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A further round of economic assistance for the local economy worth Dh1.5bn ($408m) was announced by Crown Prince and Dubai Executive Council chairman Sheikh Hamdan Bin Mohammed Bin Rashid Al-Maktoum on 11 July. This takes the total value of government aid to the emirate’s economy this year to Dh6.3bn, following an initial Dh1.5bn on 12 March and a further Dh3.3bn on 29 March.

United Arab Emirates (UAE)
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Moody’s Investors Service downgraded Oman’s sovereign debt from Ba2 to Ba3 with a negative outlook on 23 June, concluding a review process which began on 30 March. The ratings agency pointed to the lower oil price environment, which it now assumes will persist “into the medium term”. It was unlikely the government would be able to significantly offset the loss of revenue or avoid a “large and durable deterioration” in its debt, or an erosion of its fiscal and foreign currency buffers, Moody’s said.

Oman
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International investments: The Public Investment Fund (PIF) invested at least $7.6bn in listed companies in the United States and Europe in Q1 2020, underlining a trend among Gulf investors to seek longer-term opportunities amid the coronavirus-driven slump. US regulatory filings show the PIF bought stakes in 23 companies during Q1, with an emphasis on hospitality and leisure stocks (including the Walt Disney Company, travel website owner Booking Holdings and hotel chain Marriott International), technology companies (Cisco Systems, Facebook and IBM) and under-pressure oil majors (BP, Royal Dutch Shell, Total and oil sands producer Canadian Natural Resources).

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Sultan Haitham Bin Tariq Al-Said’s decision to merge the State General Reserve Fund (SGRF) and the Oman Investment Fund (OIF) – announced via a royal decree on 4 June – brings to an end a debate that has rumbled on since 2017. The new Oman Investment Authority (OIA) will combine the $14.3bn of assets held by the SGRF and $3.4bn from the OIF. To be independent of the Ministry of Finance (MoF), the new entity will report directly to the Council of Ministers.

Oman
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With apparent relish, UK weekly The Sunday Times’ annual Rich List of the wealthiest people in the UK was accompanied by lurid headlines about how major fortunes had been hugely diminished during a time of the coronavirus shutdown. Some sectors have been badly hit – the crisis in aviation underlined by legendary investor Warren Buffet accepting a “substantial loss” as he dumped Berkshire Hathaway’s stock in three major US airlines. But some investors are looking to profit.

Saudi Arabia
Issue 1103 - 22 May 2020

Saudi Arabia: Tax rate tripled

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Finance minister Mohammed Al-Jadaan on 11 May announced a tripling of the value-added tax (VAT) rate, to 15% from 1 July, in an effort to limit the damage to public finances from low oil prices and coronavirus. He also said that from 1 June the government will stop paying a monthly cost of living allowance for public sector workers. Al-Jadaan said austerity measures so far totalled SR100bn ($27bn).

Saudi Arabia
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A government declaration on 5 May that private companies will be allowed to cut salaries by up to 40%, while the public sector has so far been spared similar measures, underlines the extent that Saudi Arabia is more challenged by the coronavirus pandemic and an oil price slump that Riyadh itself has done so much to exacerbate than has previously been accepted. The daily Okaz on 5 May reported that Ministry of Human Resources and Social Development had linked salary cuts to a proportional reduction in working hours, provided the cut didn’t exceed 40%.

Saudi Arabia
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Sultan succession: The death of Sultan Qaboos Bin Said Al-Said was announced on 10 January. While predicted for some time, his death still came as a profound shock to the nation he had not only ruled but profoundly shaped since 1970, and whose political life he had dominated as an absolute ruler. Qaboos had been suffering from cancer for many years and had received extensive treatment in Europe.

Oman
Issue 1096 - 23 January 2020

Oman confronts its economic challenges

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Critical to Sultan Haitham Bin Tariq Bin Taimur Al-Said’s success will be his ability to switch emphasis away from oil and gas to develop a more broad-based economy which can meet high social and welfare spending needs, and sustainably employ more young Omanis. Haitham presides over an economy that in recent years has faltered in delivering on an ambitious programme to balance the books, reduce national debt – which had been rising to dangerous levels – and encourage private enterprise.

Oman
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Despite continuing, widespread protests focused on official corruption and mismanagement, Iraq enters 2020 with relatively solid economic metrics. Oil exports in 2019 broke records, averaging 3.53m barrels a day (b/d), with 97% of it exported via Basra. With prices heading above $60/barrel, there are sufficient revenues to fund state spending. The World Bank anticipates GDP growing by a respectable 5% this year, thanks to higher crude exports, better rainfall and stronger domestic consumption, fed by an expanding public sector wage bill.

Iraq
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IsDB green bond issue: The Jeddah-based Islamic Development Bank (IsDB) raised €1bn in five-year trust certificates on 27 November, marking the successful pricing of its first ‘green’ sukuk (Islamic bond). The paper was issued under the bank’s $25bn trust certificate issuance programme and was its third debt issuance this year. The joint lead managers and joint bookrunners on the issue were Citi, First Abu Dhabi Bank, HSBC, Landesbank Baden-Württemberg, Natixis, Société Générale, Warba Bank and Standard Chartered Bank.

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The government of President Hassan Rouhani has set out a budget with revenues and spending of around IR4,845trn for the next fiscal year, starting on 20 March 2020; this is equivalent to around $36bn at the current market exchange rate of$1=IR133,500. Rouhani called it “a budget of resistance and perseverance against sanctions… with the least possible dependence on oil,” when presenting the finance bill to the Majlis-e Shura-ye Eslami (parliament) on 8 December.

Iran
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The economic reform programme driven by Crown Prince Mohammed Bin Salman (MBS) is gradually reshaping the Saudi economy. Analysts and other sources in the kingdom have told GSN that this is creating winners and losers along the way in both the banking sector – an important player in the forthcoming Saudi Arabian Oil Company (Aramco) initial public offering (IPO) – and among retailers. Local investment bank Al-Rajhi Capital has reported seeing a “structural shift” in the spending pattern of Saudis as a result of the MBS reforms, as consumers direct more of their discretionary spending towards entertainment and culture.

Saudi Arabia
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The government is cutting spending by SR569bn ($151.7bn) between now and 2022, but Riyadh will still struggle to hit its goal of a balanced budget by 2023; this is due to sharp falls in expected oil revenues, according to analysts.The sharp cut in spending was first outlined in finance minister Mohammed Al-Jadaan’s 31 October pre-budget statement. This painted a distinctly mixed picture: output grew by 1.1% in H1 2019 – when the non-oil economy grew by 2.5% – but Jadaan predicted a slowdown in H2 19.

Saudi Arabia
Issue 1090 - 18 October 2019

IMF slashes growth forecasts

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The International Monetary Fund (IMF) has sharply pared back its growth forecasts for key Gulf economies, in its latest World Economic Outlook report, published this week. The downturn is a result of lower oil revenues and a global economic slowdown. It has cut its predictions for economic growth in Iran, Kuwait, Oman, Qatar, Saudi Arabia and the UAE for this year. The IMF is also forecasting lower growth than previously expected in 2020 in all those countries bar Kuwait.