Dark déjà vu for European economy as virus cases spike

New restrictions in Europe are not as drastic as the near-total lockdown imposed in the spring. (AFP)
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Updated 18 October 2020
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Dark déjà vu for European economy as virus cases spike

  • The early-year norm of closed hospitality venues and struggling airlines is beginning to return amid new infections

LONDON: Europe’s economy was just catching its breath from what had been the sharpest recession in modern history. A resurgence in coronavirus cases this month is a bitter blow that will likely turn what was meant to be a period of healing for the economy into a lean winter of job losses and bankruptcies.

Bars, restaurants, airlines and myriad other businesses are getting hit with new restrictions as politicians desperately try to contain an increase in infection cases that is rapidly filling up hospitals.

The height of the pandemic last spring had caused the economy of the 19 countries that use the euro to plunge by a massive 11.8 percent in the April-June quarter from the previous three-month period. About 1.5 million more people registered as unemployed during the pandemic. The damage was contained only by governments’ quick decision to spend hundreds of billions of euros to keep another 45 million on payrolls and companies running.

While the new restrictions are so far not as drastic as the near-total shutdown of public life imposed in the spring, they are kicking an economy that’s down. For many Europeans, there is a foreboding sense of déjà vu.

“It is a disaster,” says Thomas Metzmacher, who owns a restaurant in Germany’s financial hub, Frankfurt, of the government’s decision to impose an 11 p.m. curfew.

He noted that even before the new restrictions many people in his industry could only just about survive. The curfew means people who come in for a meal don’t linger for a few extra beers or schnapps, which is where restaurants make most of their profits. “Now it is: Go for a meal, finish your drink, pay, go home,” he said.

Experts say that the global economy’s course depends on the health crisis: Only when the pandemic is brought under control will it recover.

Countries like China, which have so far avoided a big resurgence like Europe, are faring better economically. The US never quite got its first wave under control and its economy remains hobbled by it.

Europe had reduced the number of infections much faster than the US and managed to keep a lid on unemployment. But the narrative that contrasted Europe’s successes against the Trump administration’s failure to subdue the pandemic is being quickly revised.

As coronavirus cases rise anew in Europe, economists are slashing their forecasts.




German Chancellor Angela Merkel has extended the wage support plan as tighter business restrictions return. (Reuters)

Ludovic Subran, the chief economist at financial services firm Allianz, says there is a high risk that the economies of France, Spain, and the Netherlands will contract again in the last three months of the year. Italy and Portugal are also at risk. While Germany is seeing an increase in infections, too, it is not as bad and the economy appears more resilient.

“We see an elevated risk of a double dip recession in countries that are once again resorting to targeted and regional lockdowns,” he said.

The pandemic is worsening just as governments were trying to ease off the massive amounts of financial support they have been giving households and business owners.

Many governments have programs where they pay the majority of salaries of workers who are redundant in the hope that they will be able to quickly get back to work after the pandemic. In France and Britain that covered a third of the labor force at one point, and 20 percent in Germany. They also gave cash handouts to households and grants to business owners.

Now governments are phasing out some of that support and aiming to provide more targeted aid to people directly affected by new restrictions. That will not help people whose jobs are affected indirectly. A pub facing a curfew, say, would be eligible to get wage support for its staff but the brewery supplying it might not.

The impact will vary between countries — while Britain is shifting to a less-comprehensive wage support plan, Germany has extended its program.

As with the pandemic’s initial surge in the spring, the sectors in Europe most affected by limits on public life are services including travel and hospitality — those that depend most on face-to-face contact between people.

Countries like Spain, Portugal and Greece rely heavily on tourism. It accounts for almost 12 percent of Spain’s economy, compared with less than 3 percent for the US and about 7 percent for France.

Major airlines in Europe expect to operate at about 40 percent of normal levels this winter and are again cutting the number of flights. Lufthansa, British Airways and others are cutting tens of thousands of jobs as they expect no quick return to how things were before the pandemic — even with government aid.

Even where there are no hard restrictions, the health hazard scares customers away, so shops are likely to see less business.

The EU is giving €750 billion ($880 billion) in financial support to member countries to cope with the fallout. Governments like Spain’s were planning to invest in long-term projects such as renewable energy and technology. It now appears they will have to spend more on just keeping the economy afloat. The European Central Bank is injecting €1.35 trillion ($1.6 trillion) into the economy, which keeps borrowing cheap even for countries with weak finances like Spain and Italy.

But the longer the pandemic drags on, the more the decisions on how to spend financial aid will become political, says Subran, the economist. Political parties are fighting over how to deploy the resources, and unions are going on strike to influence the debate. It mirrors the turmoil in the US, where a badly needed stimulus package has been delayed.

For Ludovic Nicolas-Etienne, a Parisian shopping for food among the stalls of the central Bastille square, it is a tragedy foretold. He blames the people who during the summer disregarded safety recommendations to party and socialize after months of lockdown.

“I was expecting this,” he said, wearing a mask outdoors the day after France announced a state of emergency. “Some people are not responsible enough, so the good people are paying for the bad ones.”


Oil Updates – crude steady as market weighs US demand concerns, Middle East conflict risks

Updated 51 min 29 sec ago
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Oil Updates – crude steady as market weighs US demand concerns, Middle East conflict risks

SINGAPORE: Oil prices steadied on Thursday after settling lower in the previous day, as signs of retreating fuel demand in the US, the world’s biggest oil user, contended with widening conflict risks in the key Middle East producing region, according to Reuters.

Brent crude futures inched up 18 cents, or 0.2 percent, to $88.20 a barrel at 9:30 a.m. Saudi time, while US West Texas Intermediate crude futures gained 13 cents, or 0.2 percent, to $82.94 a barrel.

Data from the US Energy Information Administration on Wednesday showed that gasoline stockpiles fell less than forecast while distillate stockpiles rose against expectations of a decline, reflecting signs of slowing demand.

The falling fuel demand is occurring amid signs of cooling US business activity in April and as stronger-than-expected inflation and employment data means the US Federal Reserve is more likely to delay expected interest rate cuts, weighing on economic sentiment.

“The current weakness in benchmark prices, after testing above $90 (a barrel) levels, is due to market sentiment refocusing on global economic headwinds over geopolitical tensions,” said Emril Jamil, senior oil analyst at LSEG Oil Research.

Geopolitics aside, prices this quarter will be driven by factors including major producer supply cuts, economic data out of China and Eurozone, on top of incremental demand expectations as the Northern Hemisphere heads into summer amid expected tighter supply, said Jamil.

A better indication of the Fed’s rate intentions will be seen after US gross domestic product and March personal consumption expenditure data is released on Thursday and Friday.

Meanwhile, fighting in the Gaza Strip between Israel and Hamas is expected to expand as Israel may start an assault on Rafah, in the enclave’s south, which may increase the risk of a wider war that could potentially disrupt oil supplies.

However, there have been no other signs of direct conflict between Israel and Hamas-backer Iran, a major oil producer, since last week.

“Tensions between Iran and Israel have eased, but Israeli attacks on Gaza are expected to worsen, and the risk of conflicts spreading to neighboring countries is underpinning oil prices,” said Toshitaka Tazawa, an analyst at Fujitomi Securities Co. Ltd.

Other EIA data on Wednesday showed that crude stocks slumped by 6.4 million barrels to 453.6 million barrels, compared with expectations in a Reuters poll for an 825,000-barrel rise. 


Saudia unveils beta version of new Travel Companion platform

Updated 5 min 5 sec ago
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Saudia unveils beta version of new Travel Companion platform

RIYADH: The Kingdom’s flagship airline Saudia has launched a beta version of its digital platform, the Travel Companion, powered by advanced artificial intelligence, aiming to transform the industry.

The new initiative, unveiled during a special event, is part of a two-year plan developed in partnership with global professional services firm Accenture.

“This platform, resulting from our ongoing collaboration with Accenture, signifies our forward-looking approach to providing guests with unparalleled convenience and flexibility,” the Director General of Saudia Group, Ibrahim Al-Omar, said. 

The main objective of this launch is to transform how travelers engage with the airline and establish new benchmarks for digital travel.

TC, initially named, offers personalized and tailored solutions to meet individual preferences and needs, providing search results from trusted and authenticated sources and incorporating visual aids in its responses.

The interface is designed as a comprehensive, one-stop solution that enables users to book concierge services, including hotels, transportation, and restaurants, as well as activities and attractions, without the need to switch between multiple platforms.

“This is a beta version. This is not the product. We will keep enhancing and developing it,” Al-Omar stressed.

Moreover, it establishes seamless connections with transportation platforms and various train companies, ensuring a smooth and uninterrupted journey.

Commenting on the new announcement, Chief Data and Technology Officer at Saudia, Abdulgader Attiah, told Arab News: “It’s like having the VVVIP concierge service at your hand. For public, it’s not any anymore VIP service. It’s not a paid service. You have it for free, and it will give you all what all kind of services that VVIP service would provide to you, so it’s your private concierge.”

He added: “We will be the anchor for the travel industry. We are not anymore, an operator for an airline, but with this app, you will be an anchor for all tourism ecosystem in a single app, so everyone can collaborate in this app, and having the links, so you don’t need to communicate with any other party, so through this app, you can communicate to all travel ecosystem.”

In future phases, Saudia plans to add more features, including voice command and digital payment solutions.

“Once we add the complete solution we will add the more services, which is we call it the concierge services; booking for hotels and transportation and the restaurants, all of these ones is done during the, next two years, and this is the complete life cycle of the, vision we have today,” Attiah told Arab News.

He added: “If you want to develop this app, five years back, it would take three, four years. Today, we have developed only in seven, eight months. To that from the inspirational part to having an actual booking, we started back in June and now we are live.”

Attiah also underlined that Saudia is the first airline in the world to implement a GenAI-based chatbot that can perform end-to-end actions, meaning it can not only engage in conversation but also execute tasks or actions based on user requests.

With an always-on Travel Companion available through a telecom e-SIM card provided by Saudia, users can stay connected globally without relying on additional internet providers.

Furthermore, users can purchase data packages for extended use, guaranteeing continuous access to the platform’s services.


Saudi economy witnessing a fundamental shift, says minister

Updated 24 April 2024
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Saudi economy witnessing a fundamental shift, says minister

RIYADH: Since the launch of Vision 2030, Saudi Arabia has witnessed a fundamental shift in its economy and the business environment is transforming with the creation of new sectors, said the Kingdom’s economy minister.

Faisal Al-Ibrahim was speaking at a conference in Riyadh on Wednesday during which he highlighted the fast-evolving business landscape of the Kingdom focused on diversifying its income sources away from oil.

Speaking at the event titled “Industrial policies to promote economic diversification,” the top official said there have been fundamental changes in the legislative and economic regulations to promote sustainable development since the launching of the Vision 2030 plan.

He said the Kingdom’s efforts to diversify its economy have led to the creation of new sectors due to the initiation of several megaprojects such as NEOM, the Red Sea, and others. 

 “We stand at a crossroads to change the global economy,” Al-Ibrahim said.

He stressed the need for strategies to ensure a flexible and sustainable economy.

“The presence of foreign investments will develop competitiveness in the long term,” the minister affirmed.

The minister also highlighted how the Kingdom was working in the medium term to focus on transforming sectors that represent a technological shift.

Saudi Arabia is keen on achieving development in the medium term by balancing short-term profits and promoting long-term success, Al-Ibrahim highlighted.

Since the launch of the vision, the Ministry of Economy and Planning has conducted several economic studies aimed at diversifying the economy by developing objectives for all sectors, raising complexity levels, and studying emerging economies to enhance the Kingdom’s capabilities.  

 


Saudi Arabia closes April sukuk issuance at $1.97bn

Updated 24 April 2024
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Saudi Arabia closes April sukuk issuance at $1.97bn

RIYADH: Saudi Arabia has completed its riyal-denominated sukuk issuance for April at SR7.39 billion ($1.97 billion), representing a rise of 66.44 percent compared to the previous month. 

The National Debt Management Center revealed that the Shariah-compliant debt product was divided into three tranches. 

The first tranche, valued at SR2.35 billion, is set to mature in 2029, while the second one amounting to SR1.64 billion is due in 2031. 

The third tranche totaled SR3.51 billion and will mature in 2036. 

“The Kingdom also plans to expand funding activities during the year 2024, reaching up to a total of SR138 billion from what has been stated previously in the Annual Borrowing Plan, with a portion of this amount already covered up to date,” said NDMC in a press statement. 

It added: “This step comes with the aim of capitalizing on market opportunities to achieve proactive financing for the coming year and utilizing it to bolster the state’s general reserves or seize additional opportunities to enhance transformative spending during this year, thereby accelerating strategic projects and programs of Saudi Vision 2030.” 

In March, NDMC concluded its second government sukuk savings round for March, with a total volume of requests reaching SR959 million, allocated to 37,000 applicants. 

The center added that the financial product, also known as Sah, offers a return of 5.64 percent, with a maturity date in March 2025. 

Earlier this month, Fitch Ratings, in a report, said that global sukuk issuance is expected to continue growing in the coming months of this year, driven by funding and refinancing demands. 

The credit rating agency noted that various other factors like economic diversification efforts by countries in the Gulf Cooperation Council region and development of the debt capital market will also propel the growth of the market in the future. 

In January, another report released by S&P Global revealed that sukuk issuance worldwide is expected to total between $160 billion and $170 billion in 2024, driven by higher financing needs in Islamic nations.

The report noted that higher financing needs in some core Islamic finance countries and easing liquidity conditions across the world are two crucial factors which will drive the growth of the market this year. 


Closing Bell: TASI edges down to close at 12,355 points 

Updated 24 April 2024
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Closing Bell: TASI edges down to close at 12,355 points 

RIYADH: Saudi Arabia’s Tadawul All Share Index dipped on Wednesday, losing 128.72 points, or 1.03 percent, to close at 12,355.69.    

The total trading turnover of the benchmark index was SR8.45 billion ($2.25 billion) as 41 of the listed stocks advanced, while 187 retreated.   

Similarly, the MSCI Tadawul Index decreased by 14.78 points, or 0.95 percent, to close at 1,548.62. 

Also, the Kingdom’s parallel market Nomu dipped, losing 365.84 points, or 1.37 percent, to close at 26,326.12. This comes as 17 of the listed stocks advanced, while 45 retreated. 

The best-performing stock of the day was Al-Rajhi Co. for Cooperative Insurance as its share price surged by 9.87 percent to SR138.

Other top performers include Al Sagr Cooperative Insurance Co. and First Milling Co., whose share prices soared by 6.38 percent and 5.63 percent, to stand at SR35.85 and SR78.80, respectively. 

In addition to this, other top performers included Batic Investments and Logistics Co. and Saudi Research and Media Group. 

The worst performer was Al-Baha Investment and Development Co., whose share price dropped by 7.14 percent to SR0.13. 

Other weak performers were National Co. for Learning and Education as well as Arriyadh Development Co., whose share prices dropped by 5.95 percent and 5.91 percent to stand at SR148.60 and SR22.60, respectively. 

Moreover, other subdued performers also include Red Sea International Co. and AYYAN Investment Co. 

On the Kingdom’s parallel market Nomu, the best-performing stock of the day was Osool and Bakheet Investment Co., as its share price surged by 12.05 percent to SR40.90. 

Other top performers on Nomu include Arabian Plastic Industrial Co. and Lana Medical Co., with their share prices soaring by 7.42 percent and 3.59 percent, respectively, reaching SR37.65 and SR41.85. 

The worst performer was Jahez International Co. for Information System Technology, whose share price dropped by 5.88 percent to SR32.

Other weak performers were Alhasoob Co. as well as Aqaseem Factory for Chemicals and Plastics Co., whose share prices dropped by 3.61 percent and 3.38 percent to stand at SR64.10 and SR62.80, respectively. 

On the announcements front, HSBC Saudi Arabia, serving as sole financial advisor, joint bookrunner, underwriter, and lead manager, has announced the intention of Dr. Soliman Abdel Kader Fakeeh Hospital Co., known as Fakeeh Care Group, to proceed with its initial public offering on the main market of Saudi Exchange. 

According to a statement, the offering will include 49.8 million ordinary shares, with 19.8 million existing shares and 30 million new shares upon completion.  

This offering is set to represent 21.47 percent of the company's share capital post-capital increase.  

Saudi Exchange and the Capital Market Authority approved the listing and IPO, respectively, with the pricing of shares to be determined after the book-building period.