LONDON: The pound’s sharp drop following Britain’s vote to leave the European Union is starting to affect companies, particularly manufacturers, by increasing the cost of the imported raw materials and goods they require to do business.
Official figures showed that producer prices rose 4.3 percent in the year through July, compared with a 0.5 percent drop in the year through June as the cost of raw materials increased due to the pound’s decline in the wake of the EU referendum.
Commodities like oil, metals and grains are priced internationally in dollars, against which the pound has fallen 14 percent since the June 23 referendum.
Higher costs for manufacturers will translate into a rising cost of living for consumers in the months ahead, said Scott Corfe, director of the Center for Economics and Business Research.
“The sharp decline in the value of (the pound) since the Brexit referendum will translate into higher prices for imported goods over the coming months, pushing inflation to above 2.5 percent in the first half of 2017,” he said in a written analysis of the figures.
Increased inflation, combined with stagnant pay growth, mean workers are likely to feel the pain.
“The UK’s strongly consumer-driven economic recovery is about to grind to a halt,” he said.
A separate report from the Office for National Statistics showed consumer prices also rose more than expected in July, to an annual rate of 0.6 percent from 0.5 percent in June, though that was not directly related to the EU vote.
The increase was caused by more expensive motor fuel and second-hand cars. Economists had expected the rate to remain unchanged at 0.5 percent.
The inflation figures are important in that they are the first since the June 23 referendum to leave the 28-nation bloc. Economists suggest that what matters most is whether a pattern emerges over time.
“As with all new information so close to the referendum, we must still treat it with some degree of skepticism as the country remains in a dust-settling mode after the material magnitude of the outcome,” Clive Black of Shore Capital wrote.
UK companies see costs rise as result of vote to exit EU
UK companies see costs rise as result of vote to exit EU
Oil Updates – prices rise more than 1% amid concerns on Mideast tensions
HOUSTON/SINGAPORE: Oil prices climbed by more than 1 percent on Thursday, almost reversing previous session’s losses, as Middle East tensions came back into focus ahead of the US election despite a mixed bag of US fuel inventories.
Brent crude futures rose 95 cents, or 1.27 percent to $75.91 at 6:02 a.m. Saudi time, while US West Texas Intermediate crude futures climbed $1, or 1.41 percent, to $71.77 as an exchange of heavy fire between Israel and Hezbollah continued to worry markets about supply.
Oil prices have gained nearly 4 percent so far this week, helping trim last week’s losses of than 7 percent on worries about Chinese demand and easing concerns about potential disruptions caused by fighting in the Middle East.
“The bumpy play in oil prices is a mix of technical reaction to uncertainty ahead,” said Priyanka Sachdeva, a senior market analyst at Phillip Nova.
“Amid lack for supporting catalyst and with sore sentiments all over oil markets, oil bulls jumping at any additional headline of escalating conflict in Middle East, looks well justified,” she added.
Israel launched strikes on Syrian capital Damascus early on Thursday, Syrian state media said, the latest such attack amid the war in Gaza.
This followed earlier Israeli strikes on Beirut’s southern suburbs on Wednesday and after Hezbollah said it fired precision guided missiles for the first time at Israeli targets.
The intensifying exchanges of fire come as Washington makes a final major push for peace between Israel and Iran-backed groups Hezbollah and Hamas before the Nov. 5 US presidential election that could alter US policy in the Middle East.
The current volatility ahead of a critical week of US Election followed with Fed’s policy decision is ensuring enough traction to cause wilder fluctuations, even though supplies remain ample, said Phillip Nova’s Sachdeva.
Meanwhile, US crude inventories rose by 5.5 million barrels last week, according to the US Energy Information Administration on Wednesday, compared with analysts’ expectations in a Reuters poll for a 270,000-barrel rise.
Despite the stockpile accumulation, implied demand still rose, said ANZ analysts in a client note.
Also on the oil demand front, support came from stronger demand for distillates, according to JP Morgan analysts in a client note, highlighting strong travel demand in Asia and consistent drawdowns in distillate stocks in several major markets.
Saudi Arabia’s non-oil exports surge by 7.5% in August: GASTAT
- Chemical products led the non-oil export categories, accounting for 25.8 percent of total non-oil shipments
- Saudi Arabia’s imports decreased by 3.93 percent in August compared to the same period last year
RIYADH: Saudi Arabia’s non-oil exports, including reexports, rose by 7.5 percent in August, reaching SR27.52 billion ($7.33 billion) compared to the same month last year, official data showed.
According to the General Authority for Statistics, the Kingdom’s non-oil outbound shipments also grew by 8.13 percent compared to July.
This reflects a continued push to diversify the economy in line with Vision 2030, which aims to reduce reliance on crude oil revenues.
“The ratio of non-oil exports (including re-exports) to imports increased to 42.5 percent in August 2024 from 38 percent in August 2023. This was due to a 7.5 percent increase in non-oil exports and a 3.9 percent decrease in imports over that period,” stated GASTAT.
Chemical products led the non-oil export categories, accounting for 25.8 percent of total non-oil shipments, with a 9.3 percent year-on-year increase. Plastics and rubber products followed, making up 23.9 percent of non-oil exports, rising 1 percent compared to the previous year.
The value of re-exported goods also saw a notable increase, rising 18.9 percent year on year in August.
However, Saudi Arabia’s overall merchandise exports declined by 9.8 percent in August compared to the same month last year, largely due to a 15.5 percent drop in oil exports. As a result, the share of oil exports in total exports fell to 70.3 percent in August, down from 75.1 percent a year earlier.
In an effort to stabilize global oil markets, Saudi Arabia implemented a production cut of 500,000 barrels per day in April 2023, a reduction that will remain in place until December 2024.
China remained the largest destination for Saudi merchandise exports, receiving SR14.83 billion, or 16 percent of total exports. Other key destinations included South Korea, India, and Japan, with exports amounting to SR8.94 billion, SR8.82 billion, and SR8.30 billion, respectively.
Meanwhile, Saudi Arabia’s imports decreased by 3.93 percent in August compared to the same period last year, contributing to a 21 percent reduction in the Kingdom’s merchandise trade surplus.
King Abdulaziz Sea Port in Dammam was the primary entry point for goods in August, with imports valued at SR18.48 billion, representing 28.5 percent of total inbound shipments.
Saudi Arabia calls on private sector to bridge $10bn agriculture investment gap
JEDDAH: Saudi Arabia has unveiled an SR37 billion ($10 billion) investment gap in its agriculture sector, urging the private sector to seize this opportunity to enhance production and infrastructure.
Sulaiman Al-Khateeb, assistant deputy minister for agriculture affairs, highlighted the shortfall during the 41st Saudi Agricultural Exhibition in Riyadh, the Saudi Press Agency reported.
He emphasized the need for private investment in key areas such as plant production, animal husbandry, fisheries, and agricultural processing.
These efforts are critical to achieving the National Agriculture Strategy 2034 goals and advancing Saudi Arabia’s push toward food self-sufficiency and sustainability.
In alignment with Vision 2030, the Kingdom aims to expand its agricultural capabilities, ensuring food security and driving economic diversification as part of its broader sustainable development strategy.
Despite having approximately 90 percent of its territory as desert, Saudi Arabia is spearheading an agricultural boom to enhance domestic crop production and reduce reliance on food imports. The Kingdom has already achieved self-sufficiency in dates, fresh dairy products, and table eggs, according to the General Authority for Statistics’ Agricultural Statistics Publication.
Saudi Arabia’s food strategy focuses on sustainable natural resource use, innovation, leadership, pest prevention, boosting the agricultural sector’s contribution to the national economy, and building a vibrant agricultural community.
Al-Khateeb outlined prominent investment opportunities, such as SR4.1 billion in integrated facilities for producing and processing vegetables like potatoes, tomatoes, strawberries, onions, and leafy greens.
He also noted SR2.1 billion in potential investments for citrus and mango production and SR690 million for seed and seedling facilities.
Investment opportunities also extend to alternative feed production and livestock and fisheries, including intensive livestock breeding projects worth approximately SR8.9 billion. Additional investments of SR5.4 billion are available for poultry farming and by-product utilization, while aquaculture projects, including shrimp and algae farming, present opportunities worth SR7 billion.
Al-Khateeb also highlighted SR8.1 billion in potential investments in agricultural processing and manufacturing for importing raw materials and producing coffee, cocoa, and sugar products. Olive oil production offers an additional SR400 million in opportunities.
To support these efforts, the Ministry of Environment, Water, and Agriculture has established various incentives and enablers for the agricultural sector, aimed at increasing production efficiency and achieving self-sufficiency in key crops and products to bolster food security in the Kingdom.
Key initiatives include promoting investment in agriculture, adopting modern technologies through loans from the Agricultural Development Fund, and offering incentivized land leases.
The ministry is also streamlining project licensing and providing technical support to enhance farmers' skills and promote modern agricultural practices. MEWA encourages agricultural companies to list on financial markets as well.
Al-Khateeb highlighted several strategic initiatives to boost agricultural production and improve sector efficiency, including halting the cultivation of perennial fodder in favor of seasonal crops, shifting to intensive livestock breeding, and localizing strategic crop seed production.
The ministry is also establishing local wheat production targets to strengthen food security while focusing on increasing exports of fish and vegetables from advanced greenhouses.
Pakistan’s finance chief says government aims to privatize national flag carrier in November
- Muhammad Aurangzeb attributed months of delay in PIA privatization to bidders’ due diligence
- He denies media reports saying the government is not serious about broadening the tax base
WASHINGTON: Pakistan is hoping to finalize both the delayed privatization of its flag carrier and the outsourcing of Islamabad’s international airport in November, the country’s finance minister said Wednesday.
Muhammad Aurangzeb, who took office earlier this year, spoke to AFP at the World Bank’s headquarters in Washington, where he is attending the annual meetings of the International Monetary Fund and the World Bank.
During a previous interview with AFP in April, Aurangzeb had said he hoped the privatization of the government-owned Pakistan International Airlines (PIA) could be completed by June 2024.
Speaking Wednesday, the finance minister said the five-month delay was down to two factors: ensuring macroeconomic stability, and doing the proper due diligence of the interested parties.
“The reality is, when any foreign investor comes in, or even the local investor, who are going to put in a substantial amount of money, they want to ensure that the foundation is there,” he said, referring to macroeconomic factors.
Aurangzeb noted that potential bidders for both PIA and Islamabad airport also required scrutiny, another factor in the delay.
“Therefore it’s ultimately the cabinet which approved the extension in the timelines so people can do their due diligence before they make these submissions,” he said.
Aurangzeb said Pakistan had been behind on existing profit and dividend repayments when the current government took office, and had taken steps to remedy that after making progress on macroeconomic stability.
The country came to the brink of default last year as the economy shriveled amid political chaos following catastrophic 2022 monsoon floods and decades of mismanagement, as well as a global economic downturn.
Inflation peaked at 38 percent, but has since dropped to less than seven percent, after the central bank maintained sky-high interest rates, amid other government tightening measures, including import bans to preserve foreign exchange.
Last month, the IMF approved a $7 billion loan, Pakistan’s 24th such payout from the multilateral lender since 1958.
Aurangzeb touted progress on the country’s current account deficit and the stabilization of the Pakistani rupee, which has depreciated against the US dollar by about 65 percent since 2020.
“In May and June on the back of this macroeconomic stability and building up on our reserves, we paid more than $2 billion to our existing international investors,” he said.
Pakistan’s gross public debt currently stands at 69 percent of GDP, according to the IMF, or roughly $258 billion.
Alongside privatizing state-owned enterprises (SOEs), Pakistan’s IMF deal also rests on increasing its tax base, and reforming of the country’s power sector.
Aurangzeb told AFP there was a common theme between all three major issues.
“Tax, power, SOE: There’s leakage, there’s theft, there’s corruption, right?” he said. “And we have to deal with all of that.”
But he dismissed media reports that the government was not serious about broadening its tax base, saying that the tax take had risen by 29 percent in the last fiscal year, which overlapped with a prior caretaker government, and was targeted to rise by a further 40 percent in the current fiscal year.
In a nation of more than 240 million people where most jobs are in the informal sector, only 5.2 million filed income tax returns in 2022.
“People who are not paying up, they need to start paying for the simple reason that we have reached a saturation point of the people who are paying,” he said.
“The salaried class, the manufacturing industry, reached a saturation point. And this cannot go forward,” he added.
The government was also committed to doing a better job of taxing certain sectors of the economy, he said, naming real estate, retail, retail distributors, and agriculture.
Pakistani companies to participate in road shows in China starting next week
- Road shows to be held on Oct. 29 and Nov. 5 in Qingdao and Guangzhou cities, respectively
- Seventeen Pakistani fisheries and 10 leather companies to participate in the road shows
ISLAMABAD: Around 27 Pakistani leather and fisheries companies will participate in “major” road shows in different cities of China on Oct. 29 and Nov.5, the privatization ministry said this week as Islamabad eyes enhancing business-to-business activities with key economic ally Beijing.
Pakistan has been eyeing foreign investment and business collaboration with various regional states, including China, to ward off a prolonged economic crisis. China’s prime minister visited Pakistan with a high-level delegation this month, during which the two countries signed various agreements to boost trade, business and investment cooperation.
The first of the road shows will be held on Oct. 29 in China’s Qingdao city while the second has been scheduled for Nov. 5 in Guangzhou. The privatization ministry said 30 representatives from 17 Pakistani fisheries companies and 16 from ten leather companies will be participating in the road shows.
“Business-to-business activities between China and Pakistan are ongoing and in this regard, major roadshows for Leather and Fisheries are being organized in different cities of China,” the ministry said.
The statement came after Privatization Minister Abdul Aleem Khan chaired a meeting on Wednesday to review progress on Pakistan-China business-to-business activities.
Khan said seven major sectors. including leather, textiles, medical and surgical equipment, fruits, vegetables, plastics, fisheries and animal foods could prove to be a “breakthrough” for the country’s economy.
He said organizations in both countries were engaged in cooperation to boost business ties with one another.
“A total of 168 companies from China and 78 companies from Pakistan are working under cooperation and Pakistan should take maximum share in the transfer of industries from China,” the statement said.
“Executives of leading Pakistani organizations participated in the high-level meeting and assured full participation in both the Road Shows in China,” the statement said.
Chinese investment and financial support for Pakistan since 2013 have been a boon for the South Asian country’s struggling economy, including the rolling over of loans so that Islamabad can meet external financing needs at a time when foreign reserves are low.
Beijing has over $65 billion in investments in road, infrastructure and development projects under the China-Pakistan Economic Corridor, which is a part of the Belt and Road scheme.
