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World Bank Upgrades Saudi Arabia’s Growth Forecast in 21/22

File photo of The World Bank logo (Reuters)
File photo of The World Bank logo (Reuters)
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World Bank Upgrades Saudi Arabia’s Growth Forecast in 21/22

File photo of The World Bank logo (Reuters)
File photo of The World Bank logo (Reuters)

Saudi Arabia is forecast to grow 2.4 percent this year and 3.3 percent in 2022, according to a World Bank report.

Previous estimates suggested that the Saudi economy was set to grow 2 percent in 2021 and 2.2 percent in 2022.

The report explained that its forecast changed following positive developments that took place during the pandemic, in addition to higher oil prices and tapering oil production cuts, and the start of a new government investment program.

The World Bank believes that in Saudi Arabia, “additional oil production cuts deepened the contraction in the oil sector but was offset by improving growth momentum in the non-oil sector.”

The World Bank stated that in oil exporters, higher oil prices will support growth and government revenue recoveries.

“Oil prices are expected to average $62 per barrel in 2021 and 2022.”

Meanwhile, the Regional Economic Outlook report issued by the International Monetary Fund (IMF), estimates the growth of non-oil GDP of the Gulf Cooperation Council (GCC) countries to hit 3.5 percent in 2021, and then 3.4 percent in 2022.

Regarding Saudi Arabia, it expects the Kingdom's economy to grow 2.9 percent in 2021, while it is expected to reach 4 percent in 2022.

For its part, the Institute of International Finance (IIF) announced in its latest report that the Kingdom’s GDP will grow 2.4 percent this year, while it will jump to 3.1 percent in 2022.

The Saudi Central Bank (Sama) reported in its recent data an increase in the value of point of sales (POS), which expresses the volume of direct individual consumption in the country. It increased 3 percent last week to reach SR9.4 billion, compared to SR9.17 billion during the previous week.

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Firm Dollar Keeps Pound, Euro and Yen Under Pressure

US Dollar and Euro banknotes are seen in this illustration taken July 17, 2022. REUTERS/Dado Ruvic/Illustration/ File Photo
US Dollar and Euro banknotes are seen in this illustration taken July 17, 2022. REUTERS/Dado Ruvic/Illustration/ File Photo
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Firm Dollar Keeps Pound, Euro and Yen Under Pressure

US Dollar and Euro banknotes are seen in this illustration taken July 17, 2022. REUTERS/Dado Ruvic/Illustration/ File Photo
US Dollar and Euro banknotes are seen in this illustration taken July 17, 2022. REUTERS/Dado Ruvic/Illustration/ File Photo

The US dollar charged ahead on Thursday, underpinned by rising Treasury yields, putting the yen, sterling and euro under pressure near multi-month lows amid the shifting threat of tariffs.

The focus for markets in 2025 has been on US President-elect Donald Trump's agenda as he steps back into the White House on Jan. 20, with analysts expecting his policies to both bolster growth and add to price pressures, according to Reuters.

CNN on Wednesday reported that Trump is considering declaring a national economic emergency to provide legal justification for a series of universal tariffs on allies and adversaries. On Monday, the Washington Post said Trump was looking at more nuanced tariffs, which he later denied.

Concerns that policies introduced by the Trump administration could reignite inflation has led bond yields higher, with the yield on the benchmark 10-year US Treasury note hitting 4.73% on Wednesday, its highest since April 25. It was at 4.6709% on Thursday.

"Trump's shifting narrative on tariffs has undoubtedly had an effect on USD. It seems this capriciousness is something markets will have to adapt to over the coming four years," said Kieran Williams, head of Asia FX at InTouch Capital Markets.

The bond market selloff has left the dollar standing tall and casting a shadow on the currency market.

Among the most affected was the pound, which was headed for its biggest three-day drop in nearly two years.

Sterling slid to $1.2239 on Thursday, its weakest since November 2023, even as British government bond yields hit multi-year highs.

Ordinarily, higher gilt yields would support the pound, but not in this case.

The sell-off in UK government bond markets resumed on Thursday, with 10-year and 30-year gilt yields jumping again in early trading, as confidence in Britain's fiscal outlook deteriorates.

"Such a simultaneous sell-off in currency and bonds is rather unusual for a G10 country," said Michael Pfister, FX analyst at Commerzbank.

"It seems to be the culmination of a development that began several months ago. The new Labour government's approval ratings are at record lows just a few months after the election, and business and consumer sentiment is severely depressed."

Sterling was last down about 0.69% at $1.2282.

The euro also eased, albeit less than the pound, to $1.0302, lurking close to the two-year low it hit last week as investors remain worried the single currency may fall to the key $1 mark this year due to tariff uncertainties.

The yen hovered near the key 160 per dollar mark that led to Tokyo intervening in the market last July, after it touched a near six-month low of 158.55 on Wednesday.

Though it strengthened a bit on the day and was last at 158.15 per dollar. That all left the dollar index, which measures the US currency against six other units, up 0.15% and at 109.18, just shy of the two-year high it touched last week.

Also in the mix were the Federal Reserve minutes of its December meeting, released on Wednesday, which showed the central bank flagged new inflation concerns and officials saw a rising risk the incoming administration's plans may slow economic growth and raise unemployment.

With US markets closed on Thursday, the spotlight will be on Friday's payrolls report as investors parse through data to gauge when the Fed will next cut rates.