Saudi allocates $3.1 billion to help firms with 2017-18 expat fee hikes

Red-hot US economy ignores global cooling – for now Initiative to support private sector companies

RIYADH, Feb 9, (RTRS): Saudi Arabia’s King Salman has approved a scheme to reimburse some of the companies who struggled to pay steadily increasing fees for expatriate work permits in 2017 and 2018 and waive the fee hikes for some who weren’t able to pay, the labour minister said.

The government is allocating 11.5 billion riyals ($3.1 billion) for reimbursements under the decision, according to the royal decree, a classified copy of which was obtained by Reuters.

“This initiative will support private sector companies, help them overcome the obstacles and achieve their goals and encourage them to expand employment of Saudi citizens,” Labour Minister Ahmed bin Suleiman al-Rajhi tweeted on Friday.

Only companies that had a higher or equal number of Saudi employees versus expats will be eligible for the reimbursement or waiver of fees, according to the decree.

Companies with a lower number of Saudis compared to expats will benefit from the initiative only after they hire more locals, it said.

In its fiscal balance programme announced in 2016 and implemented in 2017, Saudi Arabia said it would gradually increase the fees for hiring expatriates and obtaining visas for their dependents to encourage companies to hire more locals.

It also changed the system of payment from an annual work permit renewal to a one-time lump sum payment at the beginning of the year accounting for each foreign worker employed by the company - a so-called collective invoice.

The annual fee hikes, rising gradually to 2020, were seen as crucial to Riyadh’s plan to create more jobs and cut a 12.8 percent unemployment rate.

But private sector companies and businessmen lobbied vigorously against the collective invoice as crippling for labour-intensive sectors like the construction industry and for small- and medium-sized enterprises.

“The decision will have a huge positive impact on the Saudi economy and especially the manpower intensive construction sector, which was the worst hit by the collective invoice,” Osama al-Afaliq, head of the Saudi Contractors Association, told Reuters.

Some 10 million foreigners are working in Saudi Arabia, most of them doing strenuous, dangerous and lower-paid jobs and they are largely shunned by the country’s 20 million citizens.

Getting hundreds of thousands of unemployed Saudis into the workforce is a major challenge for Crown Prince Mohammed bin Salman, who oversees economic policy for the world’s top oil exporter. BRUSSELS, Feb 9, (RTRS): The two best performers among the Group of Seven economies in the third quarter almost certainly took separate paths in the fourth, as Britain suffered a Brexit reality check, while the United States sailed on despite the trade war it has sparked.

The world’s largest economy is expected to have grown by an annualised 2.6 percent in the final three months of 2018. Even if that is down from the 3.4 percent of the third quarter, it is still a healthy clip.

A first estimate should have been released by now, but the US Bureau of Economic Analysis said on Thursday the release had been pushed back to Feb 28 due to the government shutdown.

Forecasts though equate to a quarterly 0.6 percent, triple the growth rate of the euro zone in the same period. Growth in China, while far higher, cooled to a 28year low in 2018. Japan, the world’s third largest economy has yo-yoed between contraction and expansion throughout the year, with a 0.4 percent growth reading seen for Thursday.

Harm Bandholz, chief US economist at UniCredit, says that despite unstable politics in Washington, two factors explain why the US economy is one of very few holding up well in recent months – massive stimulus mainly from tax cuts and the fact that it is relatively closed and not dependent on foreign trade.

In the very short term, the government shutdown, which could resume next Friday, and the polar vortex of late January could rein in first quarter expansion.

Longer term though, even the Federal Reserve has become more hesitant, signalling last month at least a pause to its monetary policy tightening due to a cloudier outlook and growing risks.

The labour market is still glowing, but the impact of tax cuts will fade and the nation will hit a debt ceiling in March, which could ultimately lead to a debt default.

UniCredit’s Bandholz says slower growth could expose the very high debt of corporates, weakening investment spending and possibly spilling over into other parts of the economy.

“All these factors combined will be enough to push the US economy into a mild recession in 2020,” he said.

For now, US strength in the face of economic slowdowns elsewhere may well be helping President Donald Trump’s trade push.

Trump said on Thursday he did not plan to meet Chinese President Xi Jinping before a March 1 deadline set by the two countries to achieve a trade deal.

Other countries, notably Germany, are awaiting a Commerce Department report due Feb 17 on whether auto imports are security risk. Bank of America Merrill Lynch wrote on Friday that this should not in the end lead to tariffs, although believes “some brinkmanship” is likely.

Across the Atlantic, Britain enjoyed its fastest economic upturn since late 2016 during the third quarter, spurred by a surge in consumer spending over an exceptionally hot summer and England’s surprise passage to the semifinal of the soccer World Cup.

However, fourth quarter growth is seen at only half that 0.6 percent rate.

The Bank of England said on Thursday Britain faces its weakest economic growth in a decade this year as “the fog of Brexit” causes tension and the global economy slows.

It follows Tuesday’s release of the IHS Markit/CIPS UK Services Purchasing Managers’ Index (PMI), which fell to its lowest since July 2016, showing the world’s fifth largest economy stalling or contracting, with firms in services reporting jobs cuts for the first time in six years.

James Smith, economist at ING in London, said the British economy should normally mirror what was happening in the United States, partly because of its greater services base, but that had not been the case in 2018.

“Sure, there’s a bit of a global element and on the manufacturing side, the fact that euro zone demand has slowed has had an impact, but really Brexit is the main story here,” he said.

British Prime Minister Theresa May is due to report back to the UK parliament next week after securing at least a pledge of renewed talks from a day trip to Brussels.

Parliament will then hold a debate on Thursday, which could see attempts to shift control of the process away from government and give parliament a chance to define Brexit.

For the euro zone, the initial estimate on growth is already out, but the German figure is only due on Thursday, when data is expected to show Europe’s largest economy narrowly avoided a technical recession by eking out 0.1 percent growth in Q4.

Euro zone industrial production figures due the day before, on Wednesday, will also be watched closely by markets keen to know the depth of the region’s decline.