Gulf economies to shrink by 7.6% this year, says IMF

Women shop in a largely deserted Hayat mall in Riyadh during the lockdown. The Kingdom’s economy will shrink by 6.8 percent, according to the IMF. (AFP)
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Updated 01 July 2020

Gulf economies to shrink by 7.6% this year, says IMF

  • The International Monetary Fund said this month that the COVID-19 pandemic will cost the global economy about $12 trillion this year

DUBAI: Gulf Cooperation Council (GCC) countries will see their economies shrink by 7.6 percent this year, an International Monetary Fund (IMF) official said on Tuesday, revising downwards April forecasts of nearly 3 percent.

The six GCC nations are, with varying degrees, facing steep economic declines as the slowdown in business activity due to the coronavirus pandemic is amplified by a price drop in hydrocarbons, which are their main source of revenue.

The IMF last week said Saudi Arabia’s economy — the largest in the Arab world — faces a 6.8 percent contraction this year, sharper than the 2.3 percent the Washington-based lender had forecast in April.

“We expect the GCC economies to contract by 7.6 percent this year, the contraction will be across all sectors, oil and non-oil,” Jihad Azour, director of the IMF’s Middle East and Central Asia Department, said on Tuesday at a virtual economic forum.

He said oil-producing countries in other regions were likely to see even larger drops.

Bahrain, one of the smallest Gulf producers, expects its economy to shrink in line with IMF forecasts, central bank chief Rasheed Mohammed Al-Maraj told the forum.

The IMF in April had projected Bahrain’s economy to contract by 3.6 percent this year.

Saudi Arabia’s central bank governor said that the Kingdom expects its economy to fare better than the IMF forecast.

Without providing a number, Ahmed Al-Kholifey, governor of the Saudi Arabian Monetary Authority (SAMA), said the IMF outlook was “more pessimistic” than Saudi Arabia’s own projections.

Al-Kholifey said SAMA was encouraging commercial banks to lend more to support businesses during the downturn and that banking indicators were reassuring, with banks’ coverage for loans at over 140 percent in the banking sector.

In a “worst-case scenario,” he said, non-performing loans would not exceed 4 percent of total loans this year. 


Lebanese banks to ease limits on dollar transfers

Updated 48 min ago

Lebanese banks to ease limits on dollar transfers

  • Shock move comes as PM warns of ‘financial blockade to starve the people’

BEIRUT: Lebanon’s banks will ease restrictions on US dollar withdrawals following a surprise announcement on Thursday by the head of the country’s banking association.

Salim Sfeir, chairman of the Association of Banks in Lebanon (ABL), said that US dollars will be supplied by the banks with the support of Lebanon’s central bank.

Lebanese banks last November imposed strict limits on US dollar transfers amid an economic and political crisis that led to the collapse of the Lebanese pound.

The curbs were introduced as the government and central bank struggled to ease the worst economic crisis since country’s civil war.

Sfeir made his announcement after meeting Saudi Ambassador to Lebanon Walid bin Abdullah Bukhari as part of an ABL delegation.

Following the meeting, Sfeir said that he wanted to put the Saudi ambassador “in the picture of the current economic situation in Lebanon.”

He praised the Kingdom’s generosity and said “economic life will be back to normal in Lebanon.”

The US dollar exchange rate reached its highest level on Thursday, scoring between 9,500 and 9,600 Lebanese pounds, while money dealers adopted a rate of between 3,850 and 3,900 Lebanese pounds.

Riad Salame, the central bank governor, told a government session that “the volume of US dollars circulating on the black market does not exceed 5 percent (of the hard currency market) and does not reflect the actual exchange rate of the US dollar.”

Meanwhile, Lebanese political leaders held a series of meetings on Thursday amid growing popular demands for the resignation of Prime Minister Hassan Diab’s government.

Gebran Bassil, leader of the Free Patriotic Movement (FPM), met with Parliamentary Speaker Nabih Berri, while Deputy Speaker Elie Ferzli visited former leader Saad Hariri.

After the meeting Ferzli said: “We all agree that Hariri is the key to reuniting all Lebanese in order to save the country and put an end to the deterioration of the situation and to the divisions among Lebanese. We must reconsider our stance toward the government. I appeal to Diab to facilitate the process of forming a new government.”

A ministerial source told Arab News: “After 16 sessions, negotiations with the International Monetary Fund (IMF) are no longer of the same intensity, but that does not mean that talks are no longer an option. There is a political disagreement over the basis of the government plan to negotiate with the IMF. Nobody wants to bear losses.”

The source said: “This government is forbidden from undertaking reforms. It seems there is a tendency to form a government that satisfies all political parties, and that undertakes policies suitable for their own interests and presents them as reforms to the IMF.”

Diab told a Cabinet meeting on Thursday that “for the past few weeks, local and foreign parties have worked on causing a major crisis and huge losses.”

He added: “There is a major effort to lay siege to the country, a political and financial blockade to starve the people. Those who are blocking roads are not necessarily the ones who are hungry.”

Head of the Progressive Socialist Party Walid Jumblatt responded to Diab’s claims, saying: “It seems that this government and the angels who are guarding it have lost all contact with the bitter reality. It is imagining conspiracies. It is the government of nothingness, bankruptcy and hunger.”

Lawmaker and FPM member Alain Aoun said: “The speed of the collapse is faster than the pace of the government’s action, and if the government cannot curb or stop the financial meltdown, it is natural that it will collapse.”

Protests continued on Thursday with main roads blocked in Beirut and other Lebanese cities due to the spike in food prices. Protesters intercepted trucks carrying food to Syria, some belonging to international aid groups.

The Lebanese army said that five people were arrested in Tripoli after an army patrol was attacked and five trucks loaded with food seized.

Those arrested had been carrying Kalashnikov machine guns, pistols and hand grenades, the army said.

Lebanon is still experiencing electricity rationing of more than 16 hours per day due to shortage of fuel oil supplies. Energy Minister Raymond GHajjar promised to “secure enough supplies of fuel oil by next week.”