2021 Year in Review: New coronavirus variant, inflation test strength of global economic recovery

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Updated 30 December 2021
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2021 Year in Review: New coronavirus variant, inflation test strength of global economic recovery

  • The IMF estimates that global gross domestic product grew 5.9 percent in the course of the year
  • Shortages in energy markets have caused gas and coal prices to soar to an all-time high in Europe

DUBAI: According to all the orthodox economic and financial indicators, 2021 was a year of strong recovery from the “lockdown recession” of the previous year.

But despite surging growth forecasts, soaring stock markets and strong commodity prices, as the year drew to a close two shadows loomed over economic prospects — the threat from the omicron variant that appeared in November and rising global inflation trends that threatened to throw economic policymakers’ calculations into confusion.

Gita Gopinath, the chief economist of the International Monetary Fund, highlighted the push-pull nature of the global economic outlook.

“As the global economy recovers from the pandemic, a great deal of uncertainty remains about the new COVID-19 variants and increased inflation pressures in many countries,” she said.




While the global economy continues to show signs of recovery from the pandemic, uncertainty remains new COVID-19 variants and increased inflation pressures. (AFP/File Photos)

“If allowed to spread uncontrolled, omicron could lead to large-scale hospitalizations and further restrictions on mobility and travel, which will again have a negative impact on global economies, both advanced and emerging.”

Regional economists echoed her caution. Nasser Saidi, Middle East economic expert, said: “Unless the vaccination pace improves drastically (especially in low-income nations) and the new variant is rapidly brought under control, the global economy could see brakes applied on growth at least in the first quarter of next year.”

However, the reservations caused by the new variant cannot hide the fact that the world economy recovered strongly in 2021. The IMF estimated that global gross domestic product grew 5.9 percent in the course of the year — a big turnaround from the 3.1 percent decline that total GDP suffered in 2020 when the pandemic hit and all countries went into lockdown.

For the world’s biggest economy, the US, the reversal was even more notable — from a 3.4 percent decline in 2020, in 2021 the economy is forecast to grow by 6 percent. A healthy American economy pulls the rest of the world along with it.




If soaring prices in energy and other commodities are a worry for the big advanced economies, they are the opposite for the Middle East. (AFP/File Photos)

The election of President Joe Biden, committed to an aggressive policy of antivirus measures coupled with multi-trillion dollar initiatives to invest in infrastructure, gave the economy and financial markets a big boost in the year.

American stock markets — boosted by the Biden spending packages and continued support from US financial authorities — had one of their best years. The S&P 500, the most reliable index of American equity health, was nearly 30 percent up on the year.

But there were still warning signs in the US that made the policymakers twitchy. In particular, inflationary pressures continue to rise. The official inflation rate was reported at 6.8 percent in December, its highest level for nearly four decades.

Federal Reserve chairman Jay Powell insisted for much of the year that the rise in prices was “transitory,” but continued to sound a cautious note on whether the Fed would “taper” its support for financial markets into 2022 and slowly increase interest rates.




Regional economies, especially in the big oil-exporting countries in the Gulf, have enjoyed a year of solid expansion and recovery from the 2020 lockdowns. (AFP/File Photos)

“Supply and demand imbalances related to the pandemic and the reopening of the economy have continued to contribute to elevated levels of inflation. These problems have been larger and longer lasting than anticipated, exacerbated by waves of the virus,” Powell said.

For that other great engine of global economic growth, China, the year was distinctly mixed. The IMF forecast GDP growth of 8 percent in 2021 — almost back to the staggering levels that drove world economic progress in the first two decades of the century — but “the momentum is slowing,” the IMF warned, projecting a GDP growth rate of 5.6 percent in 2022.

Fears about the potential for the Chinese economy to drag the rest of the world upwards centered on some serious structural defects — such as the weakness of the property market as exemplified by the virtual collapse of real estate group Evergrande.

There were also concerns that the Chinese economy was retreating from its role as a global economic stimulus. Experts such as Ian Bremmer, president of the Eurasia Group consultancy, warned that China’s retreat from US stock markets and other forms of commercial cooperation in technology with the US and the rest of the world were problematic for the global economy.




American stock markets — boosted by the Biden spending packages — had one of their best years, but experts have concerns that China’s retreat from US stock markets and other forms of commercial cooperation in technology with the US and the rest of the world would be problematic. (AFP/File Photos)

“The dangers of President Xi getting it wrong are grave — for his own prestige and the semiconductor industry that China is reliant on,” Bremmer said.

The third major economic force in the world, Europe, also witnessed strong economic recovery in 2021, with IMF forecasts showing GDP growth of 5 percent in the Euro currency area and 6.8 percent in the post-Brexit UK.

While these projections are encouraging for European policymakers, they also disguise the reality of severe restrictions as a result of the omicron variant in many countries, and a looming winter energy crisis for many on the continent.

Gas and coal prices have soared to all-time highs in Europe as shortages in global energy markets are exacerbated by political tensions with the main supplier of gas, Russia. Oil prices, too, are strong, adding to European’s inflationary fears.




The long-suffering Dubai Financial Market witnessed 27 percent growth, while the Abu Dhabi Securities Exchange saw a spectacular 67 per cent jump in share values. (AFP/File Photo)

But if soaring prices in energy and other commodities are a worry for the big advanced economies, they are the opposite for the Middle East. Regional economies, especially in the big oil-exporting countries in the Gulf, have enjoyed a year of solid expansion and recovery from the 2020 lockdowns.

In Saudi Arabia, the rising price of crude oil in 2021, along with expansion in the non-oil sectors of the Kingdom’s economy, mean that the forecast of 2.8 percent GDP growth made by the IMF is likely to be beaten.

The Saudi budget, announced in December, showed that policymakers expect to be able to report a surplus in 2022 for the first time in nearly a decade, as strong oil prices and post-pandemic recovery work their way through the Kingdom’s economy.

Finance minister Mohamed Al-Jadaan said: “We are telling our people and the private sector or economy at large that you can plan with predictability. Budget ceilings are going to continue in a stable way regardless of how the oil price or revenues are going to happen.”




In Saudi Arabia, the rising price of crude oil in 2021, along with expansion in the non-oil sectors of the Kingdom’s economy, mean that the forecast of 2.8 percent GDP growth made by the IMF is likely to be beaten. (AFP/File Photo)

The specter of inflation hanging over the global economy is not seen as a significant threat to the Saudi economy, with forecasts of between 1 and 2 percent in 2022 much lower than international comparisons. Nonetheless, the experts predict Saudi Arabia and other dollar-pegged economies in the region will have to follow the Federal Reserve if it raises interest rates in 2022.

One common feature of regional economies in 2021 which looks certain to continue in 2022 has been the spectacular growth in financial markets, fed by booming share prices and an explosion of initial public offerings in the main investment centers.

On the Saudi Tadawul market, share prices rose nearly 30 percent year-on-year, culminating in the successful and oversubscribed IPO of the Tadawul itself. More IPOs are in the pipeline for 2022, investment analysts predict.

In the UAE, there was a similar explosion in stock markets, boosted by a series of government-related IPOs. The long-suffering Dubai Financial Market witnessed 27 percent growth, while the Abu Dhabi Securities Exchange saw a spectacular 67 per cent jump in share values.

Tarek Fadlallah, chief executive of Nomura Asset Management in the Middle East, told Arab News: “The Middle East has enjoyed a good year in terms of economic and financial markets. The region is getting a reputation as a safe haven in these troubled COVID times for investors, business people and tourists alike.”


Saudi minister discusses logistics cooperation on visit to Port of Rotterdam

Updated 29 May 2024
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Saudi minister discusses logistics cooperation on visit to Port of Rotterdam

  • Discussions touched on encouraging Dutch infrastructure investments for metal processing in the Kingdom

AMSTERDAM: Saudi Arabia’s Minister of Industry and Mineral Resources, Bandar Ibrahim Alkhorayef, paid a visit to the Port of Rotterdam, where he discussed with the port authority ways to enhance cooperation in logistics services.

Opportunities provided by the Kingdom in this sector, the role that the Kingdom can play as a strategic supplier of vital minerals, and how to enhance the flexibility of global supply chains, leveraging the Kingdom’s position as a bridge between East and West were discussed.

The meeting with port officials also explored avenues for enhancing cooperation with Dutch companies in various fields, including developing processing and recycling capabilities in both countries, benefiting from Dutch expertise and technology.

Additionally, discussions touched on encouraging Dutch infrastructure investments for metal processing in the Kingdom to achieve the aspirations of both countries in developing the sector.

Alkhorayef reviewed the objectives of the National Industrial Development and Logistics Program (NIDLP), a program under Saudi Vision 2030, which focuses on investing in the Kingdom’s unique strategic location linking three continents and transforming it into a leading industrial power and global logistics center.

The minister also toured the port’s FutureLand area, where he was briefed on the various maritime services provided to ships and shipping companies, including towing, docking, repairs, shipbuilding, and ship supply.


Saudi Arabia and Austria sign MoU for economic cooperation

Updated 29 May 2024
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Saudi Arabia and Austria sign MoU for economic cooperation

VIENNA: Saudi Arabia’s economy ministry and its Austrian counterpart signed a memorandum of understanding to boost economic cooperation between the two nations.
The Saudi Ministry of Economy and Planning Austria’s Ministry of Labor and Economy in the deal on the sidelines of the Saudi-Austrian Joint Committee held in the Austrian capital.
 The MoU was signed by the Saudi Minister of Economy and Planning Faisal bin Fadel Al-Ibrahim, and the Austrian Minister of Labor and Economy, Martin Kocher.
 The MoU aims to diversify and strengthen economic ties, exchange experiences and information, and encourage cooperation in a number of fields, including trade, industry, research and development, tourism, small and medium enterprises.
Among the content of the MoU is the organization of conferences, seminars and the exchange of visits between experts, in addition to cooperation between government institutions and the private sector.
The parties are also committed to protecting intellectual property rights and exchanging information for the purposes specified in the MoU.
This MoU comes within the framework of a cooperation agreement in the economic, commercial, industrial and technical fields signed between the two governments in 2004.


Xi calls for more jobs for youth, migrant workers

Updated 28 May 2024
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Xi calls for more jobs for youth, migrant workers

  • (We should) insist that employment of young people including college graduates is a top priority: Chinese president

BEIJING: China’s President Xi Jinping called on Monday for efforts to promote high-quality and sufficient jobs for college graduates and migrant workers, while presiding over a Politburo group study session, state media Xinhua reported on Tuesday.

“(We should) insist that employment of young people including college graduates is a top priority,” the Xinhua report quoted Xi as saying at a group study session of the Politburo, a top decision-making body of the ruling Communist Party.

The Xinhua report did not give details on job promotion support measures or plans.

The survey-based jobless rate for 16-24 year-olds, excluding college students, was 14.7 percent in April, down from 15.3 percent in March, official data showed last week.

China’s statistics bureau revised its methodology by removing college students from the survey pool after youth jobless rate surged to around 20 percent last year.

Xi also said the government should take steps to promote the employment of migrant workers, guide them to return to their hometowns and for people to start businesses in the countryside.

He called for stabilizing the income of people who had been lifted out of poverty and preventing large-scale return to poverty due to unemployment, Xinhua said.

Companies and industries with strong job creation capabilities will be supported, the report said.

China created 4.36 million new urban jobs in the first four months, Human Resources Ministry data showed, 36 percent of its annual job creation target.


Saudis spent more money on electronic devices during the 4th week of May: SAMA data

Updated 28 May 2024
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Saudis spent more money on electronic devices during the 4th week of May: SAMA data

RIYADH: Saudi Arabia’s point-of-sale spending reached SR11.2 billion ($2.98 billion) in the fourth week of May, official figures showed.

The latest data from the Saudi Central Bank, also known as SAMA, revealed that spending on electronic and electric devices surged by 9.5 percent to reach SR240.4 million.

Beverages and food, which accounts for the largest share at 14.9 percent, saw a 5.9 percent decline, reaching SR1.66 billion, during the week from May 19 to 25.

Meanwhile, transactions at restaurants and cafes, holding a 14.6 percent share, recorded a slower decline of 4.8 percent, amounting to SR1.64 billion. 

Saudi spending on miscellaneous goods and services, including personal care items, supplies, maintenance, and cleaning, constituted the third-highest share and witnessed a 5.1 percent decline that week, reaching SR1.36 billion. 

Despite composing only 1 percent of the week’s overall POS value, spending on education recorded a minimal increase of 0.1 percent to SR152.48 million.

In the past few years, this sector has been allocated the largest share of government expenditure in comparison to other divisions of the economy. 

Efforts are underway to revamp the education system, aiming to equip the national workforce with the necessary skills to thrive in a technological and information-centric global economy.

The hotel sector experienced the largest decline in POS transaction value, dropping 10.9 percent to SR227.13 million.

According to data from SAMA, 35.44 percent of POS spending occurred in Riyadh, with the total transaction value reaching SR3.97 billion. However, this represents a 1.6 percent decrease from the previous week.  

Riyadh has undergone considerable expansion, evolving into a pivotal center for growth and progress. The city is witnessing a surge in new businesses setting up operations, drawn by its vibrant economic landscape and strategic prospects for investment and innovation.

Spending in Jeddah followed closely, accounting for 14.3 percent of the total and reaching SR1.60 billion; however, it marked a 3.1 percent weekly drop. 

The two cities that registered the highest declines in POS spending were Makkah and Madinah, with decreases of 11 percent and 6.8 percent, respectively. The value of transactions in Makkah reached SR380.98 million, while in Madinah, it was SR393.26 million.


Saudi healthcare to advance with major digital tech partnership

Updated 28 May 2024
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Saudi healthcare to advance with major digital tech partnership

RIYADH: The Saudi healthcare system is set to advance as two of the country’s major companies partner to leverage digital technologies to enhance the Kingdom’s capabilities.

SAMI Advanced Electronics Co., a wholly owned subsidiary of SAMI, the nation’s defense and digital solutions provider, has signed a cooperation agreement with the National Unified Procurement Co., a Public Investment Fund company.

The agreement, signed on May 27, will provide solutions for medication tracking and IT infrastructure and increase local content through medical devices manufacturing and maintenance.

This partnership demonstrates SAMI-AEC’s unremitting efforts to build a harmonious and applicable healthcare system in Saudi Arabia based on digital technologies.

Ziad Al-Musallam, CEO of SAMI-AEC, commented on the agreement, saying that they are honored to collaborate with NUPCO, as this deal underscores the unwavering commitment of both entities to bolstering efforts aimed at enhancing the healthcare ecosystem in Saudi Arabia.

“At SAMI-AEC, we firmly believe in the significance of augmenting public health services through digital solutions and delivering e-health services. This involves integrating effective, fast technologies to empower the healthcare sector, aligning with the objectives of Saudi Vision 2030,” he said.

Fahad Al-Shebel, CEO of NUPCO, highlighted the agreement’s importance and its role in fortifying the healthcare infrastructure and facilitating access to the integrated technology offered by SAMI-Advanced Electronics Co.

Aiming to upgrade the healthcare sector by improving its facilities in all public hospitals and medical centers in the Kingdom, NUPCO is the country’s largest central company providing medical purchasing, storage, and distribution services for medicines, devices, and supplies.

With a workforce of over 3,320 individuals, 85 percent of whom are Saudi nationals, SAMI-AEC has positioned itself as a leader in electronics, technology, engineering, and manufacturing. Its services span sectors such as defense and aerospace, digital, energy, and security.

Over 800 of the company’s employees are engineers and certified experts, reaffirming the dedication of SAMI-AEC, which was established in 1988, to excellence and innovation.

On the other hand, NUPCO was established in 2009 with SR1.5 billion in capital. It is the leading company in Saudi Arabia in procurement, logistics, and supply chain management for pharmaceuticals, medical devices, and supplies for governmental hospitals.