Global growth forecasts plummet amid Ukraine war; Brazil’s central bank hikes interest rates — Macro Snapshot
Updated 23 March 2022
Arab News
RIYADH: The war in Ukraine has pushed global growth predictions down 0.5 percent, with Italy’s growth trailing back by 1.7 percent.
While Brazil’s central bank increased its benchmark interest rates by 100-basis point, Morocco held its interest rate at 1.5 percent. The British pound and Japanese yen saw alterations, even as Canada’s stocks hit a record high spurred by a rally in the technology stocks.
Global growth forecast
Independent economic research provider Capital Economics has downgraded the global growth forecast from 4 percent to 3.2 percent as the war in Ukraine continues.
Previous growth for 2022 was seen to slow from 6 percent to 4 percent. But given the Western’s aggressive response to the Russian-Ukrainian crisis will further cripple Russia’s economy, disrupt global supply chains, and fuel even higher inflation, the global growth is expected to fall to 3.2 percent.
It could drop further drop to 3 percent if Western sanctions on energy trade are backed up with secondary sanctions.
In that scenario, major central banks in advanced economies may consider scaling back tightening plans in order to support real activity, pointed out the Capital Economics report.
Tunisia default risk to rise if IMF deal delays
Tunisia is heading for default if the current deterioration in its finances continues, investment bank Morgan Stanley warned on Monday.
“In a scenario where the current rate of fiscal deterioration continues, it is probable that Tunisia would default on its debt,” Morgan Stanley said, adding it was likely to happen next year unless they secured a quick IMF program and made major spending cuts.
It follows a similar warning from credit rating agency Fitch on Friday which downgraded Tunisia’s sovereign score to “CCC” from “B-minus”. Fitch estimated an 8.5 percent of GDP government deficit this year would push Tunisia’s debt-to-gross domestic product ratio up to 84 percent.
Brazil hikes interest rate
Brazil’s central bank considered the implications of a lower rate hike of at least 75 basis points but decided on a 100-basis-point increase which would be timelier given the inflationary pressures as it approaches the end of its aggressive monetary tightening cycle.
The central bank felt the conflict in Ukraine added further uncertainty and volatility and caused a supply shock in several commodities, especially energy-related ones, before raising the benchmark rate to 11.75 percent.
Policymakers had indicated last week another 100-basis-point hike at the next meeting in May, hardening its stance to put interest rates into an even more restrictive territory to curb second-round effects of the current supply shock.
Canada stocks hit record high
Canada’s main stock index scaled another record high at the open on Tuesday as gains in technology shares overshadowed weakness in commodity-linked stocks.
At 9:34 a.m. ET (13:34 GMT), the Toronto Stock Exchange’s S&P/TSX composite index GSPTSE was up 52.59 points, or 0.24 percent, at 22,061.72.
Morocco holds interest rate
Morocco’s central bank kept its benchmark interest rate at an all-time low of 1.5 percent on Tuesday, saying its accommodative monetary policy was needed to shore up the economy amid inflationary pressures resulting from the war in Ukraine.
Driven by imported goods, inflation is expected to surge to 4.7 percent this year from 1.4 percent in 2021, before slowing to 1.9 percent next year, the bank said in a statement following its quarterly board meeting.
The bank revised down its 2022 growth forecast to 0.7 percent from an earlier 2.9 percent, citing a severe drought that lowered prospects for this year’s cereals harvest to 2.5 million tons.
Dollar rises, yen falls
The dollar rose on Tuesday as Federal Reserve Chair Jerome Powell put the possibility of half-percentage-point interest rate hikes on the table, while the yen fell through the psychological 120 level as the Bank of Japan reiterated its support for ultra-loose monetary policy.
The yen JPY=EBS hit a six-year low, down 1.1 percent to 120.81 at 12:30 GMT, having lost around 5 percent against the dollar this month, as leaping US yields and a deteriorating trade balance suck cash from the world’s third-biggest economy.
Yen crosses also suffered, with the euro EURJPY touching a five-month high of 133.30. The Japanese currency slumped to an almost seven-year low against the Swiss franc CHFJPY.
Japan must maintain ultra-loose monetary policy lest inflation hurt the economy, Bank of Japan Governor Haruhiko Kuroda said on Tuesday — contrasting with hawkish overnight comments from Powell.
Italy cuts growth forecast
Italy is set to downgrade its growth outlook this year to around 3 percent from a previous 4.7 percent target, a Treasury official said on Tuesday, amid surging energy costs and turmoil linked to Russia’s invasion of Ukraine.
“We will revise the growth estimates, this year growth will be around 3 percent,” Treasury Undersecretary Maria Cecilia Guerra told an Italian radio station.
The euro zone’s third-largest economy grew 6.6 percent last year following a record contraction of 9.0 percent in 2020 caused by extended coronavirus lockdowns.
However, this year did not begin well. Italian industrial output dived 3.4 percent in January from the month before, its steepest fall for more than a year, even before the headwinds generated by the Ukraine war.
The conflict has exacerbated already sky-high energy costs and triggered supply crunches for agriculture, prompting the ruling coalition to put pressure on Prime Minister Mario Draghi to approve an extra borrowing package.
The Treasury will detail its fiscal plans this month, when it publishes new growth forecasts and public finance targets in its annual Economic and Financial Document (DEF).
British pound jumps
The British pound strengthened to a two-week high against the euro as it continued to retrace losses which followed what investors perceived as a dovish interest rate hike by the Bank of England on March 17.
Focus has turned to UK inflation data and British Finance Minister Rishi Sunak’s Spring Statement, both scheduled on Wednesday.
Commerzbank said the update on UK inflation could move the pound considerably if rising prices once again exceed expectations.
If this was to be the case again tomorrow the BoE rate hike expectations could be fueled again, allowing sterling to recover somewhat further against EUR, Commerzbank FX analyst You-Na Park-Heger said.
RIYADH: Global investors can find a “safe harbor” in the Gulf Cooperation Council as the bloc’s public-private partnerships pipeline offers “compelling” opportunities, according to a new report.
The latest document from the Future Investment Initiative Institute highlights how economies in the region are currently driving the next wave of PPP growth.
It cites findings from Partnerships Bulletin, which ranks Saudi Arabia as second in the global emerging markets pipeline for PPP projects up to July 2025, and also places Dubai in the top 10.
While that analysis claims the Kingdom has 98 PPP projects either formally published or announced, FII says Saudi Arabia has a further 200 currently awaiting approval.
The findings align with the goals outlined in the Kingdom’s National Privatization Strategy, launched in January, which aims to raise satisfaction levels with public services across 18 target sectors, create tens of thousands of specialized jobs, and exceed 220 PPP contracts by 2030.
The strategy also aims to increase private sector capital investments to more than SR240 billion ($63.99 billion) by 2030.
The FII report says that around 90 percent of FDI into Saudi Arabia now flows into non-oil sectors, from advanced manufacturing and tourism to green energy and digital infrastructure.
“That shift reflects deliberate policy choices to open markets, standardize regulatory frameworks and use public capital to de-risk new value chains,” says the document, adding: “The result is a kind of safe harbor in an otherwise low-growth, high-uncertainty world.”
It continues: “While global FDI has stagnated or declined in many regions, the GCC’s pipeline of planned infrastructure and industrial projects now exceeds $2.5 trillion, according to Boston Consulting Group data, with PPPs playing a central role in structuring and financing them. For global investors searching for yield, diversification and inflation-linked income, this represents a compelling proposition.”
Commenting on the FII Institute report, Sally Menassa, partner at international management consulting firm Arthur D. Little, said PPPs are a strategic necessity for delivering infrastructure at speed and scale, and described Saudi Arabia’s pipeline as a “powerful execution and financing tool.”
She added: “The Kingdom’s PPP momentum must remain focused on impact, value creation and execution excellence. PPPs should not be viewed merely as a funding mechanism, but as a structural tool to enhance infrastructure performance, attract investment and support sustainable economic growth in line with Vision 2030.”
Menassa said that Saudi Arabia’s National Privitization Strategy marks a shift from a project-by-project approach to institutionalization of efforts and value creation.
“By clarifying sector priorities, strengthening project selection criteria, and formalizing governance and investor pathways, the Strategy reduces uncertainty. This clarity enhances investor confidence and improves pipeline quality,” said the Arthur D. Little official.
Sally Menassa, partner at international management consulting firm Arthur D. Little. Supplied.
She added: “PPP and privatization efforts in Saudi Arabia are not about divestment or the state shifting execution to the private sector, it is really about becoming more productive as a nation. It enhances efficiency, raises service standards, mobilizes private and SME participation, and attracts capital.”
Menassa further said that the strategy could help the Kingdom achieve stronger fiscal sustainability and higher private sector GDP contribution, both of which are critical components to accelerate the Kingdom’s economic transformation under Vision 2030.
Vijay Valecha, chief investment officer at Century Financial, believes input from the private sector across all stages, from design to construction and operations, improves the efficiency of project delivery and long-term operations in Saudi Arabia.
“Tighter governance through centralized management at the National Center for Privatization and PPP and a more streamlined process, including template contracts, a clearer regulatory environment, and a transparent pipeline, is likely to improve delivery speed,” said Valecha.
He added: “This means faster delivery of big projects like Red Sea resorts or Neom, with private firms handling operations to drive innovation. Ultimately, the strategy supercharges diversification by making the private sector the main engine of growth, aligning perfectly with Saudi Arabia’s push for a vibrant, non-oil economy.”
The FII Institute added that the global flow of FDI is increasingly concentrated in the Gulf Cooperation Council region, driven by ambitious national transformation agendas and deep pools of sovereign wealth.
Tony Hallside, CEO of STP Partners, outlined several factors that are boosting the PPP landscape in the region, which include large infrastructure demand from Vision-level programs and urbanization.
“Government frameworks that standardise PPP procurement are making projects bankable. Strong regional capital pools and sovereign support will mitigate risk and attract global players. In the GCC, Saudi Arabia’s pipeline itself is one of the largest in the Middle East, indicating strong investor interest,” added Hallside.
Underscoring the role of growing PPP in Saudi Arabia, the FII report said: “A decade ago, the Kingdom’s solar capacity was negligible, despite its vast solar resource. Through early anchor investments, long-term power purchase agreements and support for national champions, the state seeded a competitive renewables market that now attracts global players on purely commercial terms.”
Valecha said that clearer PPP laws, standardised contracts and dedicated PPP units have reduced execution risks and made projects more bankable for global infrastructure funds and developers in the GCC region.
He added that rapid urbanization, a young and growing population, rising data center power demand and energy transition projects create predictable, long-duration cash flows in the region.
“This combination of policy support, fiscal necessity and structural growth is why the GCC is emerging as one of the fastest-growing PPP markets globally,” said Valecha.
Vijay Valecha, chief investment officer at Century Financial. Supplied
Key Saudi PPP projects
Yanbu 4 Independent Water Project - supplying water to Medina and Makkah
Location Yanbu, Red Sea coast
Companies involved: Engie, Mowah, Nesma, Saudi Water Partnership Co.
Cost: $826.5 million
Expected delivery date: Operational as of 2024
Hadda Independent Sewage Treatment Plant
Location: Makkah Province
Companies involved: Metito Utilities, Etihad Water and Electricity, SkyBridge Limited Co., Saudi Water Partnership Co.
Expected delivery date: 2028
As Sufun Solar PV Independent Power Project
Location: Hail region
Companies involved: TotalEnergies, Aljomaih Energy & Water, Saudi Power Procurement Co.
Expected delivery date: Expected to connect to the grid in 2027
Construction of greenfield international airports
Location: Taif, Abha, Qassim, and Hail
Companies involved: Currently in the planning stage; investors are being sought
One-Stop Station Project
Location: Intercity road network across the Kingdom
Companies involved: Saudi Arabia’s Roads General Authority and National Center for Privatization & Public-Private Partnership announced a full list of qualified bidders in February.
King Salman Park
Location: Riyadh
Companies involved: King Salman Park Foundation, Ajdan Real Estate, Sedco Capital
Cost: $1 billion
Project: Madinah-3, Buraydah-2, and Tabuk-2 Independent Sewage Treatment Plants
Location: Madinah, Buraydah, and Tabuk
Companies involved: Acciona Agua, Tawzea, Tamasuk, Saudi Water Partnership Co.
Cost: $627 million combined
Riyadh Metro Line 2 Extension
Location: Riyadh
Companies involved: Royal Commission for Riyadh City, Arriyadh New Mobility Consortium, led by Webuild. Riyadh Metro Transit Consultants (JV between US Parsons and France’s Egis and Systra) as project management and construction supervision consultant.
Cost: Up to $900 million
Expected delivery date: 2032
The crucial role of emerging markets
According to the FII Institute report, the ability to deliver resilient infrastructure, expand digital connectivity and accelerate the energy transition will increasingly depend on the strength and legitimacy of PPPs, as fiscal space tightens and investment needs rise.
FII estimates a $5 trillion global infrastructure financing gap by 2040. It also points to significant regional shortfalls, including an estimated $3.7 trillion gap in the US and an annual $130 billion to $170 billion gap across Africa. In this context, PPPs are moving from a transactional procurement route to a central model for financing and delivery.
The report highlighted that emerging markets, including Saudi Arabia, are currently driving the next wave of PPP growth, with spending across low-and middle-income countries reaching $100.7 billion in 2024, up 16 percent year on year, according to figures from the World Bank.
Moreover, emerging markets now represent around 61 percent of global PPP activity by gross domestic product share.
According to Partnerships Bulletin’s findings up to July 31 2025, the Philippines leads the emerging-market pipeline with 230 projects, followed by Saudi Arabia with 98, Kyrgyzstan with 80, Bangladesh with 71, and Peru with 54 projects.
Greece has 42 projects in the pipeline, followed by Dubai at 28, Kenya at 25, Colombia at 24, and Pakistan at 14.
PPP: An engine of growth
When capital was cheap, PPPs were often treated as an optional extra – a way to shift specific projects off the public balance sheet, or to import private-sector efficiency into construction and operations, the FII report said.
However, now, nations consider PPPs as a central hub of their economic strategy, as they enable the state to stretch every dollar of public investment using private capital, while retaining strategic control over what gets built, where and to what standard.
“The real differentiator is complexity. When a project presents significant financial uncertainty or unpredictable demand, or if there’s a high level of climate exposure or technological risk, a PPP can give leaders the tools to manage those issues without slowing things down,” said Bob Willen, global managing partner and chairman of Kearney, said in the FII report.
Erik Ringvold, chief business development officer at Regional Voluntary Carbon Market Co., was quoted in the report as saying that carbon markets will benefit through PPPs, as deepened public-private partnerships could help achieve progress toward national emissions targets, while simultaneously creating economic opportunity and catalyzing new green industries.
“Saudi Arabia has made large strides toward an emissions compliance system, with an operational carbon standard in place, and an emissions trading system announced to be launched over the coming few years,” said Ringvold.
He added: “At VCM, we see a clear future carbon vision for Saudi Arabia. One ecosystem. One marketplace. One iconic collaboration – with the PPP model at the heart of its success.”
PPPs for investors and citizens
For investors, infrastructure-backed PPPs offer long-duration, often inflation-linked cash flows at a time when public markets are volatile and dominated by a narrow set of mega-cap technology stocks.
For citizens, well-designed PPPs can mean better services, more resilient infrastructure and faster progress toward climate and development goals, without unsustainable tax rises or austerity.
FII, however, cautioned that public consent is becoming decisive. Across seven countries, only 23 percent of citizens agree that PPPs “equally benefit everyone”, compared with 41 percent of business and government leaders.
Tony Hallside, CEO of STP Partners. Supplied
Hallside said that public consent hinges on transparency, accountability, and visible service outcomes.
He added that governments should publish clear procurement frameworks, communicate cost-benefit and performance expectations in plain language, and measure user satisfaction and service quality over time — “reinforcing that PPPs deliver tangible improvements in infrastructure and services.”
Menassa echoed similar views and said that communication with the public is not sufficient, but the performance and execution phase holds the key to PPP projects.
“Winning public opinion for PPPs is rather a marathon not a race. It starts with building awareness and trust by providing transparency and demonstrating value for money, ensuring affordability and service quality of public services is maintained through strong regulatory oversight, and ensuring competitive, transparent procurement processes,” added Menassa.
According to the Arthur D. Little official, the public must see tangible improvements in service reliability, efficiency and accountability, and acceptance will follow.
“The world can’t afford to delay the infrastructure and energy transition investments that will determine prosperity – and planetary stability – for decades to come. Nor can it fund them through public budgets alone. Financing the future is, by definition, a joint endeavour,” added the FII report.
