A roadmap for the li­cens­ing round

Govern­ment passes oil & gas de­crees

Executive Magazine - - Front Page -

global pic­ture.

But there are some re­ports of re­gional rel­e­vance, just like there are a hand­ful of fun songs about eco­nom­ics. As the World Bank’s re­gional out­look for the Mid­dle East high­lighted last month, the re­gion-wide pace of eco­nomic growth this year is fore­cast to reach 3.1 per­cent in 2017, af­ter hav­ing ex­pe­ri­enced – for an emerg­ing re­gion un­sat­is­fac­tory – es­ti­mated growth of 2.7 per­cent for 2016. The out­look, which es­ti­mates Le­banese GDP will in­crease 1.8 per­cent in 2016 and mod­estly ac­cel­er­ate to rates of 2.2 per­cent this year and 2.3 per­cent in 2018, sees oil im­porters achiev­ing the strong­est gains. Specif­i­cally, Saudi Ara­bia is fore­cast to grow by a quite mea­ger rate of 1.6 per­cent in 2017, but this will be an im­prove­ment in com­par­i­son to the es­ti­mate for 2016.

The fac­tors to watch in this re­gard are re­gional de­vel­op­ments in­volv­ing friends as well as more dis­tant neigh­bors and those, whether states or non-state ac­tors, that have shown them­selves as out­right foes of Le­banese progress. Be­sides the hope for pos­i­tive change from the Le­banese par­lia­men­tary elec­tions, it seems pru­dent to pay care­ful at­ten­tion to de­vel­op­ments in the economies of the Gulf Co­op­er­a­tion Coun­cil coun­tries.

Shuaa Cap­i­tal ob­served in De­cem­ber that Saudi Ara­bia al­lo­cated SAR 890 bil­lion to spend­ing in its 2017 fis­cal bud­get, above both bud­getary and ac­tual spend­ing in 2016, and is also plan­ning for a bud­get deficit of SAR 198 bil­lion in 2017, 40 per­cent lower than the deficit for 2016.

Es­ti­mates by of­fi­cials in the United Arab Emi­rates im­ply that Dubai’s econ­omy will be in­creas­ingly on the mend in 2017. In a pre­sen­ta­tion at the UAE Eco­nomic Out­look 2017 event in Jan­uary, the Chair­man of Dubai’s Eco­nomic De­vel­op­ment Com­mit­tee Sheikh Ahmed Bin Saeed al-Mak­toum said the emi­rate was ex­pected to grow by 3.1 per­cent in 2017, af­ter grow­ing 2.7 per­cent in 2016 in real terms amid an un­friendly re­gional and global eco­nomic cli­mate.

By watch­ing Arab eq­ui­ties – an ex­er­cise that is not found ev­ery­where – Credit Suisse in Jan­uary spoke of “an im­pres­sive rally” in Mid­dle East mar­kets, whereby the re­gion’s 17 per­cent gains in Q4 of 2016 marked the “by far the strong­est per­for­mance by any re­gion and al­lowed the Mid­dle East to post a mod­estly pos­i­tive re­turn for 2016 over­all.”

“Af­ter ex­pe­ri­enc­ing a con­trac­tionary eco­nomic en­vi­ron­ment over the past two years, eco­nomic in­di­ca­tors across the Mid­dle East are begin­ning to show signs of im­prove­ment. The oil ex­port­ing GCC economies are set to reap the ben­e­fits of higher oil prices and progress made on sub­sidy re­form, while Egypt has suc­cess­fully ini­ti­ated the po­lit­i­cally dif­fi­cult steps to­wards pre­serv­ing its for­eign ex­change re­serves,” wrote Fahd Iqbal, Head of Mid­dle East re­search at Credit Suisse.

In other mod­er­ately en­cour­ag­ing news from the re­gion’s fi­nan­cial in­dus­try, the an­nual in­vest­ment bank­ing re­port for the Arab re­gion by Thom­son Reuters, which was re­leased last month, said that in­vest­ment bank­ing fees in the Mid­dle East reached $820.8 mil­lion dur­ing 2016, an 18 per­cent year-on-year in­crease and the high­est an­nual fee to­tal in the re­gion since 2008. Ac­cord­ing to Thom­son Reuters’ anal­y­sis, debt is­suance in the re­gion was the high­est in over 35 years and jumped year-onyear by 145 per­cent to al­most $78 bil­lion, bol­stered by Saudi Ara­bia’s $17.2 bil­lion bond sale in Oc­to­ber of last year. On the other hand, merger and ac­qui­si­tion ac­tiv­ity, as well as eq­uity is­suances in the Mid­dle East, were de­scribed as low in com­par­i­son to other years, with val­ues of an­nounced M&As with re­gional par­tic­i­pa­tion at $47 bil­lion – the low­est since 2013 – and eq­uity and eq­uity-re­lated is­suances at $2.6 bil­lion, which a di­rec­tor at Thom­son Reuters said was “a 55 per­cent de­cline year-on-year and the low­est an­nual is­suance to­tal in the re­gion since 2004”.

Mean­while, the out­look for GCC banks is mixed ac­cord­ing to rat­ings agency Stan­dard and Poor’s. S&P Global said the agency ex­pects the fi­nan­cial pro­files of GCC banks to “con­tinue to weaken in 2017-2018”, but added that this ex­pec­ta­tion had been in­cor­po­rated in rat­ings and that it con­sid­ers most GCC banks to have cre­ated “suf­fi­cient cap­i­tal buf­fers to re­main re­silient to their weak­ened op­er­at­ing en­vi­ron­ment”.

In this al­to­gether com­plex land­scape of re­gional as­sess­ments, global risks and more or less fear­ful an­tic­i­pa­tions, Le­banon will have to find its place for the best pos­si­ble eco­nomic per­for­mance, as well as con­duct its do­mes­tic pol­i­tics and busi­ness to the best of its ca­pac­ity. By con­sen­sus of many economists, it seems there are rea­sons, but not enough rea­sons, to keep on pre­dict­ing dooms­day in the global econ­omy. More likely is that we will mud­dle along, with risks build­ing un­der­neath and erupt­ing ev­ery now and then, with­out us be­ing able to evade them but also with­out be­ing de­stroyed. Same pro­ce­dure as ev­ery year.

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