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tv   Bloomberg Markets Middle East  Bloomberg  April 23, 2017 12:00am-1:01am EDT

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>> saudi arabia -- broadens as the king names new appointments. below $50 aalls barrel since its worst week. gets forrance presidential election. tracy: and an outlook for
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business and middle east. is 7:00 a.m. here in triad. i am in dubai where it has turned 8:00. look with a u.s. markets. the s&p, relatively unchanged despite corporate warnings. -- earnings. the s&p had a good week, the best since february. and the nasdaq down 0.1%. we have a lot of investors treading water, and ahead of geopolitical risks taking place in the form of the french elections. wti crude below $50 a
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barrel. a painful week for oil investors. gold up. the u.s. dollar index, treading water. take a look at the euro stock volatility index. it's spiked 4.2%. a little bit of nervousness in the markets. looking back in terms of trends and patterns, a tough week for oil prices. it is going to mean a tough week for gulf stocks. impactsreally see some on what has been happening. individual numbers and how they performed. stocks, 2.6%. the property developer making a little bit of gain.
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weakness in stocks like kingdom holdings. all down, over 4%. the volumes are below the average. the saudi index has been the worst performer. the worst week so far this month. a pervasive low volume problem in the middle east. let's check in on the first word headlines. voters in france can to the polls to cast their ballots in the first round of the country's presidential election. citizens living abroad have already been voting. results will be released sunday evening. the top two candidates will go into a runoff vote may 7. ecb officials have signaled
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their willingness to support the banks in the event of market turmoil. the bank could use refinancing operations as well as emergency liquidity tools. the eu area has years of experience. mnuchin has sent a reassuring message that what works for the u.s. can work for the rest of the world. he was speaking during a discussion durin with christine lagarde. >> we have been in a post financial crisis where we have ub optimal growth. we believe we can get to 3% or more. the difference for the u.s. economy is quite significant. economicand that
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growth for the u.s. is good for world economies. egyptian the president will begin his visit to the u.s.. the visit comes after talks el-sisi -- talks are expected to focus on security. by 2600ews powered journalists. this is bloomberg. you so much. let's get back to our top story. king issued a royal decree restoring bonuses and allowances or state employees cut as part of austerity measures. he announced changes to
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government offices. tell us what the reaction has been on the ground. fewef: it has just been a hours. a wide range of changes in involving some of the ministers, government policy and budget policy. that will come as a surprise. and now, rolling back. it gives them a bit of scope to loosen things up a bit. 80 bonus toing serving on the front lines. great to have you back on the program. does this strike you as a surprise? the government is saying, we are halfway there. it is a bold move but also a
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smart move. economic policy takes into account politics. consumers are going to be happy. about 3.5lking million saudis who will benefit from these additional benefits. higherll translate into gdp growth. zero point 45% will benefit because of these payments. the question is what it does to macroeconomic growth figures. that with ased price for brent oil. revising the forecast down. i look at what movies is saying.
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where does the economy go and how quickly could this policy change have an impact? the economy, it was an adjustment year. they stepped a little back. this is in relative terms. they saved about 80 billion riels. the minister of finance announced he is going to save more this year. this money could be put to that fuele, meaning it could liquidity and demand in the economy that has been more difficult this year and last year in terms of consumption and demand. tracy: it is tracy alloway. i wanted to ask you what you
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think has happened to the goal of reducing the budget shortfall? it was not immediately clear whether the decision to reinstate bonuses would conflict with the aim to reduce the budget shortfall. >> the government will continue to have its goals on the balanced budget i 2020. next year, we will have the vat coming into force. adjustedis has to be with the demand factor. the economy needs to get a boost. it is positive for confidence. lacking wasnomy was confidence. people were wondering, i'm being charged more and more. in my getting back?
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any reform policy has to take time. it is good to push back and readjust text's. tracy: confidence plays such a huge role in the economy. take a look at this chart. it shows essentially, saudi arabia bank asset claims. you can see credit has been struggling. potentially because people were uncertain of what would happen to the economy in the face of low oil prices. affectyou expect that to bank lending in particular? g of confidence? liquidity has been an issue, more like a year ago then
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today. clearly, as there is demand pickup, we are going to see this over the next asked months. that is going to impact positively banks and corporate's. it takes time for them to go back and kickstart lending operations. we are going to be looking forward for the second half of the year, as more positive. i think demand on the consumption side, it is about 40% of the economy that comes from consumption. it will start again, this confidence building measure lacking for about a year. what about the credit rating? fiscal consolidation,
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leads to steeper than expected debts. it would have a negative impact. warn creditgh to agencies to look at this again? if saudi arabia this year has a fiscal deficit that is willsively above 17%, that create a lot of alarms throughout the world. right now, i'm not so worried. they have enough debt condition -- cushion. raiseill 15-20,000,000,000 dollars in funding. as they reduce the fiscal reserves areign not going to be declining as fast. they have about 15% of debt-gdp
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to raise in funding. that we can depend on in the following years. yousef brought up the rating agencies which they great point. excited about the prospect of saudi arabia diversifying its economy. some are looking at this as a smart move. this ise others who say a bit of a reversal. they are getting rolled back. should we be interpreting this in terms of saudi arabia's own government reform? interpret we should them as the government being in tune with the people. we are at an early stage.
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fiscal adjustment is taking into account the savings the government is making. non-oil revenues that will help the government in additional funding to close the gap. in terms of international debt that can be raised. the difference is the debt saudi arabia is going to raise is going to come from the international community. government is within line. if they do have a budget deficit , which i don't think they well, it is going to be around 11-12%. this is going to be good news. above 17, it is bad news. tracy: you stay with us here on bloomberg markets. later, we will get more on saudi's plans to overhaul its economy.
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further, we falls will see whether investors are losing faith. this is bloomberg. ♪
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you are watching "bloomberg markets." oil witnessed one of its worst weeks, the dropping below $50 a barrel as investors lost overcomeextension will u.s. production. technical committee met and concluded an extension would be necessary. goldman sachs group says there is no fundamental evidence to justify the selloff in prices. the i will tell you what the problem is. we are once again caught between
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the tension of opec supply cuts versus what is happening in the u.s.. outid have data come friday. i will give you the good news first. jump. this small week,akes added this bringing the total to 688. news is they continued to decline. in the face of all that pressure that opec is supposedly putting on the market. yousef: the folks decided this over there. they revised their forecast for crude oil. $60 ae now looking at barrel in 2018. ultimately, the inventories are part of the story. spoke to ministers and they
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said he you are focusing too much on u.s. inventories. they are confident it is going to work out. on theee where we sit story. joining us from the gulf research center. opec, you are fighting for survival. >> they are fighting to keep prices at a level where a lot of these countries can maintain their fiscal deficits. oil continues to go down, that will not be good. i am hopeful there will be an next six to extend the months and that will boost oil prices. yousef: they have turned this into a defensive going lower rather than back up. do they need to ramp this up, be
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more aggressive? great point. they have to be more aggressive. saudi arabia has taken the whole thing on its shoulders. reflected on to be negative gdp growth. they need to contribute. otherwise, we could see oil prices going further down. if we do get that extension of the opec agreement, which most people seem to agree weare going to get, are going to see the same market reaction? people were really surprised. caught offguard. people aren't really expecting it. >> it is a very good analogy. is expecting.
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we could see a bit of a correction. see a we could disciplinary adjustment so oil prices could recover. atwe said, when you see oil we 55, saudi arabia says will need to fiscally adjust. we need to make efforts to fiscally adjust the economy. tracy: a lot of people talking about the need for patience. wait and see. when it comes to that rebalancing, what are you on the lookout for? when will you look at the market and say, a ha.
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it is difficult to say. for sure, the inventory data has to become more dynamic. also, we need to see a clear-cut adjustment by the non-opec members. we are seeing they are all complying. we need to see a more forceful global economy in terms of the demand. we keep forgetting the demand side. it may turn out to be -- plenty to get through. we will talk about the visit by the president in saudi arabia. what that means for trade. we will dig deeper into the sa udi economic recovery story. this is bloomberg. ♪
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yousef: let's pick up on the saudi arabia story. difficult times over the last year. there has been a tense relationship. although it does not need to be, looking at the volume of trade. saudi arabia after china, the partner forst trade the egyptian nation. egypt relationship, it quite a fewough hurdles. now perhaps a chance for a reset? so much at stake. side, bothecurity countries need to work close. events in sinai are not good. saudi arabia needs the jew
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-positioning.- geo egypt has depended on support. it is important may find a middle ground. i think this is going to be established because of this visit. recently, the court case was resolved in egypt. the island in question was given to saudi arabia or at least recognized as belonging to saudi arabia. egyptians will see this as a positive step. the politics will show the countries are back on track. tracy: the other big news we saw, the announcement of a new ambassador. part of the overhaul announced last night.
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how do you see the relationship with the u.s. of all vain? be goodgs going to compared to the obama administration? new think we are seeing a between the country's being established. the relationship with the u.s. out to beo be turned exceptionally positive. we will see a fabulous and dynamic relationship he established. we have seen the announcements of saudi officials. now we are seeing this change, putting in place a dynamic new signal to the importance of the relationship. thank you for stopping by. let's get you what is to come on the program. ceoill be speaking to the
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business is see how holding up in this part of the world. this is bloomberg. ♪ with xfinity x1...
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featuring rdma host jordan fisher. and the ardy goes to... watch disney channel presents the 2017 rdmas. april 30th on disney channel. >> checking in on the first word headlines, voters go to the polls to cast their ballots in the first round of the elections. they have already been voting. released sunday evening. the top two candidates will go to a runoff vote. paul ryan has told republican colleagues a spending bill will be ready in time to avoid a government shutdown. any details provide of the bill. there was no discussion of how any deal to keep the government functioned -- funded would
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resolve unsettled issues. general electric has reported a sharp drop in cash flow. raising pressure on the ceo. to -$1.6 billion. $1 billion worse than expected. global news, 24 hours a day, powered by 2600 journalists and analysts. this is bloomberg. you are watching bloomberg markets: middle east. the heart of saudi arabia paschi capital, riyadh. turned to the
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u.s.. the chad fairman says a patch of wheat data does not change his view of two rate hikes. he spoke about uncertainty in the economy. take a listen. >> we need to a knowledge there usual. uncertainty than that is because many policies are actually undecided. when they are undecided, it is uncertainty. growth fort, 2.3% the u.s. this year, assumes tax cuts have a positive effect, and the fed normalization is reasonably gradual. tracy: the federal reserve is wayne the potential for u.s. economic growth and whether it could be derailed when it comes to the trump administration.
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that is something david lipton picked up on. >> everyone is optimistic. everyone sees growth momentum is picking up. the question is whether the uncertainty -- tracy: we know u.s. monetary policy piece of key importance to those here. valueurrencies have the paid to the dollar. whether it gets derailed by a trump policy announcement is of interest. what are you looking at? absolutely. we have seen a remarkable cut recovery.
12:34 am into that first, the big announcement and terms of changes, for government policy. context,s to get more the head of research. great to have you back. we put together a chart for viewers to get additional perspective. we have highlighted this in terms of colors, improvements. deterioration's. what is going on? were rolling up our sleeves. and sorting out fiscal issues. pattings, we are ourselves on the back. >> it was always the question of income and oil price. year, they were cutting and
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enhancing. 2017, they saved about 17 billion riyadh. announcements,e it has declined by 50%. this has helped the government. even the government could have an opportunity to change oil prices. i want to clarify something. , basedct the government on $50.
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oil.ue from about $50 could we found it to be very reasonable. despite the decline that happened. revenues better than expected. a reaction to the reality on the ground? they are trying to adjust it to make sure they are not drumming the economy down too much. >> it was the elastic consumption. related for example to the subsidies. but, we can't ignore what we saw in the last six months. unemployment, rising to 12.3%. by growing
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was very side essential. reforms were supposed to be done. asset reserve is equal to 80% of the gdp. covering more than 20 times that. if we look to the most important basis of the saudi economy. rating, we did not take improven six months to the allowance. we expect some reforms to happen in the coming six months. we did not expect it to happen that soon. >> it is tracy. you didn't expect the reforms to come in so soon. what he think the impetus for the move has been.
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that seems to be the big question. what is the timing? why so quickly? why the reversal? flex the things that happened, as i mentioned. they waited until q1. then, consider 70-80% of salaries. it wasn't that big. consumption was affected. the majority of the society has started to say kumal we are looking for opportunities for growth in the future. gdp growth was declining.
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the economy did not create more than 60,000 jobs. other reasons, ciber was increasing. it was an opportunity to create so many deposits. there were so many savings. subsidy in the economy, there are so many jobs the government tried to create. always provide with the consumption. there were so many announcements the pif, that was a signal something was happening, going to happen.
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i went to press you on the consumer spending point. should we get more question? do have the poll in the form of the vat which yousef brought up. lore oil prices. factor in the push the sense we have the bonuses for state officials reasons dated. youh of these forces do think is going to win out in the end? we don't look to the taxation as affecting the constitution? the benefits is to correct the factors. excess to the
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accounting. this is the benefits. the global average is 12%. saudi arabia expects it to be 5%. say, produce needed imprecation. that was the idea. yousef: let's talk about hospitality and how it is holding up. i spoke with the ceo of the largest hotel operator. he is still positive and upbeat about the road ahead. take a listen. in the region, it is difficult for the last 24 months. hotel, we have never left a country when it has been
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difficult. for us, we are sending more and more contracts. dubai and the middle east will come back. it is a matter of time and creating more demand. in terms of geographic priorities, what are your top three? >> dubai at the hub. coming to dubai for tourism and so forth. saudi arabia is a big endeavor. newting a lot of destinations. my cat is a big destination. we are getting bigger and bigger and qatar. ubai is the biggest priority because of its size. saudi arabia comes second read egypt, we are not going to let go.
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been anit has incredible year for uncertainty. depends on the free flow of travelers and trade. we happen to be 95 countries. some are going through tough times. brazil is a big country for us. indonesia, the middle east. china has been doing well. france is going to come back. in terms of pure diverse of vacation, out of the country, 10 will be suffering. it will not be the same 10 countries every year. accor today has never been stronger. in terms of talent. i look at the world as being
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multiple unforeseen events. each we can face because of the size and the balance sheet. has been axit positive? outsider, i would not be saying the same thing. short. not be there is a lot of unknown. it is not really to predict. reliance andtrong resiliency of the u.k. population, spending less outside but more in the u.k.. yousef: are you confident you will achieve your growth target? >> half of the events, i did not did it. it will be the same the next
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three years. happened to bes outside of europe. half of them have to be in asia-pacific. 15% in south america. hotels.have already signed with outside owners. accor: the ceo of speaking exclusively to bloomberg television. coming up, we will look more at the saudi arabia story. specifically, some equity ideas. weakness still prevails. what about the consumer services under pressure? this is the rebound story going forward. one of the reasons we are here. this is bloomberg. ♪
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you are watching bloomberg markets: middle east. yousef: let's take up the conversation around the performance of the saudi -- the worst performance last year. tracy: that is right. we are going to have a lot to talk about later today. as you mentioned earlier, it did not have a fantastic week last week. ending down, roughly following the path of oil prices. today is the first day of trading. moving from same day to a settlement. that is meant to align the index with other market and potentially pave the way for
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inclusion. we will see whether investors are excited about that move. in terms of broader thoughts what is happening, there is a lot of liquidity here. investors, the untapped frontier. if you look at the group ranked returns function in terms of how the individual sectors performed. year, defensive sectors, up marginally. now with this fiscal a judgment. >> if you look to deposit, the -- we are going to
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see more of what the government is spending. mightf the provisions reverse that. we expect governments, the private sector debt has been declined. 30-40%. this is going to help the banking sector. that are then estimated. the issue wasn't here. it was whether there was a growth in borrowing. people become more optimistic. this is going to have investment and there is going to be growth. sectorsis one of the affected positively.
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even the petrochemical sector, -- about $50.ices this is going to help more the petrochemical sector to sustain its growth. other sectors, i think there is -- ipressure of higher wish i could say it was too early to say this sector is going to improve. tracy: you mentioned the banks have been coming in better than expected. what about provisions? is there a point where we are going to reach where they began to come back down? >> i think it is going to start to reach the level of 2016.
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q, it was going to decline. it is tooe sector, low. year,vernment paid last 105 billion react. -- riyahd. even the future project will not match so many provisions. for -- are waiting yousef: the government is waiting for oil prices to rebound. does not going to help your budget. clients inu telling terms of sectors to expose themselves to? >> the government ace, base, is in
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line with predictions. ote volatility, we can n say there is a clear weakness. there is some week this which affects the reserve. if you look to the reserve of oil, it was less than estimated. that was a good consumption but not seasonal. if we look even to the unconventional oil supply, it cannot sustain this level of prices except one region. prices willns oil be more than 32,000. not positive on that front. always a pleasure having you on the+++
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you are watching "bloomberg markets: middle east." tracy: markets are closed in the uae. is rest of the region certainly trading. what are you going to be watching? it is open and there is a lot at stake. the government moving to ease some of those policies. they are saying, revenues have improved. togives us the ability loosen up fiscal policy. we are at the beginning of fiscal consolidation. other stocks we are going to be mba reported its first met profits. communications saying they heard of 38% of
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accumulated deficit. unbelievable. finally, 85 points, cement stocks have been under pressure. tracy: so much to keep an eye on. something us we are going to have to watch. coming up, it is the french elections. on bloomberg television and radio, we do have special coverage of the first round of the vote. lacqua and are bloomberg reporters. we will also have the latest market reaction. that is it. ♪ i will be back in dubai
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early monday. this is bloomberg. ♪
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