Ratings firm Fitch reported on Tuesday that the Sultanate of Oman’s budget for the current fiscal year indicates that the government will continue to repay public debt. This is helping the state’s resilience in case of potential shocks.
Fitch noted, however, that the trajectory of debt relief in 2024 will be moderated by higher social spending.
“We now expect the surplus to fall to 1. 8% of GDP in 2024, from an estimated 3. 3% in 2023, based on fiscal data and our latest oil price assumptions. In our December sovereign data comparator, we had forecast that the surplus would remain broadly strong at 2. 1% of GDP in 2024, up from 2. 2% in 2023,” Fitch said.
“The lower surplus in 2024 will partly reflect a projected 1% drop in oil production, in line with the recent cut to the country’s OPEC production quota, as well as a slight weakening of foreign oil prices, that will weigh on income.
The budget forecasts that the expansion of non-oil profits will be driven through stronger economic activity, with no significant new measures to increase profits being announced,” Fitch said.
The overall effect on Oman’s credit metrics should be broadly in line with the assumptions we made when we upgraded the sovereign’s Long-Term Foreign-Currency Issuer Default Rating (IDR) to ‘BB+’ from ‘BB’, with a Stable Outlook, in September 2023.
The government plans to expand the social safety net, which will add about 1% of GDP to spending, as reflected in our September assessments. The costs of fuel subsidies will remain substantial, at around 0. 7% of GDP in 2024, we expect the government to remove those subsidies if global energy costs fall.
The authorities also plan to keep public capex broadly stable in 2024.
“Overall, we expect spending to remain prudent and existing primary expenditures to develop in line with nominal GDP.
The budget offers no indication of a significant reversal of recent fiscal consolidation measures, and we expect more modest progress on power value reform. At the same time, public finances will benefit from a lower debt service rate in 2024 due to liability control operations that the government has been wearing down since 2022. “
The government will use a portion of the surplus to continue paying the debt. Oman’s use of providential revenues from high oil costs to reduce its debt and extend maturities was one of the points that motivated our resolution to upgrade its credit rating in September.
“However, we expect the speed of debt relief to slow in 2024, with public debt-to-GDP falling to around 33% in 2024 from 36% in 2023. This is due not only to a smaller surplus, but also to the authorities. • willingness to reduce your debt. It plans to channel part of the surplus to Oman’s Future Fund towards economic development.
The report concludes: “Efforts to diversify economies will face significant obstacles and it will take time to assess their track record. Meanwhile, Oman’s public finances will remain vulnerable to global oil value shocks, albeit less so than before Covid-19. pandemic.
External debt maturities remain high, at $6 billion a year for the government and state-owned enterprises combined, less burdensome than in recent years.
Gulf Air, Bahrain’s national carrier, on Saturday unveiled its first flight to AlUla International Airport, from where the airline will operate direct Bahrain-AlUla flights twice a week, from February 3 to March 6 and from April 10 to 27. aboard the Gulf Air A320neo aircraft.
The Royal Commission for AlUla (RCU) aims to expand air connectivity to local and foreign destinations and transform AlUla into a global logistics hub in northwestern Saudi Arabia.
Vice President of RCU’s Office of Destination Management and Marketing, Rami Almoallim, said: “We are pleased to welcome new travellers on their adventure to AlUla, which provides a cultural and tourist experience. »
He added that AlUla’s inclusion among Gulf Air’s most sensible seasonal destinations for the current year is a testament to the tourist appeal of this historic site.
“It also contributes to our efforts to facilitate access to AlUla as a destination for direct foreign flights from nearby foreign air hubs,” he added.
In recent years, several projects have been carried out at AlUla International Airport for its services. The airport joined the list of foreign airports in March 2021. The airport’s total domain has expanded to approximately 2. 4 million square meters, and the airport’s flying deck can accommodate up to 15 aircraft at a time.
Enhancing aviation operations and developing the infrastructure of the airport aligns with AlUla’s goals of receiving two million visitors annually by 2035, utilizing a pioneering model of practical and sustainable tourism strategy.
Saudi airlines have expanded the reach of their flights to AlUla International Airport, connecting it to Europe by operating flights to Paris and adding foreign destinations, from Dubai, Doha and Cairo.
The Egyptian Suez Canal Authority reported that January 2024 earnings saw a large 46% decline from the same period in 2023, from $804 million to $428 million.
The Authority’s Chairman, Osama Rabie, said in televised statements that 1,362 ships crossed the Canal in January of 2024, compared to 2,155 vessels in January 2023, a 36% drop.
Rabie noted that this is the first time the Suez Canal has gone through a crisis, adding that the Authority has held meetings with shipping agencies and companies to find a solution.
He said that the meetings witnessed consensus that the Suez Canal route is the best, shortest, and safest maritime course and that the Cape of Good Hope is an unsustainable navigation route.
Rabie noted that ships are delayed by between 12 and 15 days, depending on the ship’s speed and weather conditions, due to the use of select routes to the Red Sea and the Suez Canal, which disrupts global chains.
The official said the Suez Canal factor affects the whole world, only Egypt.
He expects traffic through the channel to increase once the current crisis is over to compensate for source chains.
The International Monetary Fund (IMF) recently warned of escalating tension in the Red Sea region and its repercussions on trade and shipping costs.
The Fund said in a report adding an update on the regional economic outlook in the Middle East and North Africa (MENA) that after ships arrived under drone strikes in the Red Sea and Gulf of Aden, many large shipping companies moved their shipments. other shipping routes, with potential implications for global supply chains and commodity trade, as well as higher insurance costs.
It warned that shipping costs could rise if tensions persist after some shipping companies moved more of their industry to longer choice routes, which would increase fuel and operating costs.
Lebanon’s Central Bank opened for monthly withdrawals of money a segment of deposits that were “not eligible” for full collection, according to the existing government’s description.
This was accompanied by a resolution obliging operating banks to adopt the exchange rate announced on the electronic platform when preparing periodic budget statements and moving financial assets and liabilities denominated in foreign currency.
The two measures were announced in circulars signed by Acting Governor Wassim Mansouri, numbered 166 and 167 respectively, and issued together over the weekend.
According to sources close to the matter, this is a double preventive measure that requires new projects in the Ministry of Finance after the recent approval of the general budget.
A senior banking official contacted via Asharq Al-Awsat said the features of the executive and legislative roadmap for the desired rescue and recovery plan may continue to take shape after five years of persistent currency and banking crises.
The circular, which was published on Saturday, allows monthly withdrawals of $150 from some accounts opened by depositors after Oct. 31, 2019 to convert Lebanese pound savings into dollars.
According to the bank’s director, this resolution will make it possible to achieve relative equality among depositors.
Mansouri insisted on beginning the circular with the phrase: “Without prejudice to the right of depositors to their deposits. “The circular will be in force from February until mid-2024, with an option for renewal.
Unlike previous decisions, both measures were approved after consultations with the Association of Banks.
The World Bank has warned of a global crisis in the chain of origin if attacks by Iranian-backed Houthi militias on ships in the Red Sea continue for three more months, saying it would be a crisis similar to what the world experienced during the coronavirus pandemic.
In its report on the diversion of Suez Canal ships and fears of a new supply chain crisis, the World Bank showed that the global container shipping industry will most likely absorb the capacity surprise caused by the attacks, as demand is weak in January. and February. .
However, if attacks persist in March and April, when the global industry reports a seasonal rebound, capacity constraints may cause a supply chain crisis like the one in 2021-2022.
The crisis came when container shipping failed to recover in the overseas industry at the end of 2020.
The World Bank recalled the COVID-19-related closures and staff shortages at ports kept ships waiting days or weeks to unload their cargo, resulting in fewer ships being available to move goods.
The report claims that the festival for places on ships sent there has skyrocketed; accumulation increased 8-fold on routes between Asia and Europe or North America compared to 2019.
The source of tensions in the chain of origin differs today, but the end results may be similar.
Longer distances and higher fares
According to the World Bank, major carriers, including Maersk and Hapag-Lloyd, have suspended operations through the Suez Canal to the Red Sea and are diverting their ships around the Cape of Good Hope, adding 3,000 to 3,500 nautical miles and seven to 10 days for a typical adventure between Europe and Asia.
The extra distance could absorb from 700,000 to 1.9 million standard containers of shipping capacity, depending on the estimate.
This higher figure is comparable to the locked capacity of 2021 at the height of the COVID crisis, as measured through the World Bank’s Global Supply Chain Stress Index.
Additional circular prices at the Cape of Good Hope, which add up to $1 million in fuel for each circularArray, translate into higher shipping rates.
Maersk adds to its books a “transit interruption surcharge” of $200 per TEU (contracted and single) between East Asia, Northern Europe, the Mediterranean Sea, and the East Coast of the United States. “High Season Surcharge” of $300 and $1,000 consistent with TEU.
According to the report, the Mediterranean Shipping Company (MSC), a global container shipping company, announced that it would impose a “contingency adjustment fee” of $500 per TEU on shipments from Europe to Asia and the Middle East.
Spot rates have continued to rise. The rate for shipping from Asia to Europe has risen to more than $3,000 per 40-foot container, three times more than the lowest rate in 2023 (around $1,000).
The World Bank said this could simply mean that Asian exporters are again competing for shipping slots in anticipation of significant disruptions in the chain of origin.
Fortunately, he added that January and February are quiet seasons for freight, so existing capacity may be enough to serve longer routes in the coming weeks.
But naval attacks that would continue into March could have a significant impact on global industry and global value chains.
Gold rose slightly as the dollar retreated and Treasury yields fell, while costs of other metals remained broadly mixed.
Valuable safe-haven steel rose 0. 1% to $2,073. 0 a troy ounce and is on track to consolidate its weekly gains after the Federal Reserve said rate cuts would not happen anytime soon, causing yields to fall, analysts said, AFP reported.
That said, “gold seems too jittery in our view,” RBC analysts noted.
Buffeted by macroeconomic pressures both positive and negative, it is unsurprising that gold can’t quite pull consistent investor flows in, given its expectations-based pricing, the analysts said.
Three-month copper fell 0.3% to $8,615.5 a metric ton, while aluminum rose 0.6% at $2,285.0 a ton.
The U. N. food agency’s global value index fell in January to its lowest point in just three years, due to falling grain and meat prices.
The Food and Agriculture Organization’s (FAO) price index, which tracks the most globally traded food commodities, averaged 118.0 points in January, down from 119.1 the previous month, the agency said on Friday.
January’s figure is the lowest since February 2021.
“Global wheat export costs declined in January due to a strong festival among exporters and the arrival of newly harvested materials in southern hemisphere countries,” FAO said in its update. per month day.
FAO also said maize prices fell sharply, reflecting an advance in development conditions and the start of harvest in Argentina and better materials in the United States.
The meat price index declined for the seventh consecutive month as abundant supplies from leading exporting countries drove down international prices of poultry, bovine, and pig meats, the FAO said.
In a separate report, FAO said global cereal production in 2023 is on track to reach a record 2. 836 billion tonnes, up 1. 2 percent from 2022. World coarse grains production was set at a record 1,523 million tonnes, following an upward adjustment of 12 million tonnes. tons this month.
“Most of the revision reflects new official knowledge from Canada, (mainland) China, Turkey and the United States, where a combination of higher yields and higher-than-expected harvested acreage led to higher maize production estimates,” he added. .
Turkey’s central bank governor Hafize Gaye Erkan resigned on Friday, raising a desire to protect her family amid a “reputation assassination,” and was temporarily replaced by a lawmaker who is expected to respect her strict political stance.
President Tayyip Erdogan, who hired Erkan eight months ago to abandon years of low interest rates that fueled inflation and adopt a more orthodox policy, appointed Deputy Governor Fatih Karahan to take the reins, the Official Journal reported on Saturday, two hours after the wonderful resignation.
Karahan, a former economist at the Federal Reserve Bank of New York, was appointed to the House of Representatives in July and is seen as a capable successor who played a vital role in shaping financial adjustment.
Erkan, a former head of a U. S. bank, began raising rates as soon as she was appointed in June, launching a 180-degree turn after years of low rates under Erdogan that had boosted inflation and scared away foreign investors.
Since then, the central bank has raised its key interest rate from 8. 5% to 45%. Last week, after a 250 basis point increase, it said it had adjusted inflation enough to achieve disinflation, indicating a halt.
Erkan said that “our economic program has begun to bear fruit,” citing the buildup of foreign exchange reserves and expectations that inflation would begin to cool by mid-year “as proof of this success. “
“Despite all these developments, as the public knows, a primary crusade has recently been organized against me to damage my reputation,” he added on social media platform X.
“To prevent my family and my innocent son, who is not even a year and a half old, from being further affected by this situation, I have asked our president to forgive me from my duties. “
Last month, the opposition newspaper Sozcu published an article about a central bank worker who claimed to have been wrongfully dismissed through Erkan’s father.
Erkan then reacted by calling an “unfounded” article directed at her, her family and the bank “unacceptable” and vowed to exercise her legal rights against those responsible.
The International Monetary Fund (IMF) has revised its expectations for economic growth in Saudi Arabia, indicating a positive outlook for the Kingdom’s economy.
The IMF now forecasts an expansion rate of 5. 5% in 2025, up from its previous estimate of 4. 5% in October 2023.
These revisions were made based on data published in the IMF’s “Global Economic Outlook Updates” report in January 2024, which highlighted the positive outlook for the functionality and strength of the Saudi economy despite the dangers and challenging situations presented by the global economic outlook. .
This outlook confirms the expansion and prosperity of the Saudi economy, driven by strong leadership both regionally and internationally.
The report also expects the global economy to reach an expansion rate of 3. 1% in 2024 and 3. 2% in 2025.