG, which had been halted as a result of the conflict. 
Middle East must empower youths to accelerate the data economy, says PWC
The new age of data abundance must be shared equally, or vast swathes of the Middle East region will face ‘data inequalities,’ warns a new report from PwC. “By engaging with youth as the present and future drivers of data economies, governments can ensure that the rewards of the data revolution reach everyone in society,” the management consulting firm said in its ‘Building the Data Economies of the Future’ paper, which was produced in conjunction with Dubai’s World Government Summit. According to Mona Abou Hana, a partner at PwC Middle East and one of the report’s authors, every government in the region ‘can and should’ be promoting the promise of data-driven economies.  “The ultimate goal is a leveler digital playing field, where no one is denied the opportunity to benefit from a data-rich world and involving young people must lie at the heart of the response,” said Mona Abou Hana. The report pointed out that ‘disrupting the education system’ is a must for cultivating a data economy. “Governments have recognized the need to move towards innovative educational models. Such reforms generally do not go far enough in disrupting traditional education systems in preparation for a data economy and in providing all young people with the digital skills and opportunities to build and benefit from the data economies of the future,” it said. Maria Axente, the report’s co-author and programme driver at PwC Artificial Intelligence, Technology & Investments and AI for Good Lead, said the purpose of any government educational initiative or public/private partnership should be to put young people in the driver’s seat, as shapers of their digitized future.
Commodity Tracker
Business Events this Week In UAE
​Oracle OpenWorld Middle East
@ Dubai World Trade Centre
Date: 11 February - 12 February 2019
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