GCC governments are set to ease up on fiscal austerity in 2018, benefiting from higher oil prices and from the measures they have taken in the past few years to restrain spending, reform subsidies and raise non-oil revenue.
However, by raising government spending and focusing on social stability and economic diversification, governments risk returning to the pro-cyclical policies of recent years, leaving themselves ill-prepared for the next oil price downturn.
Meanwhile, geopolitical risks are elevated after a whirlwind of events in 2017.
Average Brent oil prices, at around $70 per barrel so far this year, are approaching the fiscal break-even level in Saudi Arabia (A+/stable) and Oman (BBB-/negative). Fitch Ratings estimates that, under current forecasts for spending, both would post budget surpluses if Brent averages above $80 per barrel in 2018.
However, this more benign fiscal environment could prompt both countries to loosen the purse strings, preventing stabilisation of their external reserve levels and leading to a continued build-up of debt. Saudi Arabia, facing lacklustre non-oil growth, already introduced a new stimulus programme just days after announcing an expansionary 2018 budget. It has also pushed out its target of reaching fiscal balance to 2023 (from 2020 originally).
Oman’s 2017 budget deficit was in excess of what had been budgeted, despite higher-than-expected oil prices. Having to diversify the economy and provide jobs to a young, rapidly-growing and underemployed population of Omanis, the government will find it tough to let spending drop off as existing projects are completed. Whether Oman sticks to its spending targets, thereby helping stabilise its public and external debt ratios, will be key to any resolution of the negative outlook on its ratings.
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Read more:
S&P affirms Abu Dhabi's ratings and forecasts economic growth for 2018
Saudi non-oil sector regains momentum in May
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Bahrain, which Fitch Ratings recently downgraded to BB-/stable, is facing a challenging year even if the recent strength in oil prices is sustained, with a fiscal break-even Brent price of around $100 per barrel. Some subsidy reforms and spending restraint notwithstanding, the government has yet to identify a clear medium-term strategy to tackle high deficits. With government debt approaching 90 per cent of gross domestic product and interest costs eating up savings elsewhere on expenditure, investors are reportedly demanding clearer expressions of support from other GCC countries before committing additional funds. Meanwhile, Fitch Ratings estimates that the recent $1 billion sukuk covered only around 30 to 40 per cent of Bahrain’s external financing needs this year.
In both Oman and Bahrain, concerns about social stability limit the government’s ability to rein in fiscal deficits. More broadly, the GCC countries remain exposed to the risk of terrorism as a result, to varying degrees, of regional tensions, speed of social change, and earlier oil-driven austerity measures.
In the geopolitical arena, tension between Saudi Arabia and Iran will persist and risks escalating proxy conflicts, particularly in Yemen. Increased assertiveness on the part of Saudi Arabia; Iranian influence across the region; and the direction (or sometimes perceived lack thereof) of US foreign policy under the US President Donald Trump administration including its opposition to the nuclear deal with Iran have heightened risks in this area.
We do not expect an imminent resolution to the dispute between Qatar (AA-/stable) and the Saudi/UAE-led coalition. Our recent stabilisation of Qatar’s outlook partly reflected the government’s management of the fallout from the rupture of relations with neighbours.
In Saudi Arabia, the threat of domestic challenges to reforms remains even as Crown Prince Mohammed bin Salman has strengthened his position.
In conclusion, Fitch views the current level of oil prices as temporary. Our June Global Economic Outlook has prices moderating to an average of $65 per barrel in 2019 and $57.5 per barrel in 2020. The scale of the oil price shock, deterioration of fiscal and external balance sheets and the insufficiency of policy responses in the past years has led to rating downgrades in Bahrain, Saudi Arabia and Oman. Geopolitical developments directly contributed to the downgrade of Qatar’s rating last year.
Of the seven GCC sovereigns that Fitch rates, only Oman remains on a negative outlook, but geopolitics and the further deterioration of fiscal and external positions are risk factors for the ratings of all GCC sovereigns. Only Abu Dhabi and Kuwait (AA/stable) have maintained their ratings owing to the strength of their balance sheets and small fiscal deficits.
Jan Friederich is Head of Middle East & Africa Sovereign Ratings and Krisjanis Krustins a director in the MEA team at Fitch Ratings, which is a member of The Gulf Bond and Sukuk Association.
Company Profile
Company name: myZoi
Started: 2021
Founders: Syed Ali, Christian Buchholz, Shanawaz Rouf, Arsalan Siddiqui, Nabid Hassan
Based: UAE
Number of staff: 37
Investment: Initial undisclosed funding from SC Ventures; second round of funding totalling $14 million from a consortium of SBI, a Japanese VC firm, and SC Venture
SPECS
Engine: 1.5-litre turbo
Power: 181hp
Torque: 230Nm
Transmission: 6-speed automatic
Starting price: Dh79,000
On sale: Now
TWISTERS
Director:+Lee+Isaac+Chung
Starring:+Glen+Powell,+Daisy+Edgar-Jones,+Anthony+Ramos
Rating:+2.5/5
Notable cricketers and political careers
- India: Kirti Azad, Navjot Sidhu and Gautam Gambhir (rumoured)
- Pakistan: Imran Khan and Shahid Afridi (rumoured)
- Sri Lanka: Arjuna Ranatunga, Sanath Jayasuriya, Tillakaratne Dilshan (rumoured)
- Bangladesh (Mashrafe Mortaza)
TOURNAMENT INFO
Fixtures
Sunday January 5 - Oman v UAE
Monday January 6 - UAE v Namibia
Wednesday January 8 - Oman v Namibia
Thursday January 9 - Oman v UAE
Saturday January 11 - UAE v Namibia
Sunday January 12 – Oman v Namibia
UAE squad
Ahmed Raza (captain), Rohan Mustafa, Mohammed Usman, CP Rizwan, Waheed Ahmed, Zawar Farid, Darius D’Silva, Karthik Meiyappan, Jonathan Figy, Vriitya Aravind, Zahoor Khan, Junaid Siddique, Basil Hameed, Chirag Suri
Ads on social media can 'normalise' drugs
A UK report on youth social media habits commissioned by advocacy group Volteface found a quarter of young people were exposed to illegal drug dealers on social media.
The poll of 2,006 people aged 16-24 assessed their exposure to drug dealers online in a nationally representative survey.
Of those admitting to seeing drugs for sale online, 56 per cent saw them advertised on Snapchat, 55 per cent on Instagram and 47 per cent on Facebook.
Cannabis was the drug most pushed by online dealers, with 63 per cent of survey respondents claiming to have seen adverts on social media for the drug, followed by cocaine (26 per cent) and MDMA/ecstasy, with 24 per cent of people.
Fifa Club World Cup quarter-final
Esperance de Tunis 0
Al Ain 3 (Ahmed 02’, El Shahat 17’, Al Ahbabi 60’)
ESSENTIALS
The flights
Emirates flies direct from Dubai to Rio de Janeiro from Dh7,000 return including taxes. Avianca fliles from Rio to Cusco via Lima from $399 (Dhxx) return including taxes.
The trip
From US$1,830 per deluxe cabin, twin share, for the one-night Spirit of the Water itinerary and US$4,630 per deluxe cabin for the Peruvian Highlands itinerary, inclusive of meals, and beverages. Surcharges apply for some excursions.
SPEC SHEET: APPLE M3 MACBOOK AIR (13")
Processor: Apple M3, 8-core CPU, up to 10-core CPU, 16-core Neural Engine
Display: 13.6-inch Liquid Retina, 2560 x 1664, 224ppi, 500 nits, True Tone, wide colour
Memory: 8/16/24GB
Storage: 256/512GB / 1/2TB
I/O: Thunderbolt 3/USB-4 (2), 3.5mm audio, Touch ID
Connectivity: Wi-Fi 6E, Bluetooth 5.3
Battery: 52.6Wh lithium-polymer, up to 18 hours, MagSafe charging
Camera: 1080p FaceTime HD
Video: Support for Apple ProRes, HDR with Dolby Vision, HDR10
Audio: 4-speaker system, wide stereo, support for Dolby Atmos, Spatial Audio and dynamic head tracking (with AirPods)
Colours: Midnight, silver, space grey, starlight
In the box: MacBook Air, 30W/35W dual-port/70w power adapter, USB-C-to-MagSafe cable, 2 Apple stickers
Price: From Dh4,599
Sarfira
Director: Sudha Kongara Prasad
Starring: Akshay Kumar, Radhika Madan, Paresh Rawal
Rating: 2/5
Our family matters legal consultant
Name: Hassan Mohsen Elhais
Position: legal consultant with Al Rowaad Advocates and Legal Consultants.
Day 1 results:
Open Men (bonus points in brackets)
New Zealand 125 (1) beat UAE 111 (3)
India 111 (4) beat Singapore 75 (0)
South Africa 66 (2) beat Sri Lanka 57 (2)
Australia 126 (4) beat Malaysia -16 (0)
Open Women
New Zealand 64 (2) beat South Africa 57 (2)
England 69 (3) beat UAE 63 (1)
Australia 124 (4) beat UAE 23 (0)
New Zealand 74 (2) beat England 55 (2)
Last-16
France 4
Griezmann (13' pen), Pavard (57'), Mbappe (64', 68')
Argentina 3
Di Maria (41'), Mercado (48'), Aguero (90+3')
ABU DHABI'S KEY TOURISM GOALS: BY THE NUMBERS
By 2030, Abu Dhabi aims to achieve:
• 39.3 million visitors, nearly 64% up from 2023
• Dh90 billion contribution to GDP, about 84% more than Dh49 billion in 2023
• 178,000 new jobs, bringing the total to about 366,000
• 52,000 hotel rooms, up 53% from 34,000 in 2023
• 7.2 million international visitors, almost 90% higher compared to 2023's 3.8 million
• 3.9 international overnight hotel stays, 22% more from 3.2 nights in 2023
EMIRATES'S REVISED A350 DEPLOYMENT SCHEDULE
Edinburgh: November 4 (unchanged)
Bahrain: November 15 (from September 15); second daily service from January 1
Kuwait: November 15 (from September 16)
Mumbai: January 1 (from October 27)
Ahmedabad: January 1 (from October 27)
Colombo: January 2 (from January 1)
Muscat: March 1 (from December 1)
Lyon: March 1 (from December 1)
Bologna: March 1 (from December 1)
Source: Emirates
ABU DHABI ORDER OF PLAY
Starting at 10am:
Daria Kasatkina v Qiang Wang
Veronika Kudermetova v Annet Kontaveit (10)
Maria Sakkari (9) v Anastasia Potapova
Anastasia Pavlyuchenkova v Ons Jabeur (15)
Donna Vekic (16) v Bernarda Pera
Ekaterina Alexandrova v Zarina Diyas
Company Profile
Company name: Hoopla
Date started: March 2023
Founder: Jacqueline Perrottet
Based: Dubai
Number of staff: 10
Investment stage: Pre-seed
Investment required: $500,000
Company Profile
Company name: Namara
Started: June 2022
Founder: Mohammed Alnamara
Based: Dubai
Sector: Microfinance
Current number of staff: 16
Investment stage: Series A
Investors: Family offices
COMPANY PROFILE
Date started: 2020
Founders: Khaldoon Bushnaq and Tariq Seksek
Based: Abu Dhabi Global Market
Sector: HealthTech
Number of staff: 100
Funding to date: $15 million
Company Profile
Name: Direct Debit System
Started: Sept 2017
Based: UAE with a subsidiary in the UK
Industry: FinTech
Funding: Undisclosed
Investors: Elaine Jones
Number of employees: 8
COMPANY PROFILE
Name: Haltia.ai
Started: 2023
Co-founders: Arto Bendiken and Talal Thabet
Based: Dubai, UAE
Industry: AI
Number of employees: 41
Funding: About $1.7 million
Investors: Self, family and friends
Kill
Director: Nikhil Nagesh Bhat
Starring: Lakshya, Tanya Maniktala, Ashish Vidyarthi, Harsh Chhaya, Raghav Juyal
Rating: 4.5/5
65
Directors: Scott Beck, Bryan Woods
Stars: Adam Driver, Ariana Greenblatt, Chloe Coleman
Rating: 2/5
The specs
Engine: Single front-axle electric motor
Power: 218hp
Torque: 330Nm
Transmission: Single-speed automatic
Max touring range: 402km (claimed)
Price: From Dh215,000 (estimate)
On sale: September
Chris Jordan on Sanchit
Chris Jordan insists Sanchit Sharma will make an impact on the ILT20, despite him starting the campaign on Gulf Giants' bench.
The young UAE seamer was an instant success for the side last season, and remained part of the XI as they claimed the title.
He has yet to feature this term as the Giants have preferred Aayan Khan and Usman Khan as their two UAE players so far.
However, England quick Jordan is sure his young colleague will have a role to play at some point.
"Me and Sanchit have a great relationship from last season," Jordan said.
"Whenever I am working with more inexperienced guys, I take pleasure in sharing as much as possible.
"I know what it was like when I was younger and learning off senior players.
"Last season Sanchit kick-started our season in Abu Dhabi with a brilliant man-of-the-match performance.
"Coming into this one, I have seen a lot of improvement. The focus he is showing will only stand him in good stead."
Shubh Mangal Saavdhan
Directed by: RS Prasanna
Starring: Ayushmann Khurrana, Bhumi Pednekar
Living in...
This article is part of a guide on where to live in the UAE. Our reporters will profile some of the country’s most desirable districts, provide an estimate of rental prices and introduce you to some of the residents who call each area home.
The specs
Engine: 4-cylinder 2-litre
Transmission: 9-speed automatic
Power: 252 brake horsepower
Torque: 352Nm
Price: from Dh146,700
On sale: now
THE NEW BATCH'S FOCUS SECTORS
AiFlux – renewables, oil and gas
DevisionX – manufacturing
Event Gates – security and manufacturing
Farmdar – agriculture
Farmin – smart cities
Greener Crop – agriculture
Ipera.ai – space digitisation
Lune Technologies – fibre-optics
Monak – delivery
NutzenTech – environment
Nybl – machine learning
Occicor – shelf management
Olymon Solutions – smart automation
Pivony – user-generated data
PowerDev – energy big data
Sav – finance
Searover – renewables
Swftbox – delivery
Trade Capital Partners – FinTech
Valorafutbol – sports and entertainment
Workfam – employee engagement
Disturbing facts and figures
51% of parents in the UAE feel like they are failing within the first year of parenthood
57% vs 43% is the number of mothers versus the number of fathers who feel they’re failing
28% of parents believe social media adds to the pressure they feel to be perfect
55% of parents cannot relate to parenting images on social media
67% of parents wish there were more honest representations of parenting on social media
53% of parents admit they put on a brave face rather than being honest due to fear of judgment
Source: YouGov
Herc's Adventures
Developer: Big Ape Productions
Publisher: LucasArts
Console: PlayStation 1 & 5, Sega Saturn
Rating: 4/5