(Bloomberg) — Saudi Arabia’s economy all but ground to a halt last year, raising the likelihood that the government will turn on the fiscal taps to deliver faster growth in 2020 in the face of disruptions from the coronavirus and the prospect of lower energy prices.
Held back by curbs on oil output negotiated by OPEC, the economy of the world’s biggest crude exporter expanded just 0.3% in 2019, down from 2.4% a year earlier and short of the government’s forecast of 0.4%.
Offsetting an acceleration in non-oil growth to 3.3%, the oil sector shrank 3.6%, the most since at least 2011, according to data released Sunday by the General Authority for Statistics.
Read: Humbled Saudis May Yet Clinch OPEC+ Deal as Virus Spreads (1)
After a period of austerity that followed the collapse of crude prices six years ago, Saudi Arabia was looking to private businesses to help achieve economic growth of 2.3%. Despite signs of a pickup to start 2020, however, the government may now have to rethink its plans to scale back spending as the impact of the virus outbreak ripples from China to Europe and the Americas.
Saudi policy makers “could opt to defer spending cuts, should non-oil growth be lower than expectations,” according to Bilal Khan, Middle East and North Africa senior economist at Standard Chartered. The bank has revised its 2020 growth forecast for Saudi Arabia to 1% from 2.3% on anticipation of a decline in oil output.
‘Cushion the Impact’
“Fiscal measures could cushion the impact on non-oil economic activity,” he said.
Even deeper cuts to oil production will likely be on the agenda of an emergency meeting by OPEC and its partners set to take place this week. Saudi Arabia has led an effort to shore up oil markets against the coronavirus with swift output cuts to compensate for a drop-off in energy demand and crude prices.
Oil had its worst week since the financial crisis on fears that the spreading coronavirus will crush demand, with Brent crude sliding below $50 a barrel.
The kingdom’s 2020 budget, which envisages a deficit of 6.4% of gross domestic product, is designed under the assumption that the global oil benchmark will average about $65 per barrel, according to calculations by Bloomberg Economics.
The International Monetary Fund predicts Saudi Arabia would need Brent to trade at $89 to balance its budget in 2020. The energy sector accounts for about 50% of the kingdom’s GDP.
(Bloomberg) — The head of the International Monetary Fund warned the US that the global economy is closely watching interest rates and industrial policies given the potential spillovers from the world’s biggest economy and reserve currency.
“All eyes are on the US,” Kristalina Georgieva said in an interview on Bloomberg’s Surveillance on Thursday.
The two biggest issues, she said, are “what is going to happen with inflation and interest rates” and “how is the US going to navigate this world of more intrusive government policies.”
The sustained strength of the US dollar is “concerning” for other currencies, particularly the lack of clarity on how long that may last.
“That’s what I hear from countries,” said the leader of the fund, which has about 190 members. “How long will the Fed be stuck with higher interest rates?”
Georgieva was speaking on the sidelines of the IMF and World Bank’s spring meetings in Washington, where policymakers have been debating the impacts of Washington and Beijing’s policies and their geopolitical rivalry.
Read More: A Resilient Global Economy Masks Growing Debt and Inequality
Georgieva said the IMF is optimistic that the conditions will be right for the Federal Reserve to start cutting rates this year.
“The Fed is not yet prepared, and rightly so, to cut,” she said. “How fast? I don’t think we should gear up for a rapid decline in interest rates.”
The IMF chief also repeated her concerns about China devoting too much capital and labor toward export-oriented manufacturing, causing other countries, including the US, to retaliate with protectionist policies.
China Overcapacity
“If China builds overcapacity and pushes exports that create reciprocity of action, then we are in a world of more fragmentation not less, and that ultimately is not good for China,” Georgieva said.
“What I want to see China doing is get serious about reforms, get serious about demand and consumption,” she added.
A number of countries have recently criticized China for what they see as excessive state subsidies for manufacturers, particularly in clean energy sectors, that might flood global markets with cheap goods and threaten competing firms.
US Treasury Secretary Janet Yellen hammered at the theme during a recent trip to China, repeatedly calling on Beijing to shift its economic policy toward stimulating domestic demand.
Chinese officials have acknowledged the risk of overcapacity in some areas, but have largely portrayed the criticism as overblown and hypocritical, coming from countries that are also ramping up clean energy subsidies.
(Updates with additional Georgieva comments from eighth paragraph.)
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The head of the International Monetary Fund warned the US that the global economy is closely watching interest rates and industrial policies given the potential spillovers from the world’s biggest economy and reserve currency.
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Published Apr 18, 2024 • 2 minute read
(Bloomberg) — The head of the International Monetary Fund warned the US that the global economy is closely watching interest rates and industrial policies given the potential spillovers from the world’s biggest economy and reserve currency.
“All eyes are on the US,” Kristalina Georgieva said in an interview on Bloomberg’s Surveillance on Thursday.
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The two biggest issues, she said, are “what is going to happen with inflation and interest rates” and “how is the US going to navigate this world of more intrusive government policies.”
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Article content
The sustained strength of the US dollar is “concerning” for other currencies, particularly the lack of clarity on how long that may last.
“That’s what I hear from countries,” said the leader of the fund, which has about 190 members. “How long will the Fed be stuck with higher interest rates?”
Georgieva was speaking on the sidelines of the IMF and World Bank’s spring meetings in Washington, where policymakers have been debating the impacts of Washington and Beijing’s policies and their geopolitical rivalry.
Read More: A Resilient Global Economy Masks Growing Debt and Inequality
Georgieva said the IMF is optimistic that the conditions will be right for the Federal Reserve to start cutting rates this year.
“The Fed is not yet prepared, and rightly so, to cut,” she said. “How fast? I don’t think we should gear up for a rapid decline in interest rates.”
The IMF chief also repeated her concerns about China devoting too much capital and labor toward export-oriented manufacturing, causing other countries, including the US, to retaliate with protectionist policies.
China Overcapacity
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Article content
“If China builds overcapacity and pushes exports that create reciprocity of action, then we are in a world of more fragmentation not less, and that ultimately is not good for China,” Georgieva said.
“What I want to see China doing is get serious about reforms, get serious about demand and consumption,” she added.
A number of countries have recently criticized China for what they see as excessive state subsidies for manufacturers, particularly in clean energy sectors, that might flood global markets with cheap goods and threaten competing firms.
US Treasury Secretary Janet Yellen hammered at the theme during a recent trip to China, repeatedly calling on Beijing to shift its economic policy toward stimulating domestic demand.
Chinese officials have acknowledged the risk of overcapacity in some areas, but have largely portrayed the criticism as overblown and hypocritical, coming from countries that are also ramping up clean energy subsidies.
(Updates with additional Georgieva comments from eighth paragraph.)
Article content
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