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Saudi king approves $19 billion of economic stimulus steps

The Custodian of the Two Holy Mosques, King Salman bin Abdulaziz of Saudi Arabia, issued a royal decree approving 72 billion riyals ($19.2 billion) worth of measures to stimulate growth in the private sector next year, state news agency SPA reported on Thursday.

The measures are part of a 200 billion riyal package that is to extend over four years.

The measures include residential loans worth 21.3 billion riyals, a 10 billion riyal fund to support economic projects, and 1.5 billion riyals to support distressed companies.

A 2.8 billion riyal government fund will be created to invest in smaller companies, while the government will adjust the fees which it charges for services to save smaller companies 7 billion riyals.

Massive ‘beat the vat’ sale on top brands this weekend in Dubai

As we head closer to the festive season in December, shopping is what you should do this weekend.

Your last resolution for 2017 should be to fill in your wardrobes before VAT comes in force in the UAE from January 1, 2018.

And there is a massive ‘Beat the VAT’ sale by top international brands coming to Dubai this weekend. Just head to hall number 5, 6 and 7 at Dubai World Trade Centre from December 13 to 17.

Dubai Shopping Festival to begin with 12-hour sale

The entry is free and you can shop all day from 10am to 10pm.

Brands up for grabs include DKNY, D&G, Versace, Crocs, Aldo, Boss, Nine West, Nina Ricci, Toms, Guess, Paris Hilton, Diesel, Arcancil, Yolo and many more.

So, you no longer have to wait for the big Dubai Shopping Festival, starting on December 26 to buy gifts for your family. Rush and grab the best deals!

UAE, Saudi working on digital currency for cross-border trade

The UAE is working with Saudi Arabia’s central bank to issue a digital currency that would be accepted in cross-border transactions between the two countries, UAE Central Bank Governor Mubarak Rashed Al Mansouri said on Wednesday.

The digital currency would be based on blockchain, the shared ledger of transactions that is maintained by a network of computers on the Internet rather than a central authority, he said in a speech to a regional financial conference.

The two central banks have in the past expressed scepticism about digital currencies such as bitcoin, with the UAE Central Bank saying it did not recognise bitcoin as an official currency. In July, the Saudi Central Bank warned against trading bitcoin because it was outside the bank’s regulatory reach.

On Wednesday, however, Al Mansouri said the central banks wanted to understand blockchain technology better. He told reporters that the UAE-Saudi digital currency would be used among banks, not by individual consumers, and would make transactions more efficient.

“It is digitisation of what we do already between central banks and banks,” he said.

A decade ago, the UAE and Saudi Arabia discussed the possibility of creating a single currency among members of the six-nation Gulf Cooperation Council but the UAE pulled out of the project in 2009.

Adnoc distribution shares make strong debut on ADX

Shares of Abu Dhabi National Oil Company’s fuel distribution unit made a strong stock market entrance on Wednesday, opening 16 per cent above its initial public offer price.

Adnoc Distribution’s IPO, Abu Dhabi’s first in six years, raised $845 million, and was oversubscribed several times.

Following a bell ringing ceremony led by Dr Sultan Ahmed Al Jaber, UAE Minister of State and Adnoc Group CEO, and Hamad Al Shamsi, chairman of the Abu Dhabi Securities Exchange (ADX), Adnoc Distribution is started trading on the ADX under the symbol ‘Adnocdist’.

The shares, which were listed at an initial public offering price of Dh2.5, were trading at Dh2.77 cents at 10:51am.

Adnoc said the IPO brought the subsidiary’s market capitalisation to $8.5 billion, making it the fourth-largest firm on the ADX.

The IPO was a tremendous success and drew a very strong response from investors, according to Rashed Al Baloushi, CEO of the Abu Dhabi Securities Exchange.

Al Baloushi said a total of 12,000 investors from 73 nationalities participated in the subscription, with final allocations hitting approximately 90 per cent for qualified investors and 10 per cent for individual and other investors.

“The offering was multiple times oversubscribed on the qualified investor tranche. The retail or individual investor tranche of the offering was oversubscribed by 22 times on the original retail tranche size; and owing to this exceptional level of oversubscription, it was decided to increase the retail tranche size to10 per cent of the offering, allowing retail investors to further participate in this unique opportunity,” Al Baloushi said.

He added that the significant interest and demand from UAE-based investors paves the way for further interest and investment in similar future transactions.

IMF confident on UAE’s economic growth

The UAE’s economy is expected to recover gradually next year without suffering a significant blow to growth from the introduction of a five per cent value added tax in January, a senior International Monetary Fund (IMF) official said.

Natalia Tamirisa, IMF mission chief to the Arab world’s second-biggest economy, said Dubai’s spending on preparations to host Expo 2020 would help to boost growth. On Sunday, Dubai announced a 19.5 per cent leap of spending in its 2018 state budget, largely because of higher allocations for infrastructure.

“We see a gradual recovery for the UAE over the next few years on the back of firming oil prices, a pick-up in global trade, investment for Expo 2020 and easing fiscal consolidation,” Tamirisa said in a telephone interview.

Non-oil sector growth is projected to rise from 1.9 per cent this year to 2.8 per cent next year, and to continue climbing to between 3.3 and 3.5 per cent in 2020, she said. The introduction of VAT next month will be a big change for consumers and companies, which have long been accustomed to minimal taxation in the Gulf.

Analysts believe some consumers may rush to make purchases this month to beat the tax, potentially setting the economy up for weakness early next year when the spending fades.

But Tamirisa said the effect was not likely to be large enough to hurt the economic recovery, and that the government looked set to manage the launch of the tax without disrupting business.

Stable outlook seen for GCC firms in 2018

Higher oil prices and continued public spending support the stable 2018 outlook on non-financial companies in the GCC, Moody’s Investors Service said on Wednesday.

“Improving oil prices, which are narrowing fiscal deficits, as well as an ongoing commitment to public spending and a supportive stance towards government-related issuers will underpin the stable outlook on GCC companies over the next 12 months,” Rehan Akbar, vice-president and senior analyst at Moody’s, said in a report.

Analysts pointed out that governments across the GCC are committed to increase public spending just as Dubai announced through its recent expansionary budget with a record spending of Dh56.6 billion. The budget, allocating an increased spending to boost infrastructure efficiency in line Dubai Strategic Plan 2021’s targets and future commitments, especially Expo 2020, reflects a strong commitment to social expenditure, including health, education and housing, analysts said.

“Limited clarity on policy direction and on the pace of implementation of structural economic reforms, as well as political risks and high currency volatility drive the negative 2018 outlook for Turkish companies. Similarly, the negative outlook for firms in South Africa reflects continued political and policy uncertainty, and depressed business and consumer demand,” said Akbar.

Rated GCC corporates are mainly government-related issuers, which will continue to benefit from strong competitive positions and government support.

Oil prices above $50 a barrel will allow countries with large fiscal buffers and small populations to implement fiscal reforms at a slower pace than their regional peers, which will in turn support the operating environment in these countries. The ratings agency said fewer growth opportunities would drive GCC companies toward consolidations and acquisitions outside the region, as well as investments in increasing vertical integration, and corporate focus on costs. Mature state-owned corporates are increasingly looking to diversify funding sources, which could lead to an uptick in capital market activity.

Oxford Economics said in a report that after two difficult years including a tough 2017 where regional GDP growth is expected to come in at just 0.3 per cent, the GCC economies are set to enjoy their fastest expansion in three years in 2018. “We forecast 2.7 per cent growth for the region next year with all six GCC economies set to enjoy a relatively robust performance,” it said.

UAE banks record credit growth in q3

Credit growth in the UAE rose on the back of increased economic activity both in the government and private sectors with lending witnessing a decent increase during the third quarter of 2017.

The Central Bank of the UAE’s latest data released on Wednesday showed that gross credit reached Dh1.58 trillion by the end of the third quarter of 2017 from Dh1.545 trillion during the same quarter last year, an increase of 2.3 per cent.

Barring government-related entities (GREs), lending by banks to all other sub-sectors recorded growth during the quarter. Domestic credit growth expanded 1.6 per cent to Dh1.447 trillion.

While lending to private sector witnessed an uptake of 2.4 per cent year-on-year during the third quarter of 2017, reaching Dh1.07 trillion. Lending by the financial institutions to government increased 4.3 per cent to Dh181.5 billion by the end of last quarter. Loans to individuals in the UAE totalled Dh335.1 billion, an increase of 3.3 per cent.

The increased lending to the government and private sector reflected that the non-oil private sector expanded while the government also continued to invest in infrastructure development projects.

Mik Kabeya, an analyst at Moody’s Investors Service, said the UAE banking system would see robust credit growth underpinned by strong capitalisation, stable funding and liquidity conditions.

Emirates NBD’s Purchasing Managers’ Index (PMI) for the UAE and Dubai Economy Tracker for November showed solid upturn in non-oil private sectors.

Khatija Haque, head of Mena Research at Emirates NBD, said that the UAE PMI rose to 57.0 in November from 55.9 in October, signalling a faster rate of growth in the non-oil private sector. This was the highest reading since August, and the second highest reading this year.

“Purchasing activity and accumulation of pre-production inventories has been sharply higher year-to-date compared with last year. While some of this might be attributed to pre-VAT stockpiling, survey respondents indicated they had boosted inventories ahead of an expected upturn in sales,” she said in the note.

According to Dubai Economy Tracker, the November survey showed solid growth in Dubai’s economy last month, at a similar pace to the previous two months.

Dubai government also this week issued its 2018 budget focused heavily on the infrastructure development related to Expo 2020.

Going forward, Haque believes that public investment and spending, particularly on infrastructure, will be a key driver of economic growth in the emirate next year.

According to Central Bank, the overall outlook regarding the soundness of the banking sector remains positive during the third quarter of 2017. Banks’ specific provisions for non-performing loans increased from Dh81.7 billion at the end of June 2017 to Dh83.1 billion in the third quarter of 2017, thereby ensuring that NPLs are fully provisioned.

Bank deposits at banks increased 5.8 per cent year on year to Dh1.595 trillion by Q3 2017 from Dh1.508 trillion for the same period last year, the apex bank said in its quarter report.

As the banks increasingly go digital, they are reducing the number of branches as more and more consumers tend to opt for online banking.

According to Central Bank’s Q3 data, 22 national banks have decreased the number of branches to 810 at the end of Q3 2017 compared to 816 at the end of the Q2 2017. The 26 foreign banks have kept the number of branches at 85.

At the same time, the number of bank employees has declined for both, national and foreign banks, laying off 223 employees during the first nine months of this year.

The number of employees of local and foreign banks were 28,986 and 7,365, respectively at the end of Q2 2017 to 28,767 and 7,316, respectively, at the end of last quarter, mainly due to consolidation in banking activity and cost efficiency.

According to Central Bank figures, the percentage of the number of presented and returned cheques increased from 4.3 per cent in Q2 2017 to 4.6 per cent in Q3 2017. The total amount of returned cheques from the total presented amount also increased to five per cent in Q3 2017 compared to 4.5 per cent in Q2 2017.

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