IMF cuts China’s 2019 growth forecast as trade tension escalates

The US government listed $300 billion more of Chinese goods for possible tariff hikes after earlier imposing punitive duties on $200 billion of imports from China. (AFP)
Updated 05 June 2019

IMF cuts China’s 2019 growth forecast as trade tension escalates

  • The downgrade came just two months after the IMF raised its China growth forecast to 6.3 percent from 6.2 percent

BEIJING: The International Monetary Fund (IMF) on Wednesday cut its 2019 economic growth forecast for China to 6.2 percent on heightened uncertainty around trade frictions, saying that more monetary policy easing would be warranted if the Sino-US trade war escalates.

The downgrade came just two months after the IMF raised its China growth forecast to 6.3 percent from 6.2 percent, partly on then-brightening prospects for a trade deal with the United States.

A sudden escalation in the Sino-US trade tensions last month underlined the risks for the world’s second-biggest economy from higher US tariffs on billions of dollars of Chinese goods.

Washington has levied higher tariffs on a total of $250 billion of Chinese imports since mid-2018, accusing China of forced technology transfers and intellectual property theft. China, which denies the accusations, has retaliated with tariffs on about $110 billion of US goods.

“Growth is expected to moderate to 6.2 percent and 6.0 percent in 2019 and 2020, respectively,” said the IMF’s Deputy Managing Director David Lipton in a statement. “The near-term outlook remains particularly uncertain given the potential for further escalation of trade tensions.”

US President Donald Trump has threatened to slap tariffs of up to 25 percent on an additional list of Chinese imports worth about $300 billion.

The trade war has already upended global supply chains and hurt world growth. Economists say the tariffs will curb growth in the United States and China, and financial markets fret a protracted dispute could tip the world economy into a recession.

China’s central bank has cut the amount of cash that commercial lenders need to set aside as reserves six times since the start of 2018 to spur lending and prop-up its slowing economy. Beijing is also rolling out tax cuts to support businesses, especially manufacturers hurt by the intensifying trade war.

“The policy stimulus announced so far is sufficient to stabilize growth in 2019/20 despite the recent US tariff hike,” Lipton said, following recent meetings with officials in China.

“No additional policy easing is needed, provided there are no further increases in tariffs or a significant slowdown in growth.”


Wizz Air chief expects flight prices to fall as budget sector rebounds quicker

Updated 05 March 2021

Wizz Air chief expects flight prices to fall as budget sector rebounds quicker

  • Airlines to discount fares to encourage recovery
  • Carriers have cut routes and axed jobs

DUBAI: Budget airlines are expected to recover from the pandemic faster than their full service counterparts, the Wizz Air CEO told Asharq.
The boss of the Abu Dhabi-based carrier also expects prices to fall as competition forces carriers to cut fares.
“I expect the prices of airline tickets to decrease, as all carriers will be eager to return to the market, and the whole sector will want to motivate travelers to return to travel,” Varadi said.
Regional airlines have axed thousands of jobs and pulled routes in response to a year of flying restrictions triggered by the COVID-19 pandemic. Now the industry is driving efforts to encourage governments to open the battered sector.
Wizz Air cut staff numbers by almost a fifth last year and also reduced salaries while returning older leased aircraft to drive down costs.
Passenger numbers at Wizz Air plunged 87 percent in February compared to a year earlier.


From FIFA to Fortnite, Saudi Arabia pushes telecoms giants to boost gaming response times

Updated 05 March 2021

From FIFA to Fortnite, Saudi Arabia pushes telecoms giants to boost gaming response times

  • Telecoms body monitors response times
  • Gaming sector attracts PIF investment

DUBAI: Saudi Arabia is measuring the gaming response times across its major telecoms networks in the latest move by the government to encourage investment in the booming industry.

The Kingdom’s Communications and Information Technology Commission (CITC) has launched the ‘Game Mode’ initiative, to drive competition among telecom operators to provide the best experience for gamers.

It includes the launch of a quarterly award for the Internet service provider with the best response time for video gaming, a key indicator of the network’s performance, the Saudi Press Agency reported.

The first report reveals that Mobily topped the list of average response time in the popular game “Fortnite” in the fourth quarter of 2020, based on an average response time of 21 seconds. This compared with Integrated Telecom at 28 seconds, Zain at 29 seconds, and Saudi Telecom Company (STC) at 35 seconds, for a total national average of 33 seconds.

Soccer video game “FIFA” was also tested by Game Mode, with Zain ending in first place among operators with an average response time of 29 seconds.

The gaming market in the Kingdom is estimated to be worth SR2.6 billion ($690 million) and its growth rate is among the highest in the world. The market is expected to reach SR9.5 billion by the end of the decade.

The Kingdom’s Public Investment Fund (PIF) has also been building its presence in the sector, acquiring more than $3 billion worth of stock in three US video-game makers during the fourth quarter of last year.


Lebanese dread end to subsidies as economic crisis bites

Updated 05 March 2021

Lebanese dread end to subsidies as economic crisis bites

BEIRUT: To feed her family, Lebanese mother Sandra Al-Tawil sold her fridge and washing machine. Now she fears the cash-strapped state will scrap food subsidies, plunging them deeper into poverty.
Lebanon is locked in its worst economic crisis since the 1975-1990 civil war, with no end in sight.
The value of the Lebanese pound has plunged, driving up the price of crucial imports like food and fuel and triggering small but angry protests.
More than half of Lebanon’s population is poverty stricken and relies on subsidies, but a central bank demand for “an immediate plan to ration subsidies” is looming.
“We’re already tightening our belts. What will we eat if we can no longer buy rice or lentils?” 40-year-old Tawil said.
Tawil and her husband lived a comfortable life in Dubai before returning to their homeland to open a high-end hair salon in 2019.
But that dream turned to nightmare after the financial crisis and the COVID-19 pandemic hit.
“I had to sell my washing machine and fridge... just to get the minimum of daily bread and pay rent,” said the mother of two young children.
Her husband found a job at the start of the year, and the Beit El Baraka charity is helping them out with food and school fees.
But Tawil is still worried, and furious with the political class she blames for the malaise.
“If I see people heading out to protest, I’ll be the first to join them,” she said.
In a country that imports 80 percent of its food, much of the six million population depends on subsidies to get by.
Even without them being lifted, many are already struggling, said Beit El Baraka founder Maya Ibrahimchah.
“There have been many more demands for help over the past four months,” she said.
“Those we are helping today are all from the middle class.”
The state has poured up to $437 million into subsidies a month, the World Bank estimates, to keep prices in check for bread, medicine, fuel and electricity, as well as around 300 other items since mid-2020.
To counter the pound’s drastic devaluation, importers get access to dollars at a preferential rate to ensure they can afford to continue bringing in supplies.
For flour, fuel and medicine, for example, they offer dollars at the official exchange rate of 1,507 pounds to cover most of their cost.
But traders must resort to the black market to cover the difference, where Tuesday the rate hit a record low of 10,000 pounds to the dollar.
As a result, in less than a year the price of a large bag of subsidised bread has risen from 1,500 to 2,500 pounds.
Authorities have remained vague about how the subsidies will be reduced, though meetings are ongoing.
In early December, central bank governor Riad Salameh said it could only fund subsidies for another two months. Later that month, he said two billion dollars were available for them.
At the end of February, the central bank’s website showed it had $17.9 billion in foreign currency reserves, yet $17.5 billion of that is the bank’s required reserves.
The bank did not respond to AFP’s repeated requests for comment.
The UN food agency has warned any subsidy reduction would have “major inflationary repercussions” and “put an unbearable strain on households.”
The price of bread could increase by up to three times and fuel by 4.5 times, the World Food Programme said, adding it was critical to immediately scale up assistance to the poorest.
Under the government’s latest plan, subsidies could be gradually lifted, with financial aid to soften the blow over several years.
The state would first lift subsidies for bread, fuel and around 300 other items, under the plan seen by AFP, before later on reviewing spending in the electricity sector.
To compensate, up to 80 percent of the population would receive handouts — 50 dollars a month for adults aged over 23 and half for anybody younger.
Those amounts, and the numbers of beneficiaries, would then progressively diminish.
Until then, the authorities have secured $246 million from the World Bank to help 786,000 Lebanese.
But Nasser Jomaa, 52, said he doubted the government would really provide any financial support.
“It’s just empty words. We have zero faith in the state,” said the driver, who lives with his unemployed 25-year-old son.
As the Lebanese pound has plunged on the black market, he has seen his monthly income drop in value from $1,000 to just $160.
He added that any lifting of subsidies would be “catastrophic.”
Already, he said, “we no longer eat meat.”


Saudi Arabia jumps 10 places in entrepreneurship index as startups make their mark

Updated 05 March 2021

Saudi Arabia jumps 10 places in entrepreneurship index as startups make their mark

  • Saudi Vision 2030 encourages startup culture
  • Index based on 12 entrepreneurship measures

DUBAI: Saudi Arabia has jumped 10 places in a global entrepreneurship index as the Kingdom looks to encourage startups.

It reached 7th place overall by the end of last year, according to the Global Entrepreneurship Monitor report 2020/2021, which noted that the Kingdom ranked 41st in 2018, Al Arabiya reported.

Saudi Arabia has witnessed significant progress in encouraging new businesses to take flight over the last three years.

The Entrepreneurial Status Index is mainly based on measuring countries’ average results across 12 main measures of entrepreneurship.

The Saudi economy is undergoing massive economic reforms, led by the transformation strategy Saudi Vision 2030.

A big part of that plan focuses on boosting the Kingdom’s startup ecosystem with supportive regulatory frameworks and local venture funds.

It has led to a flurry of new startups emerging in recent years, some of which have been featured by Arab News.

These include Mine Bags, which allows people to change the the look of items by switching between different brooches and straps, and Vegan Street — the Jeddah restaurant started by three young Saudis, which was the first Saudi restaurant to be approved by BeVeg, the world’s leading vegan certification company.


Goldman hikes Brent forecast, sees oil at $80 in third quarter

Updated 05 March 2021

Goldman hikes Brent forecast, sees oil at $80 in third quarter

  • Iran supplies likely to remain 'inelastic'
  • Lowers production forecast for OPEC+

Goldman Sachs Commodities Research raised its Brent forecast for second and third quarter by $5 a barrel after OPEC and its allies kept the deal unchanged, and said ‘discipline of shale producers’ is likely behind the group’s slower output increase.
The Wall Street bank now sees Brent prices at $75 a barrel in second quarter and at $80 a barrel in third quarter of 2021, it said in a note.
US shale producers have quickly responded to oil price gains in recent years, winning market share as Saudi Arabia and other major producers have cut output, although they held back on boosting production since pandemic-led demand destruction last year.
The Organization of the Petroleum Exporting Countries and its allies (OPEC+) on Thursday agreed to extend most oil production cuts until April, after deciding that the demand recovery from the coronavirus pandemic was still fragile.
“OPEC’s supply strategy is working because of its unexpectedness and suddenness,” Goldman said.
“We believe it is now clear that OPEC+ is in fact pursuing a tight oil market strategy, with our updated supply-demand balance pointing to OECD (inventories) falling to their lowest level since 2014 by the end of this year.”
The bank lowered its OPEC+ production forecast by 0.9 million (bpd) over the next six months, and said shale, Iran and non-OPEC supplies are likely to remain highly inelastic to prices until the second half of 2021, allowing OPEC+ to quickly rebalance the oil market.
“Key will be the potential shale supply response, although the latest earnings season suggests investors are still a long way away from rewarding growth,” the bank said, and raised its 2022 US shale production forecast by 0.3 million bpd.