Economies in the Middle East will see more stability this year, as prices of major commodities rebound and the global economy picks up, Standard Chartered's regional chief executive said.
"A lot of hard work is required but the positive tailwinds you are seeing in the rest of the world should benefit this region," said Sunil Kaushal, who heads Africa and the Middle East for the bank, said in an interview with The National on the sidelines of the World Economic Forum in Davos.
The Middle East region however, has so far missed out on “the tailwinds we are seeing” globally and is lagging, added Mr Kaushal, who previously worked for the bank in Asia including in India, Taiwan and Singapore. The US, Japan, Europe and large emerging economies like China and India are “chugging along... and are in a good spot.”
The IMF on Monday raised its forecast for worldwide growth this year. The global economy which has been gaining traction since 2016 continues to strengthen while oil prices which collapsed in 2014 have regained ground in the wake of consensus on production cuts between Opec and other non-member countries. The Washington-based organisation's revised forecast see global growth reaching 3.9 per cent for 2018 and 2019, a 0.2 percentage point change from its estimates last October.
A “knee-jerk reaction” to the pain felt from the oil price crash impacted growth in the Middle East region in 2015 and 2016, Mr Kaushal said.
The GCC is now in a counter-cyclical situation, beholden to raise interest rates in line with US monetary policy while experiencing slower economic growth, he added.
However, fiscal reforms which include the introduction of VAT and a reduction in energy subsidies are important and if durable will help the region going forward. Geopolitics though remains an issue for future growth, he said.
Standard Chartered itself has also been recovering from a difficult period related to the crash in commodity prices. A restructuring and review of the business globally also impacted Middle East operations with job cuts made in the UAE.
“Clearly [the whole bank has] made good progress from 2015 and we are focused on growing the business,” he said.
For the third quarter Standard Chartered reported income of $3.6 billion, 4 per cent higher year-on-year. While year-to-date income was also up 5 per cent, there are still concerns about the competitive landscape in some key markets.
In the Middle East and beyond, the bank is driving efficiencies and “making the right investments” on the digital side of banking while also growing its data analytics capability in Bangalore, Mr Kaushal said.
“Overall, the structural growth prospects remain intact,” he added. Although the management of costs is ongoing, the bank's “focus is on driving good quality income growth while keeping a handle on the costs.”
During this week in Davos, as he meets global leaders like India’s Prime Minister Narendra Modi and mingles with other CEOs, Mr Kaushal is feeling “cautiously optimistic” for the year ahead.