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Fears of SVB’s Collapse Having Repercussions on Arab Countries

Anticipation for disclosures of the investment sectors and financial activities in the Arab countries due to the resounding bankruptcy of the Silicon Valley Bank (Reuters)
Anticipation for disclosures of the investment sectors and financial activities in the Arab countries due to the resounding bankruptcy of the Silicon Valley Bank (Reuters)
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Fears of SVB’s Collapse Having Repercussions on Arab Countries

Anticipation for disclosures of the investment sectors and financial activities in the Arab countries due to the resounding bankruptcy of the Silicon Valley Bank (Reuters)
Anticipation for disclosures of the investment sectors and financial activities in the Arab countries due to the resounding bankruptcy of the Silicon Valley Bank (Reuters)

The collapse of the California-based Silicon Valley Bank (SVB) has fueled fears among customers, depositors, and technology companies regarding the economic level in the US. They also worry about the announced bankruptcy having a contagion effect in wider regions of the world.

The Arab region does not seem immune to the repercussions, as banks in Kuwait disclosed minor exposures to SVB's bankruptcy.

Arab world banks and investment institutions have expressed caution towards SVB’s economic failure.

The fallout of SVB's insolvency will widen, specialists told Asharq Al-Awsat, adding that its impact will reach the business environment and the banking sector worldwide.

Experts noted that the business and financial environments in the Arab and Gulf regions would each be affected differently.

“SVB’s collapse highlights potential risks to the financial sector and potential implications for global financial stability,” said Fadel bin Saad al-Buainain, Saudi Shura Council member.

“Whatever has been said about controlling the bank’s crisis and limiting its repercussions on the banking system, that saying lacks relevance for two reasons,” he added.

The two reasons cited by al-Buainain include the overlapping of the components of financial sectors, which aggravates exposure to risks, and panic driving depositors to withdraw their money out of fear of being written off due to the bankruptcy of banks.

“I think that the panic that afflicted depositors may have an impact that exceeds the impact of the collapse of the bank,” revealed al-Buainain.

“We find that panic hit financial markets and made investors more cautious,” he added, noting that “this may dry up the market and increase repercussions.”

Al-Buainain clarified that raising interest rates had made investors less willing to invest and take risks and that the tightening of monetary policy may be one of the causes of what happened recently.

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China’s Economy Set to Slow in Q2 as Pressure from US Tariffs Mounts

A laborer works on the glass wall of a building near a luxury brand logo in Beijing, China, Friday, July 11, 2025. (AP)
A laborer works on the glass wall of a building near a luxury brand logo in Beijing, China, Friday, July 11, 2025. (AP)
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China’s Economy Set to Slow in Q2 as Pressure from US Tariffs Mounts

A laborer works on the glass wall of a building near a luxury brand logo in Beijing, China, Friday, July 11, 2025. (AP)
A laborer works on the glass wall of a building near a luxury brand logo in Beijing, China, Friday, July 11, 2025. (AP)

China's economy is likely to have cooled in the second quarter after a solid start to the year, as trade tensions and a prolonged property downturn drag on demand, raising pressure on policymakers to roll out additional stimulus to underpin growth.

The world's No. 2 economy has so far avoided a sharp slowdown in part due to a fragile US-China trade truce and policy support, but markets are bracing for a weaker second half as exports lose momentum, prices continue to fall, and consumer confidence remains low.

Data due Tuesday is expected to show gross domestic product (GDP) grew 5.1% year-on-year in April-June, slowing from 5.4% in the first quarter, according to a Reuters poll. The projected pace would still exceed the 4.7% forecast in a Reuters poll in April and remains broadly in line with the official full-year target of around 5%.

"While growth has been resilient year-to-date, we still expect it to soften in the second half of the year, due to the payback of front-loaded exports, ongoing negative deflationary feedback loop, and the impact of tariffs on direct exports to the US and the global trade cycle," analysts at Morgan Stanley said in a note.

"The third-quarter growth could slow to 4.5% or lower, while Q4 faces unfavorable base effect, putting the annual growth target at risk," the analysts said. They expect Beijing to introduce a 0.5-1 trillion yuan ($69.7 billion-$139.5 billion) supplementary budget from late in the third quarter.

China's exports regained some momentum in June while imports rebounded, as factories rushed out shipments to capitalize on a fragile tariff truce between Beijing and Washington ahead of a looming August deadline.

GDP data is due on Tuesday at 0200 GMT. Separate data on June activity is expected to show both industrial output and retail sales slowing.

On a quarterly basis, the economy is forecast to have expanded 0.9% in the second quarter, slowing from 1.2% in January-March, the poll showed.

China's 2025 GDP growth is forecast to cool to 4.6% - falling short of the official goal - from last year's 5.0% and ease even further to 4.2% in 2026, according to the poll.

BALANCING ACT

Investors are closely watching for signs of fresh stimulus at the upcoming Politburo meeting due in late July, which is likely to shape economic policy for the remainder of the year.

Analysts polled by Reuters expect a 10-basis point cut in the seven-day reverse repo rate - the central bank's key policy rate - in the fourth quarter, along with a similar cut to the benchmark loan prime rate (LPR).

Beijing has ramped up infrastructure spending and consumer subsidies, alongside steady monetary easing. In May, the central bank cut interest rates and injected liquidity as part of broader efforts to cushion the economy from US President Donald Trump's trade tariffs.

But China observers and analysts say stimulus alone may not be enough to tackle entrenched deflationary pressures, with producer prices in June falling at their fastest pace in nearly two years.

Expectations are growing that China could accelerate supply-side reforms to curb excess industrial capacity and find new ways to boost domestic demand.

It's a stiff challenge, analysts say, as Chinese leaders face a delicate balancing act in their quest to cut production while maintaining employment stability in the face of a worsening labor market outlook.