One of Us Cannot Be Wrong!                                                   16 June 2023

The 3,625 real estate and properties transactions totalled US$ 3.41 billion, during the week, ending 16 June 2023. The sum of transactions was 189 plots, sold for US$ 621 million, and 2,753 apartments and villas, selling for US$ 1.91 billion. The top three transactions were all for plots of land, one in Palm Deira, sold for US$ 46 million, the second in in Business Bay for US$ 37 million, and the third in Al Thanya First for US$ 34 million. Al Hebiah Fifth recorded the most transactions, with thirty-four sales, worth US$ 24 million, followed by twenty-eight sales in Wadi Al Safa 3, for US$ 149 million, and twenty-four sales in Madinat Hind 4, valued at US$ 8 million. The top three transfers for apartments and villas were all for apartments – the first in Island 2, valued at US$ 31 million, another in Palm Jumeirah, for US$ 23 million, and an apartment in Marsa Dubai for US$ 22 million. The mortgaged properties for the week reached US$ 785 million, with the highest being for a plot of land in Al Wasl, mortgaged for US$ 207 million, whilst one hundred and fourteen properties were granted between first-degree relatives worth US$ 113 million. Latest DLD statistics indicate that in the first five months of the year, 29k primary sales occurred – soaring 41% on the year – totalling US$ 18.46 billion.

On Wednesday, Emaar Properties launched a massive US$ 20 billion waterfront project – The Oasis by Emaar – which will encompass more than one hundred million sq ft and provide 7k residential units, focusing on large mansions and villas with spacious plots. It will provide residents with views of water canals, lakes, and parks and will also feature 1.5 million sq ft of retail space. 25% of the land will be dedicated to lakes, water canals, parks, jogging tracks, green spaces, and various luxury amenities.  Its actual location and other details will be released later, but the teaser points to a massive boost for the luxury real estate sector and that the Dubai developer is filling a void in that sector. Emaar’s founder, Mohamed Alabbar noted that “our primary objective is to design one-of-a-kind destinations that complement our clients’ opulent way of life while providing unmatched comfort and luxury. Our most recent integrated project, The Oasis by Emaar, is poised to complement the urban landscape of Dubai and redefine the future of luxurious living amidst nature and water, blending harmonious architecture and exceptional amenities.”

Sobha Reality has posted that its aim for this year is to double its sales to US$ 4.9 billion, driven by strong demand from Russian, Indian, UK, Chinese and Iranian investors; the announcement was made by Ravi Menon, co-chairman of Sobha Realty, after he unveiled the mixed-use US$ 4.6 billion mega project, Sobha Hartland II project. Last year, its chairman indicated that 2022 sales would reach US$ 2.45 billion, attributable to an increase in population and the UAE’s status as the safest country.

The latest property on the market in Dubai is valued at US$ 204 million, being a Versailles-like mansion located in Emirates Hills. According to the property agents, Luxhabitat, it is the most expensive property being sold in the region. Called The Marble Palace, the twelve-year-old palace encompasses 70k sq ft, with an additional 60k sq ft of built-up space that includes a coral reef aquarium, two fourteen mt domes and one hundred and sixty marble columns. The villa’s facade is made of hand-worked marble cladding imported from around the world, and the property also has a pond, a panic room, an indoor pool room and a 24-carat gold Jacuzzi, among other amenities. The property also has a 360 sq mt master bedroom, as well as a large mini-master bedroom, together with three other bedrooms and the potential to add eight more rooms, with a bathroom to bedroom ratio of four to one. Furthermore, there is a 200 sq mt gym on the first floor and a 16-car garage in the basement.

Fifth Solutions notes that Dubai has nearly reached its pre-pandemic size, at an estimated 98% of its pre-Covid level, attributable to a strong bounce back, starting in early 2021.With the way the economy is growing in 2023, it is all but certain that Dubai’s real GDP growth will reach that level by the end of the year. However, with oil prices forecast to slow in the coming months, the economy may decelerate to 3.4% this year – but still ahead of the 2015-2019 average 3.1%. Future growth will be above this level as the wholesale and retail sectors, (which account for 26% of total GDP), will pick up, helped by a growing population, (now at 3.597 million – 4.75% higher than the 3.434 million two years ago) and the sustained influx of tourists, especially those with elevated purchasing power. There is no doubt that the 55% 2022 tourism growth was a catch-up figure last year, but in the first four months of 2023, the growth is at 6.020 million, up 18% on the year – slightly below pre-pandemic level by 4.0%.

It is estimated that more than 743k residential units are completed in Dubai and that probably a further 45k will be added by the end of the year; in 2022, 29.4k apartments and villas were handed over to tenants in Dubai. With the number of launches already known and new projects on the horizon, it is easy to see that the total number of housing units in Dubai could top one million before the end of this decade, driven by pent-up demand, as the economy continues to return to pre-Covid levels and the city’s population growth regaining momentum. At the same time, with the population growing at a very conservative 1.5%, the question is how many units are required. In six years’ time, the population could be 4.82 million and by June 2029, this blog estimates that the minimum number of residential units would be at 996k –  or an extra 42k a year.

Dubai has secured third place among prominent global cities, behind Miami and Singapore but ahead of New York, London, Tokyo, Sydney, Johannesburg, Paris and San Francisco. One of the main reasons behind this success are the ambitious targets set by the Dubai Economic Agenda (D33), which has supported Dubai in its goal to become one of the world’s leading urban economies. The index is based on four categories—population, economic growth, office vacancies and house prices—over the past three years. Dubai has seen its population grow by 5.8%. It also noted that “in most cities, the twin blows of Covid and geopolitical tension have proved more of a problem… Cities in bits of the world that did not go overboard with restrictions, such as Dubai and Miami, benefited—sometimes at the expense of those that did, like San Francisco.” It also added that “Dubai and Singapore offer year-round warm weather (important when people can work remotely) and lenient regulation (helpful for those annoyed with Western red tape)”, and “Dubai has introduced social reforms, decriminalising alcohol and the cohabitation of unmarried couples.”

A new report by Henley & Partners, has forecast that this year the country will attract 4.5k new millionaires, making it the second most popular in the world behind Australia which is expected to welcome 5.2k; third, fourth and fifth places went to Singapore, US and Switzerland with numbers of 3.2k, 2.1k and 1.8k. The country is currently home to 109.9 millionaires, with US$ 1 million-plus wealth, 298 centi-millionaires, with US$ 100 million-plus assets, and twenty billionaires. The firm, which tracks private wealth and global investment migration trends, focuses on persons with a net worth of at least US$ 1 million. Interestingly, it sees migration trends reverting to their pre-pandemic patterns – Australia regaining its top position, as it held for five successive years prior to the pandemic and China seeing the biggest net outflows as it has each year for the past decade. On the flip side, the four countries recording the biggest outflows are China, India, UK and Russia losing 13.5k, 6.5k, 3.2k and 3k HNWIs; for obvious reasons to the casual observer, UK posted a doubling in outflows from a year earlier, but pre-Brexit consistently recorded net positive inflows. The US still has a net inflow of 2.5k but this is a far cry from the 2019 level figure of 10.8k, largely attributable to  the threat of higher taxes.

According to the Department of Economy and Tourism’s Dubai FDI Monitor report, based on data from the Financial Times’ ‘fDi Markets, the emirate has managed to attract a record-breaking 451 projects – a 107.7% increase on the year. This saw Dubai achieve the top global ranking in attracting Foreign Direct Investment projects in the cultural and creative industries in 2022. Dubai’s total FDI capital flows in the cultural and creative industries surged to US$ 2.0 billion in 2022, ranking the city first in the MENA region and twelfth globally (up from fourteenth in 2021). By generating 12.4k jobs, Dubai has been placed first in the MENA region and sixth globally in job creation in FDI.  US, India, UK, France and Switzerland were the leading FD investors in Dubai’s cultural and creative industries in terms of FDI projects, while the US, India, Switzerland, France and UK topped the list in terms of FDI capital inflows.

It is reported that Worldpay is expanding its global presence in the UAE so that it will be able to expand its payment processing capabilities into the region. The leading payments technology company will now be able to extend its top-notch payment services to domestic merchants in the UAE, allowing them to enhance their offerings both locally and internationally. Additionally, this expansion welcomes international merchants with global aspirations and rapidly growing enterprises seeking to establish a presence in the UAE market. There is no doubt that the platform has entered a growing local e-commerce market which is forecast to top an impressive US$ 43 billion by 2026, with credit cards playing a significant role in driving this growth.

Emirates and Kenya Airways have signed an interline partnership that will see the local carrier being able to fly to twenty-eight destinations on the Kenya Airways network, using Nairobi as the gateway. Furthermore, Emirates passengers travelling via Dubai can also book a single ticket itinerary from or to Mombasa. Passengers on the African airline, travelling from Nairobi and Mombasa, will now be able to access the Emirates’ network and seamlessly connect through Dubai to twenty-three various locations in the ME and Asia. The agreement will provide customers with increased travel options as well as seamless baggage check-in to their final destination.

The Dubai Chamber of Digital Economy will launch an initiative in September, offering a set of packages for digital start-ups, in partnership with a number of private sector and government entities. The aim of this exercise appears to ensure that Dubai is the most appealing and most attractive environment for new digital companies setting up, and also expanding, in the region. At a signing last Monday, the likes of Telr, Dubai CommerCity, e& and Safepay joined the launch as partners. Only last year, the UAE announced its Digital Economy Strategy, aimed at doubling the contribution of the tech sector to its GDP over the next decade.

The Roads and Transport Authority and Al Futtaim Automotive have signed a three-year partnership agreement to deploy three hundred and sixty vehicles, including electric and hybrid variants, for use in Dubai’s key conferences and events. The deal will see the Dubai company supplying ten electric buses, two hundred and fifty electric, one hundred hybrid vehicles; it will also provide ten electric charging units, capable of both direct and alternating current. The Volvo buses will be powered by smart technologies and among its many modern features includes a monitoring system to track the driver’s condition and detect fatigue.

Following the May 2022 UAE-India Comprehensive Economic Partnership Agreement, bilateral non-oil trade has boomed posting a healthy 5.8%, to US$ 51 billion, in the first twelve months – a 5.8% increase. CEPA, the country’s first-ever bilateral trade deal and a cornerstone of its new foreign trade agenda, has eliminated or reduced tariffs on more than 80% of product lines, created new platforms for SME collaboration and promoted mutual investment flows, particularly into priority sectors. Over the next seven years, the UAE is hoping to double trade with India.

The Central Bank of the UAE, as part of its commitment to promoting economic and financial stability and growth, has released the United Arab Emirates Monetary, Banking, and Financial Markets Developments Report for Q1 2023. The report provides insights into the monetary and banking activities, as well as the developments in the UAE financial markets, during the quarter. It can be split into five groupings – Monetary Developments, Banking Sector Development, Bank Assets/Loans/Deposits, Capital/Reserves and Foreign Assets. Money Supply M1, Money Supply M2 and Money Supply M3.

All three sub-divisions, Money Supply M1, Money Supply M2 and Money Supply M3.  headed north in the quarter – M1, (which comprises Currency in Circulation outside Banks and Monetary Deposits), up by 3.0%, over the three months, to US$ 206.9 billion, M2 (which includes M1 plus Quasi Monetary Deposits), by 5.0%, to US$ 487.3 billion and M3, (including M2 plus government deposits), by 4.5%, to US$ 598.3 billion. The second sector reported that there were twenty-two locally incorporated banks, with 494 branches; there were forty-seven electronic banking service units, with Cash Offices remaining constant at twenty-one. In Q1, there were increases in all five sectors of banks’ assets – total assets were 2.6% higher at US$ 1,025.8 billion, gross credit 0.9% to US$ 516.6 billion, customer deposits 3.8% to US$ US$ 628.3 billion, resident deposits 4.1% at US$ 570.2 billion, and non-resident deposits 0.4% to US$ 58.1 billion. The fourth sector noted that the aggregate capital and reserves of banks increased by 0.5% to US$ 117.4 billion and that the Total Capital Adequacy Ratio stood at 17.8%, well above the prescribed requirements. The Central Bank’s foreign assets increased by 8.8% to US$ 117.4 billion, whilst the report highlighted that the ADGM dipped 6.7%, whilst the DFM headed in the other direction – 1.6% higher on the quarter.  

As it concludes a series of roadshows in Shanghai, Guangzhou and Chongqing, the DMCC posted that it has seen a 24% hike in the number of Chinese companies, to 770, joining the free zone over the past twelve months; bilateral trade outside of oil last year grew to over US$ 72 billion. DMCC executives met and briefed over six hundred business leaders across various sectors on the benefits of doing business in Dubai through DMCC. As part of the roadshow, DMCC signed a strategic Memorandum of Understanding with the Lin-gang Special Area of China (Shanghai) Pilot Free Trade Zone, that will boost cooperation in areas such as innovation, commerce, logistics and trade. It will also allow both parties to establish and explore dedicated services for companies in Dubai and Shanghai, streamlining the requirements and processes for companies looking to set up in both regions.

In line with the decision of the US Federal Reserve Board to hold interest rates, the Central Bank of the UAE has decided to maintain the Base Rate applicable to the Overnight Deposit Facility unchanged at 5.15%; (this was the first time the Fed opted against a rise in over a year).The central bank also decided to maintain the rate applicable to borrowing short-term liquidity from the CBUAE through all standing credit facilities at 50 bp above the Base Rate. However, it seems likely that the Fed will raise rates in July, that will normally impact UAE rates.

In its latest strategy, Emirates NBD hopes to achieve gender equality and empower all females and has joined a pledge to accelerate the achievement of the UN Sustainable Development Goal 5. Dubai’s largest bank is one of eight leading local and multinational companies in the UAE to sign the SDG 5 Pledge which is aligned to the UAE government’s focus on increasing female equity and representation across public and private sector workplaces. To achieve its aims, it will work closely with the UAE Gender Balance Council, with SDG stating that the target is to “raise awareness on the importance of ensuring women’s full and effective participation and equal opportunities at all levels of decision-making.” Key actions to achieve gender balance include ensuring equal pay/fair compensation practices, promoting gender equitable recruitment/promotion, and being transparent about progress through annual reporting to the to the UAE GBC.

Forbes ME’s top one hundred listed companies for 2023 sees four UAE’s making the top ten – International Holding Company jumping from twelfth place to fifth spot this year, with First Abu Dhabi Bank, Emirates NBD and Taqa coming in eighth, ninth and tenth. Aramco, Saudi Basic (Sabic), Qatar’s QNB Group and Saudi National Bank maintained their places in the leading four entities.

There is no doubt that listed companies in the UAE have had a very successful Q1, with recent Kamco Invest data showing that listed companies in Dubai and Abu Dhabi recorded profit surges of 51.2% and 51.8%; these returns outperformed their GCC peers, where quarterly profits headed south because of a fall in energy and commodity prices. Dubai net profits reached US$ 4.8 billion, mainly driven by earnings growth in the banking, real estate and capital goods sectors, whilst Abu Dhabi listed companies’ profits reached US$ 11.1 billion. In Dubai, the banking sector was the biggest contributor to the impressive returns, with quarterly profit figures 84.2% higher at US$ 2.8 billion, largely helped by Emirate NBD’s 114.7% profit surge to US$ 1.6 billion. The emirate’s real estate sector saw a 31.4% hike in net profits to US$ 1.2 billion, mainly attributable to Emaar contributing 72.7% of the total’s US$ 872.9 billion. The utilities sector posted a 0.5% dip to US$ 248.0 million. Across the GCC, aggregate net profit for listed companies showed a decline of 9.1% to US$ 61.5 billion.

The DFM opened on Monday, 12 June 2023, 154 points (4.4%) higher the previous fortnight, gained 184 points (5.1%) to close the week on 3,786, by 16 June 2023. Emaar Properties, up US$ 0.06 the previous fortnight, climbed US$ 0.22 to close on US$ 1.88 by the end of the week. DEWA, Emirates NBD, DIB and DFM started the previous week on US$ 0.70, US$ 3.86, US$ 1.46, and US$ 0.40 and closed on US$ 0.71, US$ 4.05, US$ 1.50 and US$ 0.40. On 16 June, trading was at 539 million shares, with a value of US$ 207 million, compared to 263 million shares, with a value of US$ 117 million, on 09 June 2023.

By Friday, 16 June 2023, Brent, US$ 2.19 lower (2.8%) the previous fortnight, gained US$ 1.23 (1.7%) to close on US$ 76.30.  Gold, US$ 30 (0.9%) higher the previous fortnight, shed US$ 3 (0.3%) to US$ 1,971 on 16 June 2023.  

Opec has again raised its 2023 oil demand, which is projected to grow by 2.3 million bpd to 101.9 million barrels, as it seems China’s growth momentum has decelerated in recent months following a robust initial rebound. The world’s largest crude importer saw its exports dip 7.5% annually last month, its biggest fall since January, with some estimating that the recent economic slowdown may persist into Q3. The forecast for the thirty-eight member nations of OECD is for a 200k barrel increase, driven mostly by the US and the Asia-Pacific region offset by ‘weak’ European demand, still struggling with an ongoing sluggish economy and continuing supply chain bottlenecks.

So as to address “significant” global supply disruption, cause mainly by the Ukrainian crisis, the US Department of Energy confirmed the addition of 6.1 million barrels of oil to its stockpiles. Three million billion barrels, added to the US Strategic Petroleum Reserve, were purchased for an average price of US$ 73, lower than the average of about $95 per barrel that SPR crude was sold for in 2022. The DoE also announced a new notice of solicitation for a further 3.1 million barrels will be added to the SPR in September. When oil prices touched US$ 130 in March 2022, Washington made the largest sale yet from the SPR of 180 million barrels.  It is estimated that this strategy shaved up to US$ 0.40 off gasoline prices, compared to what they would have been if not for these drawdowns.

Following Toyota announcing the launch of a complete range of EVs, by “next generation” batteries, starting in 2026, its shares climbed 5.0%; the development and manufacture of these vehicles will be carried out by a newly established unit called BEV Factory. The Japanese carmaker also confirmed that it is aiming for an unheard of 1k km driving range and that it would be actively working on developing a method for mass producing all-solid-state batteries for its electric vehicles, by 2027. Toyota has set ambitious goals for its electric EV sales, aiming to achieve 1.5 million all-electric vehicle sales per year by 2026 and increase the annual number to 3.5 million by 2030.

Months after a mission failure, and the May closure of Virgin Orbit, Sir Richard Branson’s space tourism company Virgin Galactic says it will launch its first commercial flight, Galactic 1, sometime between 27 June – 30 June. This first flight will be a scientific research mission, carrying three crew members from the Italian Air Force and the National Research Council of Italy, to conduct microgravity research, whilst its second commercial spaceflight launch will be in early August, and thereafter monthly spaceflights will take place; to date, 800 tickets have been sold at the individual price of US$ 450k.

Google has been formally notified by the European Commission that a preliminary finding has found it has violated EU antitrust regulations, and harmed competitors, by favouring its own online display advertising technology (ad tech) services. There is no doubt that Google is the dominant player in the market, with its ad tech tools – DoubleClick for Publishers (DFP), Google Ads and ‘DV360’ (its ad-buying tools). It seems that Article 102 of the Treaty on the Functioning of the EU, which prohibits the abuse of a dominant market position, is the basis of the alleged misconduct. Earlier in the year, Google’s ad tech business faced scrutiny in the US with the Department of Justice asserting that Google’s anti-competitive practices “forced key competitors to abandon the market for ad tech tools, dissuaded potential competitors from joining the market, and left Google’s few remaining competitors marginalised and unfairly disadvantaged”.

To meet the increased soaring demand, and to replace aged planes, Airbus has raised its twenty-year forecast by 3.4% to 40.9k; it is estimated that of this total, 58% are expected for fleet growth and the balance for replacement. Of the new deliveries, 80% will be narrow-bodies, with the remaining 8.2k being wide-bodies and the bulk of these will be delivered to the ME to airlines such as Emirates and Qatar Airways. Airbus said the world’s fleet would more than double to 46.6k aircraft in 2042, from 22.9k at the beginning of pre-pandemic 2020. The plane maker forecasts that passenger air traffic will grow annually by 3.6% over the next twenty years.

George Soros has handed over the running of his US$ 25 billion financial and charitable empire to his son Alex, the second youngest of his five children. The history graduate already sits on the investment committee for Soros Fund Management and is also in charge of his father’s “super PAC”, a US mechanism to direct funds to political parties. The 92-year-old billionaire philanthropist, who is also one of the largest donors to the US Democratic Party.  said his son had “earned it”. Since the 1990s, the family’s wealth has been directed to support democracy-building in dozens of countries. While father and son broadly share the same political views, he is “more political” than his father and has confirmed that he would campaign against Donald Trump’s attempt to run for a second term as US president.

The recent witch-hunt by the US Securities and Exchange Commission, bringing legal actions against cryptocurrency exchanges, such as Binance, its US affiliate, Binance.US and Coinbase, has resulted in both a mini run on blockchain analytics companies Nansen and Glassnode, and price declines of several crypto assets listed on these exchanges. The SEC opines that some crypto assets listed on these exchanges should be classified as securities rather than digital assets. Last week, over the four trading days to Thursday, outflows by blockchain analytics companies Nansen and Glassnode. Binance, Binance.US, and Coinbase witnessed a net outflow of US$ 3.1 billion through the Ethereum network, along with US$ 838 million for 31.9k bitcoin.

Tesco has noted that there are “encouraging early signs” that price rises are easing, with the retail giant reporting higher sales, whilst, at the same time, taking umbrage from criticism that the supermarket was profiteering, as latest showed food inflation hit 19.1% in the year to April. The rate at which food prices is rising has been pointed out as one reason why the inflation rate for all consumer goods is not falling as quickly as expected, with prices still 8.7% higher than a year ago. Earlier in. the week, the Governor of the BoE noted that inflation was taking “a lot longer than expected” to come down, and that this was due to food price inflation being slower to drop than global commodity prices, despite past reassurances from the Bank’s contacts in the retail industry that prices would fall.

The UK economy should benefit from the announced US$ 19 billion, 51:49 Vodafone/Hutchison merger of their British mobile operations that would drive competition and investment in the country. The deal still has to be cleared by the anti-trust regulator into whether an operator, with twenty-seven million customers, could lead to higher mobile prices. The two partners have already agreed to invest over US$ 14 billion to create “one of Europe’s most advanced standalone 5G networks” that will enhance innovation, increase employment opportunities and drive economic growth.  Vodafone, UK’s third-biggest mobile operator, will have an option to buy-out the Hong Kong-based conglomerate three years after completion, if it agrees. Already, Unite, one of Britain’s biggest trade unions, said it would lead to higher mobile phone bills and job cuts, and questioned whether a company, with close ties to China, should have such a prominent place in UK telecoms infrastructure.

The US Federal Trade Commission has requested a US judge to block Microsoft from completing its US$ 69 billion purchase of Call of Duty publisher Activision Blizzard, claiming that the deal could “substantially lessen competition” in the sector; the trial, involving the largest sale in the history of the video games industry, is slated for August. The move comes after the UK blocked the deal over concerns it would hurt competition, offer reduced innovation and less choice for gamers, whilst the EU approved it. A condition for Microsoft’s proposed takeover of Activision is that it requires approval from all three regulatory bodies in the UK, the EU and the US.

Blaming high interest rates and weak demand, Instant Brands has filed for bankruptcy protection. The maker of Pyrex glassware and Instant Pot multicookers, with 2.4k employees and liabilities in excess of US$ 1.0 billion, intends to keep operations going as it strives to revive the stalling business; current financing is from existing lenders. Although business boomed during the pandemic, it has since fallen off, as consumers started to spend less on goods for their homes. The company commented that “tightening of credit terms and higher interest rates impacted our liquidity levels and made our capital structure unsustainable”. Q1 saw revenue 22% lower on the year and in January, the Illinois-based company had to pay a fine and change its marketing practices to settle US Federal Trade Commission claims that it falsely advertised Pyrex glass measuring cups as “Made in USA” while importing some of them from China. In April, Tupperware warned that it could go bust unless it could quickly raise new financing.

Having been the top selling beer in the US for the previous five months, Bud Light lost its top spot to Modelo Especial after some drinkers in the US stopped buying Bud Light after transgender influencer Dylan Mulvaney showed off a personalised can of the beer; it is reported that sales are now 25% lower after several conservative pundits, politicians and celebrities spoke out about the promotion, with the likes of Musician Kid Rock, NFL player Trae Waynes and model Bri Teresi  all sharing videos of themselves shooting Bud Light cans.

A World Bank report expects 2023 remittance flows to poor and middle-income countries to rise by 1.4% to US$ 656 billion, as the sluggish global economy continues to weaken, with source countries seeing economic activity soften, resulting in limited employment and wage gains. Last year, remittances were 8.0% higher, compared to 2021, at US$ 647 billion. The five leading recipient countries were India, Mexico, China, the Philippines and Pakistan with totals of US$ 111 billion, US$ 61 billion, US$ 51 billion, US$ 38 billion and US$ 30 billion. Economies, where remittance inflows account for a large share of GDP, include Tajikistan (51% of GDP), Tonga (44%), Lebanon (36%), Samoa (34%) and the Kyrgyz Republic (31%).

Finance Minister Ishaq Dar announced that Pakistan’s government will target a 6.54% budget deficit this coming fiscal year starting on 01 July; this is marginally down on the current year’s revised estimate of 7.0%.  (A source had said earlier in the day the budget was seen targeting a deficit of 7.7% of GDP for next year). One of the aims of this year’s budget is to satisfy the IMF to secure the release of stuck bailout money of at least US$ 2.5 billion of a US$ 6.5 billion programme arranged in 2019; this is subject to certain conditions, ahead of a probable November general election, although the minister stressed that the government had prepared “a responsible budget, not an election budget”. Inflation for the next fiscal year is expected to come in at 21% – well down on last month’s 38.0%.

This week, the country paid for its first government-to-government import of discounted Russian crude oil in Chinese currency – a welcome fillip to Pakistan’s foreign exchange reserves which are scarcely enough to cover a month of controlled imports. This import is the first to be offloaded, following a deal arranged earlier in the year; commercial details of the deal, including pricing and discounting are unknown. It is obvious that the Russians are using both the Pakistani and Chinese markets to make up the shortfall caused by sanctions closing western markets. Earlier in the month, it also outlined plans to open barter trade with Russia, Afghanistan and Iran – another sign of Pakistan seeking avenues to buy and sell commodities without trading in dollars. Last year, the country imported 154k bpd of oil, with energy imports making up the majority of the Pakistan’s external payments; it is reported that “we’re looking to target one-third of our total oil imports at the Russian crude.”

Fitch Ratings has downgraded Tunisia’s rating from CCC+ to CCC-, deeper into junk territory, and seven levels below investment grade, with the main reason being concerns that it is struggling to meet IMF conditions to clinch a financing deal. The ratings agency ranks the country’s financing risk as ‘high’, based on several factors including high debt, deteriorating finances, surging energy/commodity prices, and “uncertainty around Tunisia’s ability to mobilise sufficient funding to meet its large financing requirement”. It also forecast “that government financing needs will be high, at around 16% of GDP in 2023, (equivalent to US$ 7.7 billion) and 14% of GDP in 2024 (U$$ 7.4 billion), well above the 2015-2019 average of 9%”. Fitch reckons that there are also “increased signs that a default is probable, because of the inability to obtain funding from the IMF and unlock associated official creditor financing”. Last October, Tunisia reached a staff-level agreement with the IMF for a new US$ 1.9 billion four-year Extended Fund Facility, conditional on certain government actions, including a reform of fuel subsidies, freezing of wages and cutting energy and food subsidies. Since these were not met, funding has yet to be approved.

Although Egyptian inflation cooled in April, to 30.7%, its annual headline annual inflation accelerated faster than anticipated in May, to 32.7%, driven by higher food and beverage prices, which soared 60.0% on the year. On a monthly basis, inflation rose to 2.7% from 1.7% in April, with problems exacerbating since the onset of the war in the Ukraine last February. Because of that crisis, the country has seen tourist numbers falling and food prices surging more so because it is a net food importer. In March, the country’s annual urban inflation peaked to its highest level in six years, with the latest annual inflation narrowly below the July 2017 all-time high of 32.95%, less than a year after Egypt devalued its currency by 50%, as part of a US$ 12 billion IMF support package. Since March 2022, the US$ dollar rate has gone from US$ 0.64 to US$ 0.32, as the Sisi administration tries to meet IMF conditions so as to qualify for a package. Fitch Ratings has revised Egypt’s outlook to negative and gave the country its first downgrade since 2013, (with its long-term foreign currency issuer default rating being revised to ‘B’ from ‘B+’, which is five levels below investment grade), citing the lack of economic reforms to its fiscal system. It expects the country’s economy to continue to be beset by inflation, which is forecast to be at 24% this year and decline to 18% in 2024, foreign currency shortages, fiscal policy tightening and heightened economic uncertainty.

As the past two quarters have posted contraction, New Zealand is now in a recession as in Q4 and Q1, the country saw the economy slowing by 0.7% and 0.1%. Other indicators point to the negative returns could continue until at least the end of Q3. It is highly likely that growth thereafter may not be higher than 0.2% until Q3 2024. The IMF posted that “New Zealand’s economy is in the midst of a necessary, policy-induced slowdown following the strong post-pandemic recovery,” and “New Zealand is likely to continue slowing in the near term as monetary tightening takes hold.” Since September 2021, the country’s cash rate has risen from 0.25% to 5.5%, with its population facing increasing inflation since then. The IMF has warned inflation was declining “but will remain high” for some time. 

Only weeks ago, a June rate hike was a shoo-in, but with US rate of inflation slowing last month, the Fed took a breather, after ten consecutive increases, and this week kept rates at the same level; the CPI nudged 0.1% higher in May, compared to a 0.4% rise a month earlier, as May prices rose 4.0%, down on the month from 4.9%; core inflation, which excludes food and energy, were 0.4% higher. There are signs that inflation is slowly being tamed, after topping 9.0% last August, and that the belated Fed rate hikes have had a positive impact.

The UK Chancellor has noted that it had “no alternative” but to hike interest rates in a bid to tackle rising prices, with Jeremy Hunt reiterating that inflation was the “number one challenge we face”, and that the government would be “unstinting in our support” for the Bank of England “to do what it takes” to slow inflation. This comes despite the economy growing by 0.2% in April, and high rates/mortgage costs seeing housebuilders and estate agents having a “poor month”. The BoE was late coming to party and only started to take action in December 2021, (with the CPI at 7.0%), when rates started moving from almost zero to its current level of 4.5%.; latest figure sees inflation still at a very high 8.7%, well ahead of the BoE’s long-standing 2.0% target. The Chancellor added that “in the end there is no alternative to bringing down inflation, if we want to see consumers spending, if we want to see businesses investing, if we want to see long-term growth and prosperity.”

It does seem that UK lenders are getting cold feet when it comes to mortgages, as concerns grow that rates will continue heading northwards, as turbulence returns to the economic landscape. London & Country said lenders had been withdrawing deals and raising rates at a “relentless pace” and this week would “bring more of the same”. Over the past thirty days, mortgage rates have gone up about 0.5%, now nearing an average fixed deal of 6% and this week, Santander became the latest big lender to temporarily withdraw new deals due to “market conditions”, in line with HSBC a week earlier. It is estimated that about 1.5 million households are set to come off fixed mortgage deals in 2023 and face a sharp rise in their monthly repayments. Moneyfacts have posted that the average two-year fixed-rate mortgage deal is 5.86%, while a five-year deal has hit 5.51%, compared to 3.03% and 3.17% a year earlier in May 2022. The end result has a double whammy on the UK economy – a reduction in consumer spending, because more money is being paid on mortgage repayments, with the negative impact on economic growth prospects, and a further reduction in the availability of rental properties.

As regular pay, excluding bonuses, increased by 7.2% in the quarter to April, (at their fastest rate in twenty years, excluding the pandemic), it was still way short of the inflation rate, but an indicator that the BoE will soon be lifting rates again. The ONS noted that pay, when adjusted for inflation, fell by 1.3% in the three months to April. Since 2021, it has put up interest rates twelve times to try to slow down price rises, as the BoE has warned big pay rises are contributing to the UK’s still-high rates of inflation. The current economic climate has spooked lenders who have been lifting rates and pulling hundreds of deals, causing uncertainty for borrowers. On Tuesday, the government’s borrowing costs – which directly impact mortgage rates – rose to their highest rate since last year’s disastrous mini-budget.

This week, Jack Dorsey indicated that the Indian government had threatened to close down Twitter unless it complied with orders to restrict accounts, with authorities dismissing the accusation as an “outright lie”.  The platform’s co-founder posted that India threatened the company with a shutdown and raids on employees if it did not comply with government requests to take down posts and restrict accounts that were critical of the government over protests by farmers in 2020 and 2021. Narendra Modi’s government has always engaged in online censorship, with Deputy Minister for Information Technology, Rajeev Chandrashekhar, stating that “no one went to jail nor was Twitter ‘shut down’. Dorsey’s Twitter regime had a problem accepting the sovereignty of Indian law.” The Indian government says it only aims to restrict misinformation and posts that curb peace and security. One of Us Cannot Be Wrong!