01 September 2015

Gulf Industry magazine helps you catch up with the numbers behind economic and industrial developments in the region.


Mideast CFO optimism hit by low oil prices

THE optimism and risk appetite of chief financial officers (CFOs) in the Middle East has been impacted by the continuation of low energy prices, according to Deloitte’s latest report.

Deloitte, a leading provider of audit, tax, consulting, and financial advisory services, has released its new report the “Global CFO Signals: CFO Sentiment Q2 2015 – Staying focused; remaining vigilant”.

The report says risk appetite in the Middle East has been curbed with only 33 per cent of CFOs believing it is a good time to take greater risk onto the balance sheet.

With oil at $53 a barrel at the time of the survey, CFO optimism fell to one of its lowest levels in recent years, with only a net 26 per cent across the Middle East reporting positive prospects for their company.
That is down from 47 per cent in the previous survey, which was conducted just before the fall in oil price

 According to the report, for now the favoured strategies are cost reduction and improving internal economics. However, CFOs are optimistic about at least one thing: they expect oil prices to be higher in a year.

James Babb, partner and CFO Programme leader at Deloitte Middle East, said: “In response to challenging market conditions and decreased risk appetite, Middle East CFOs appear to have concentrated their efforts toward performing as financial stewards and operators of their organisations rather than as strategists or catalysts.”

IMF in favour of car tax in UAE

THE International Monetary Fund (IMF) has suggested introduction of several new measures including a special excise duty on cars in the UAE to increase government revenue, according to a report.

It has also recommended implementation of a value-added tax (VAT) system and corporate income tax on all companies to diversify the government›s revenues and strengthen its fiscal position, said a Gulf News report.

IMF said the UAE could generate extra revenues worth 4.1 per cent of the non-hydrocarbon domestic product (GDP) by introducing a 15 per cent ad valorem tax on passenger vehicles and broadening the coverage of its corporate income tax scheme, aside from collecting a 5 per cent VAT, the report quoted.

According to the IMF, the current tax structure does not raise enough money for the economy, thus additional revenue-generating reforms should be implemented. Collecting VAT alone will help the country raise extra income worth 2.7 per cent of non-hydrocarbon GDP, according to the IMF.

To avoid collecting general income tax from individual residents, the IMF said that widening the scope of the corporate income tax to include all foreign and domestic businesses operating in the country, except for those based in free zones, would be a great idea. The fee, however, should be reduced to 10 per cent from the current 20 per cent, it said.


Fitch revises Saudi IRD ratings to ‘negative’

FITCH Ratings has revised the outlooks on Saudi Arabia›s long-term foreign and local currency issuer default ratings (IDR) to negative from stable citing lower oil prices and higher state spending associated with the accession of a new king in January.

The agency affirmed the IDRs at ‘AA’.

The issue ratings on Saudi Arabia›s senior unsecured foreign and local currency bonds have also been affirmed at ‹AA›. The country ceiling has been affirmed at ‹AA+› and the short-term foreign currency IDR at ‘F1+’.

The revision of the outlook on Saudi Arabia›s IDRs to negative reflects the following key rating drivers and their relative weights:

The lower oil prices and higher spending will cause a significant deterioration in the fiscal position, the agency said.

They can widen the general government deficit to 14.4 per cent of GDP in 2015. The policy response has been limited and primarily consists of a reduction in capital spending that will take time to gain traction, it said.

Deficits in the mid-single digits are forecast for 2016 and 2017, assuming reduced capital spending, the absence of new one-off outlays and a gradual recovery in oil prices. Deficits would likely stay in double digits if there was no consolidation.

“We expect deficit financing to erode Saudi Arabia›s substantial buffers, a key support for its rating. Drawing down government deposits at the central bank has accounted for virtually all deficit financing so far in 2015,’ it said.


Lower food prices slow Bahrain inflation

BAHRAIN’s inflation slowed in July to 1.1 per cent as food prices fell, data from the Central Informatics Organisation shows.

Housing and utility costs, which account for 24 per cent of consumer expenses, rose 2.3 per cent from a year earlier but were flat from the previous month.

Prices of food and non-alcoholic beverages, which account for 16 per cent of the basket, fell 0.7 per cent year-on-year and dropped 2.3 per cent month-on-month.

The Consumer Price Index (CPI) decreased by 0.2 per cent in July, compared with June, as shown by the decrease in the CPI from 123.8 points to 123.5 points.

The CPI increased by 1.1 per cent in July 2015, compared with the same period of 2014. The inflation rate in consumer prices January until July was 2 per cent, compared with the same period last year, as shown by the increase in the CPI to 123.3 points during January until July, up from 120.9 points during the same period last year.


Abraaj closes North Africa fund at $375m

DUBAI-based Abraaj Group, a leading investor operating in global growth markets, announced the final close of its second dedicated North Africa private equity Fund at $375 million.

The new fund brings the total amount closed by Abraaj for the African continent in 2015 to $1.37 billion, having raised $990 million in April for its third Sub-Saharan Africa Fund.

Abraaj North Africa Fund II (ANAF II) targets well-managed, mid-market businesses in the core geographies of Algeria, Egypt, Morocco and Tunisia that have demonstrated robust growth and the ability to become regional leaders in their field.

The fund focuses on sectors that are likely to benefit from an expanding middle class, such as healthcare, education, consumer goods and services, business services, materials and logistics. The fund follows the investment strategy of its predecessor, the Abraaj North Africa Fund I, and will target both majority and significant minority stakes in businesses that allow the Group to influence the strategic direction and growth agenda of its investee companies.

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