Articles on MENA jobless rate, Islamic finance, and Estonia

Phil researched and wrote three articles for the latest edition of EMEA Finance magazine looking at issues in the Middle East and eastern Europe.

In a long feature based on a major conference held in Morocco and follow-up interviews, Phil looked at the challenges posed to the North African region from high rates of unemployment, especially among the youth, and what countries and agencies can do to tackle that. It found optimism that bodies such as the EBRD and IMF believe the region can reap the benefits of economic reform. The article is here.

Focusing on the Gulf Cooperation Council region, Phil looked how Islamic banks in the GCC have been enjoying ratings upgrades, reducing real estate exposures, and upping their lending to individuals and firms. In an interview with EMEA Finance, Nitish Bhojnagarwala, Vice President and Senior Analyst at Moody’s, said although Islamic banks’ financial fundamentals were weaker, they had improved and are converging towards the conventional banks. The article is here.

In a profile piece, Phil looked at how Kersti Kaljulaid, President of the Republic of Estonia, has become the unlikely activist for a new digital age. She was in London in April on a European tour to be a missionary for her small country’s achievement at becoming the world’s first digital state, giving citizens a digital identity enabling them to complete pretty much every municipal or state service online in minutes, as well as offering e-residency that lets anyone start a business from abroad. The article is here.

 

 

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Focus on World Bank and Bahrain for EMEA Finance

Phil Thornton contributed two articles to the latest edition of the EMEA Finance magazine out in February 2018. The first was based on a talk with Kristina Georgieva, the new chief exucirve of the World Bank. At the heart of her agenda is achieving the multilateral’s goals of eliminating extreme poverty by 2030 and boosting shared prosperity. Georgieva, who was EU Commissioner for Humanitarian Aid, sees her mission as turning this instrument into an “incentive for people to do the right thing”. “If a country has a lend-management policy for forestry to be protected, not to be chopped down, then the insurance premium ought to have a discount. As a donor, as a finance community, we are funding this discount.” The other angle is to focus on middle income countries — where 50 per cent of poor people still live — and especially in higher-risk economies where the task is to make sure that jobs are created. The article is here.

The second article was an analysis of the success that Bahrain has had in attracting foreign investment to the small island kingdom. We looked at how Bahrain’s economic development board has set out a strategy to attract foreign direct investment and SMEs that will both create jobs and help the Kingdom exploit modern technologies.EDB managing director Simon Galpin set out why Bahrain was investing in a whole raft of projects valued at over £32bn, is equivalent to oits annual GDP. These include the expansion of the airport, the US$5bn upgrading of all the major oil refineries in Bahrain, the enlargement of the Alba aluminium smelter to make it the largest in the world, and a second direct connection to the Eastern Province of Saudi Arabia for both road and rail to connect to Saudi Arabia and complement the existing King Fahd Causeway. The second factor is what Galpin calls “soft infrastructure” — reforms of business regulations that allows 100% foreign ownership and a revision of insolvency laws aimed at fostering innovation and entrepreneurship by modernising and streamlining the bankruptcy procedures.“ The third trend, which is connected to the regulatory overhaul, is the decision by the Central Bank of Bahrain to introduce the first “regulatory sandbox”. The article is here.

Contribution to Financial Times 2018 survey

We were asked by the Financial Times to contribute our views on a range of issues which have the potential to affect the UK economy during 2018. On overall growth, we said the economy will slow in 2018 as the uncertainty created by the stop-start Brexit negotiations nags at consumer and business confidence and at investment intentions. A drop to 1.5% from 1.8% in 2017 seems likely. The interesting comparison is with the eurozone, which could post growth as high as 2.4 per cent. Those data will be confirmed in spring just as the UK will leave the EU — a timely reminder of the damage that the UK is doing to itself by leaving.

On Brexit we said that it will either be possible to stay within a/the single market and a/the customs union or even that opposition to Brexit itself is starting to grow. Either there are now hopes that the UK will get as bad a deal as feared a year earlier.

On the consumer economy, we said the downward pressure on consumer spending that has so far come from a fall in real wages is likely to continue. Our other concern is the mountain of debt that consumers are building up and whether any of the bubbles in personal loans, credit card debt, and car loans will burst.

A year ago we contributed to the 2017 survey in which we said we predicted that growth would slow sharply, that inflation would rise and the negative impact from Brexit had been postponed rather than cancelled.

Writing on Iran for Raconteur

Our analysis of the opportunities that the opening up of the Iranian economy offers to British firms was featured in the second issue of the new monthly magazine Raconteur. It focused on a  country of 80 million people — a majority of whom are under 30 and highly educated — which has the second-largest gas reserves and fourth-largest oil reserves in the world. It looked at the sectors that offered the best opportunities but also examined the potential financial and legal obstacles. The article can be found here.

 

LatinFinance’s finance minister of the year

We worked with LatinFinance, the magazine that covers Latin American economies and financial markets, on its Finance Ministry Scorecard. This is an annual assessment of the performance of the finance ministers and their ministries over the latest calendar year.

It recognises outperformance in managing fiscal and external accounts, building sustainable economic growth, and contributing to controlled inflation. It takes into account ministries’ transparency and clarity in communications with markets, independence and financial strength. The final decision is based on a series of in-depth interviews with market participants including ratings agencies analysts, private-sector agencies analysts and independent economists.

Our assessment led LatinFinance to decide that Colombia and finance minister Mauricio Cardenas had performed better than any major economy over that period. The announcement is here. Colombia was the fastest-growing large economy in Latin America and the Caribbean in 2014. It kept its fiscal deficit limited, and attracted strong levels of foreign investment. Further, the country has a low debt ratio, at below 32% of GDP.  WE carried out an interview with Minister Cardenas in which he talked about how he had achieved strong growth in the face of the fall in the oil price and signs of weakness in the eurozone and Chinese economies. The article is here.

How falling oil has hit Latin America

The drop in the price of crude oil from around $115 a barrel to as low as $44 a barrel has had a major impact on Latin America, where many countries are dependent on “black gold” for import and tax revenues.

We were asked by LatinFinance, the magazine that covers the region, to look at how the impact of cheaper oil had impacted the main economies and what the effect might be of a return to previous three-digit prices.

In this article we contributed the results of interviews with leading private sector and multilateral institutional economists as well as comments by the Colombian finance minister Mauricio Cardenas. We saw howe the region was divided into winners and losers and how economists believed the region would cope wth low oil – but benefits is prices rebounded. The full article is here (login).

Contributing to FT’s 2015 UK economics poll

We were asked by the Financial Times to provide out answers to a number of key questions facing the UK economy in 2015. As in the past few years the FT was looking for subjective opinions and views rather than point forecasts.

The overarching article, which featured a poll of several leading economists and financial analysts, found that most expected the UK recovery to strengthen this year. Of 90 economists surveyed, 77 thought that decent expansion rates would endure another year with only 10 expecting a slowdown to a “disappointing pace of growth”.

Our comments on the main issues on economic growth can be found at the bottom of the article.