World Bank: War in Ukraine Raising Risks for MENA

The World Bank Group building is viewed on an empty street in Washington, D.C., US, April 13, 2020. (AFP Photo)
The World Bank Group building is viewed on an empty street in Washington, D.C., US, April 13, 2020. (AFP Photo)
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World Bank: War in Ukraine Raising Risks for MENA

The World Bank Group building is viewed on an empty street in Washington, D.C., US, April 13, 2020. (AFP Photo)
The World Bank Group building is viewed on an empty street in Washington, D.C., US, April 13, 2020. (AFP Photo)

The war in Ukraine has "multiplied risks" for the Middle East and North Africa's poorer countries by raising food and energy prices, the World Bank said Thursday, warning of potential social unrest.

In its latest update to its MENA growth forecast, the development lender said inflationary pressures set off by Covid-19 "are likely to be exacerbated" by Russia's invasion.

"The threat of Covid-19 variants remains and the war in Ukraine has multiplied risks, particularly for the poor," the World Bank's MENA vice president, Ferid Belhaj, said in the report, titled "Reality Check".

World Bank president David Malpass said this week that the Russian war on Ukraine has started a chain reaction in the global economy, pushing energy and food prices higher, exacerbating debt concerns and potentially worsening poverty and hunger.

"Rising food prices may have far-reaching effects beyond increasing food insecurity," said the report, adding: "Historically in MENA, increases in bread prices have... contributed to increased social unrest and conflict.

"This link between food prices, conflict and low growth poses a serious concern for the humanitarian crisis in fragile, conflict and violence-affected states in MENA," it said.

Ukraine is a key source of grain, while Russia is a major producer of energy and fertilizer needed for agriculture. The MENA region is heavily dependent on wheat supplies from both countries.

According to the report, inflation in Gulf countries is expected to reach 3.0 percent this year compared to 1.2 percent in 2021, and will rise to 3.7 percent in oil-importing countries from 1.4 percent last year.

"For some oil importers, food subsidies would be hard to maintain due to limited resources," while "rising oil prices could delay reforms", the report said.

Despite that, the World Bank forecasts that economic growth in the region will be 5.2 percent in 2022, the fastest rate since 2016.

"The region as a whole is buoyed by oil" and is doing "much better" than any other in the world, lead economist for the MENA region Daniel Lederman told AFP in an interview.

However, the expected growth is "insufficient and uneven".

"Insufficient because a large number of economies in the MENA region will still be poor in terms of their GDP per capita relative to where they were in 2019 in the eve of the pandemic," he said.

And "uneven because the faster (recovering) economies for 2022 are expected to be oil exporters, but oil importers are expected to suffer".

Lederman urged greater transparency from MENA governments regarding their economic data, citing this as a factor behind previously overoptimistic forecasts.

"Published research in leading economic journals in the world indicate that overly optimistic and imprecise forecasts are associated with debt and financial vulnerabilities, higher probability of financial crises and even economic contractions in the near future," he said.



China Mulls Draft Law to Promote Private Sector Development

A Chinese national flag flutters on a financial street in Beijing. (Reuters)
A Chinese national flag flutters on a financial street in Beijing. (Reuters)
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China Mulls Draft Law to Promote Private Sector Development

A Chinese national flag flutters on a financial street in Beijing. (Reuters)
A Chinese national flag flutters on a financial street in Beijing. (Reuters)

Chinese lawmakers are deliberating a draft of the country's first basic law specifically focused on the development of the private sector, the country’s Xinhua news agency reported.

“The law will be conducive to creating a law-based environment that is favorable to the growth of all economic sectors, including the private sector,” said Justice Minister He Rong, while explaining the draft on Saturday during the ongoing session of the Standing Committee of the National People's Congress, the national legislature.

The draft private sector promotion law covers areas such as fair competition, investment and financing environments, scientific and technological innovation, regulatory guidance, service support, rights and interests protection and legal liabilities.

The draft has incorporated suggestions solicited from representatives of the private sector, experts, scholars and the general public, the minister said.

China left its benchmark lending rates unchanged as expected at the monthly fixing on Friday.

Persistent deflationary pressure and tepid credit demand call for more stimulus to aid the broad economy, but narrowing interest margin on the back of fast falling yields and a weakening yuan limit the scope for immediate monetary easing.

The one-year loan prime rate (LPR) was kept at 3.10%, while the five-year LPR was unchanged at 3.60%.

In a Reuters poll of 27 market participants conducted this week, all respondents expected both rates to stay unchanged.

Morgan Stanley said in a note that the 2025 budget deficit and mix are more positive than expected and suggest Beijing is willing to set a high growth target and record fiscal budget to boost market confidence, but further policy details are unlikely before March.

Last Friday, data released by the country's central bank said total assets of China's financial institutions had risen to 489.15 trillion yuan (about $68.03 trillion) by the end of third quarter this year.

The figure represented a year-on-year increase of 8%, said the People's Bank of China.

Of the total, the assets of the banking sector reached 439.52 trillion yuan, up 7.3% year on year, while the assets of securities institutions rose 8.7% year on year to 14.64 trillion yuan.

The insurance sector's assets jumped 18.3% year on year to 35 trillion yuan, the data showed.

The liabilities of the financial institutions totaled 446.51 trillion yuan, up 8% year on year, according to the central bank.

Separately, data released by the National Energy Administration on Thursday showed that China's electricity consumption, a key barometer of economic activity, rose by 7.1% year on year in the first 11months of the year.

During the period, power consumption of the country's primary industries increased by 6.8% year on year, while that of its secondary and tertiary sectors rose by 5.3% and 10.4%, respectively.

Residential power usage saw strong growth of 11.6% during this period, the administration said.

In November alone, power usage climbed 2.8% from one year earlier, according to the data.