GCC financial markets impacted by conflict in eastern Europe

scion

Like other markets globally, financial markets in Oman and the wider GCC were mostly impacted by the conflict in eastern Europe, according to an industry expert.

“The ongoing Russia-Ukraine conflict has strongly affected energy deliveries and profoundly changed how the market worked,” said Daniel Takieddine BDSwiss CEO Mena.

Elaborating on the current oil prices, both domestically and globally, in the short term Daniel said, “It goes without saying that the conflict in Europe would continue to be a threat to the supply side, however, the market is seeing a decline in demand.”

“This is particularly the case with the aggressive tightening in monetary policy that the Federal Reserve is leading, which could accelerate the global economic slowdown. As a result, oil prices could continue to slide with rebounds from time to time whenever production cuts would happen,” he further added.

When asked whether this escalation has a large impact on economic growth, Daniel said that the conflict in Ukraine has already significantly affected global economic growth by pushing up commodities prices including oil, natural gas and grains among other things and by disrupting supply lines.

“This has affected countries that depend on these products like Egypt for grains and Europe for natural gas. The ensuing inflation has accelerated monetary policy tightening which continues to affect growth. In this regard, any further escalations could exacerbate existing issues,” he added.

Logistics and supplies of commodities and other essential products could still be under threat if tensions flare up, Daniel warned, adding that supplies of electronic components were strongly affected by the COVID-19 conditions applied in China in the past and could see similar effects if the logistics chain is disrupted with Taiwan being an important production centre along with China.

“The same could be said about grains, which are produced massively in Russia and Ukraine, and are shipped thanks to a fragile agreement between the belligerents. Additionally, the war could affect future crop harvests, which could significantly affect supplies,” he pointed out.

Regarding his views about inflation in the US, the US Federal Reserve’s policy and its impact on Oman and the Gulf Cooperation Council (GCC) countries, Daniel said, “We could see the Federal Reserve continue raising key interest rates this year and the next in a bid to fight inflation. The latter has started to decline but not as fast as previously expected which could prompt the US central bank to pursue a more aggressive policy.”

“This in turn could result in slower demand for energy products which are essential exports for Oman and other countries in the region as well as in an erosion of confidence among investors, leading to lower prices on the stock market,” he added.

Speaking about the stock markets in Oman and GCC countries, Daniel said, “Most markets in the GCC initially benefited from the increasing energy prices that resulted from the war in Ukraine and the sanctions applied by the European Union on Russia. The higher prices helped boost equities and local economies while the increasingly tighter monetary policies, in particular in the US, eroded confidence and weighed on performances.”

“Currently, stock markets are mainly weighed by the global economy’s slowdown and a looming recession as central banks raise interest rates to fight inflation. At the same time, the tensions between the US, Taiwan and China and the conflict in eastern Europe could contribute to the deteriorating economic conditions in the respective continents,” he added further.

SOurce:https://timesofoman.com/article/121591-gcc-financial-markets-impacted-by-conflict-in-eastern-europe

Gulf economies to grow faster in 2022, oil price fall biggest threat

scion

The economies in the six-member Gulf Cooperation Council will grow at their fastest paces in several years, according to a Reuters poll of economists who cautioned the risk to that outlook was skewed to the downside.

Crude oil prices, a major driver for Gulf economies, climbed to their highest since 2014 on Wednesday, driven by escalating global political tensions involving major producers including the United Arab Emirates and Russia, which could worsen already tight supplies.

That is bullish news for the six wealthy oil-exporting countries in the region.

The Jan. 11-19 poll of 25 economists forecast all six economies in the Gulf Cooperation Council would grow faster this year than was expected three months ago.

Saudi Arabia was predicted to top the list with a growth of 5.7%, followed by Kuwait and UAE with 5.3% and 4.8% respectively.

Economic growth in Qatar, Oman and Bahrain was expected to average between 3%-4% for 2022. If realised, that would be the best these countries have witnessed in several years.

Despite the relatively tight fiscal policy, and some external headwinds, we expect the GCC economies to see faster growth in 2022 as they continue to build on the progress made last year,” said Khatija Haque, head of research and chief economist at Emirates NBD.

“While the outlook for 2022 remains broadly constructive, there is still a high degree of uncertainty especially with regards to the evolution of the coronavirus pandemic.”

As the global economy deals with the prospect of persistent inflation, the region’s price outlook was modest, but varied.

Inflation was expected to stay between 2.0% and 2.8% this year, with the lowest reading for the UAE, Saudi Arabia and Oman at 2.0% and the highest for Qatar at 2.8%.

Saudi Arabia, the world’s largest crude oil exporter and the region’s economic and political heavyweight will see 5.7% economic growth this year. If realised, it would be the fastest growth since 2012 when oil averaged around $111 per barrel.

Apart from an upgrade to the median forecast from the October Reuters poll, the range of forecasts also showed higher highs and higher lows.

The UAE, a global trade hub and the GCC’s second-biggest economy was forecast to grow 4.8% this year, the fastest since 2015.

Dependency on energy prices has the attendant risk that any disruption in prices due to geopolitical tensions and a slowdown in the global economy could hurt the recovery.

Nine of 10 economists who answered an additional question said a decline in oil prices and new coronavirus variants were the biggest threats to GCC economic growth this year.

“The risk of oil price declines is still the biggest risk for the GCC region, while supply chain disruptions will continue to play a role and throw a wrench into global growth, but probably not so much for GCC economies,” said Ralf Wiegert, MENA economics team head at IHS Markit.

“GCC growth is very much centered on the upside already…oil supply and GDP growth in the GCC rests on the assumption of strong global demand for oil in 2022.”

Eight of ten respondents said risks to their growth forecasts were skewed more to the downside.

Source:https://economictimes.indiatimes.com/news/international/uae/gulf-economies-to-grow-faster-in-2022-oil-price-fall-biggest-threat/articleshow/89086426.cms