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Middle East & African Monitor - 27 December 2016

  • Saudi Arabia is “Optimistic” over a rebound in oil prices – Energy minister
  • Egyptian President dismisses claims of a “militarized” economy
  • Iranian Rial hits record lows
  • FITCH affirms Kenya ratings
  • World Bank to provide US$500 Mio in support for Ghana’s energy project
  • Oman issues OMR 150 mio bond
  • Iraq to receive Korean fighter jets – Iran gets 50% discount on Boeing order
  • Nexans wins cable contract in Qatar

REGIONAL COMMENTARY

Saudi Arabia is “Optimistic” over a rebound in oil prices – Energy minister
Saudi Arabia’s Energy Minister, Khalid al Falih, was quoted via a Bloomberg interview yesterday, as saying that there is currently no need for any additional crude production cuts on top of those recently agreed by OPEC and 11 other producers, and that he expects the market to continue to rebalance. “I’m very optimistic that next year will see economic recovery and a recovery of oil markets. Prices, unsustainable at current levels, will also need to rise to encourage investment in the new supplies needed in coming years, while crude will balance somewhere between US$50 and US$100 a barrel,” Al Falih stated. Meanwhile as revealed in the country’s budget statement last week, Saudi Arabia managed to reduce its budget deficit to SAR 297 bio this year compared to SAR 367 bio in 2015 after making sharp cuts in public spending. Next year however the government plans to try and boost economic growth by raising its overall spend by 8% to SAR 890 bio against SAR 825 bio in 2016 (excluding late payments), a large chunk of which will be allocated towards infrastructure projects including new roads, marine facilities and airports as well as the expansion of the Grand Mosque in Mecca. Officials have also promised to continue to remove unnecessary bureaucratic red tape and move forward with privatization plans in those sectors earmarked for such within ‘Vision 2030’ and, although domestic energy prices are expected to rise next year, the government has said it will supplement the income of its poorer citizens via a system of cash handouts.

Egyptian President dismisses claims of a “militarized” economy
According to the Ahram media outlet , the Egyptian President, Abdel Fattah al Sisi, this weekend dismissed claims that his country’s army controlled more than 50% of the economy. "It has been said that the military's economy is worth 20% or even 50% of the economy. We wish that the army’s economic contribution becomes 50%, as the army is one of the state's components, but the citizens know this cannot happen. We have nothing to hide, the military accounts for between 1.50% to 2.00% percent of the economy," Sisi stated, adding that the army paid taxes on all commercial projects it was involved in. The President’s comments were made during the inauguration of new production lines at the military-controlled Al Nasr chemicals company in Abu Rawash.

Iranian Rial hits record lows
The Iranian Rial traded as low as 41500.00 against the US dollar in the parallel market yesterday over continuing concerns an incoming Trump administration could further disrupt attempts by Iran to attract foreign direct investment and perhaps even threaten the P5+1 nuclear accord. The official USD/IRR exchange rate is currently set at 32300.00 but the Central Bank recently gave some of the large local banks permission to trade at the parallel rate with their non-governmental clients as part of an ongoing effort to unify the two rates. Meanwhile Fox News has said that a number of influential Iranian dissidents in the US have sent a letter to President-elect Trump calling on him to honour his campaign pledge to renegotiate the nuclear agreement. "During the Presidential campaign, we and millions of Iranians followed your forthright objection to the nuclear agreement reached between the Obama administration and the Islamic Republic of Iran. We sincerely hope that with your election, the new administration and the United States Congress will have the opportunity for the first time to review the regional and international outcomes of that disastrous agreement without any reservations, as was promised to the voters,” the letter purportedly read.

FITCH affirms Kenya ratings
The FITCH ratings agency has affirmed Kenya’s long-term foreign and local currency ratings at B+ but with a negative outlook. The issuer ratings on the country’s senior unsecured foreign currency bonds have also been affirmed at B+. In a statement the agency justified its decision by saying; “Kenya's ratings are supported by its strong growth potential and resilience to shocks, favourable business climate and only moderate exposure to commodity prices. However, its ratings are constrained by its low GDP per capita, sizeable twin budget and current account deficits and rising public and external debt ratios, as well as by political risks. Kenya is starting to make headway in reducing its budget deficit, but it remains substantial and the consolidation path is subject to downside risks.”

World Bank to provide US$500 Mio in support for Ghana’s energy project
The World Bank will provide over US$500 mio in loans and guarantees to help Ghana finance it’s US$7.7 bio Sankofa oil and gas project.

Oman issues OMR 150 mio bond
Oman’s Central Bank announced yesterday that its latest 10-year local currency bond issue was oversubscribed and that the average yield was 5.57%. The bond carries a coupon rate of 5.50% per annum and will mature on the 27th of Dec 2026. The auction which was conducted on the 21st of Dec was open to both resident and non-resident investors. Oman is expected to offer up to US$2 bio in international bonds next year in order to help fund its budget deficit.

Iraq to receive Korean fighter jets – Iran gets 50% discount on Boeing order
The Iraqi Air Force is reportedly set to take delivery of 24 ‘Golden Eagle’ T50 fighter jets from South Korea during the first quarter of next year. These aircraft were manufactured by the Korea Aerospace Industries Corporation and the US$1.1 bio aircraft order was placed back in 2013. Meanwhile Iran’s transport authority announced this past weekend that the country will only pay 50% of the original US$16.6 bio sticker price for 80 Boeing passenger planes. “Boeing has announced that its Iran-Air contract is worth US$16.6 billion. However, considering the nature of our order and its choice possibilities, the purchase contract for 80 Boeing aircraft is worth about 50% of that amount," Iran’s deputy transport minister Asghar Fakhrieh-Kashan claimed on Sunday. The order apparently covers a range of Boeings including 737 max 8’s, 777-300ER’s and 777-9’s.

Nexans wins cable contract in Qatar
Paris based Nexans has been awarded a EUR 300 mio contract to supply low and medium voltage power cables to connect electricity substations to various ongoing civil infrastructure projects across Qatar.

Middle-East-African-Monitor-27-12-2016

AND FINALLY…
The oldest pots ever to have been used to cook grain & vegetables rather than meat, have recently been discovered in the Uan Afuda cave and Takarkori rock shelter in Libya. These particular pots are reportedly estimated to be around 10,000 years old, although it’s worth noting that primitive hunter-gatherers in Japan were using clay pots to cook seafood over 15,000 years ago.

Glenn Wepener, Executive Director & Geopolitical Analyst Middle East & Africa
National Bank of Abu Dhabi
MarketInsights&Strategy@nbad.com
Tel: +971 2 6110 127

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NBAD Middle East & African Monitor - 27 December 2016

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