2013: Global growth gaining momentum

As we are near the end of 2013, it is time to have a recap of key developments which impacted economies, banking and markets.

An investor at the Dubai Financial Market. The UAE and Qatar will be upgraded to emerging market status from May 2014. — KT file photo

We saw “Abenomics” in Japan which involved a combination of measures such as aggressive quantitative easing from the Bank of Japan, a surge in public infrastructure spending and the devaluation of the yen. The euro crisis entered a new stage with Cyprus bailout, which involved leving tax on depositors in March 2013. The Global Governance called for a coordinated effort to stop international tax evasion, urging governments to systematically share bank data. The impetus for this new approach came from Foreign Account Tax Compliance Act.

The global economic growth in 2013 came under struggle as emerging economies slowed down even though advanced economies gave indications of recovery. The advanced economies have gained some speed, while the emerging market economies had slowed. The emerging economies witnessed significant challenges such as slowing growth, rising inflation and currency weakening on account of concerns of US Federal Reserve tapering. Many emerging market and developing economies face a trade-off between macroeconomic policies to support weak activity and those to contain capital outflows

Of the 27 jurisdictions that comprise the Basel Committee, 25 had issued the final set of Basel III based capital regulations. The European Union and the United States issued final Basel III regulations in June and July 2013. At the close of year end the financial regulators approved the long awaited Volcker’s rule which was passed in response to the crisis.

Saudi Arabian Monetary Agency (Sama) adopted Basel III on January 1, 2013 and is also working on developing the final regulations for mortgages in Saudi Arabia. In 2013 Saudi banks loan growth and interest income arose and Net interest margin improved however fee income was affected. In Qatari Banks loan growth arose but not as strong as previous year and net Interest margin remained under pressure.

In Oman loan growth is slow on account of retail regulations and slow government spending, however Islamic banking window provided opportunities. Some of the UAE banks have bounced back with good performance this year as UAE economy showed signs of recovery and confidence have emerged in trade, tourism and services sector of Dubai.

The concerns of attack on Syria and possible tapering by the US Fed had created panic in the financial markets in August-September 2013. The rapid fall in Asian currencies in August-September 2013 revived the fears of 1997 Asian financial crisis. The pain was more for countries such as India and Indonesia with high current account deficits.

The UAE and Qatar will be upgraded to “emerging market status” from May 2014. The UAE had won the honour of hosting “World Expo 2020” in Dubai under the theme “Connecting Minds, Creating the Future” in November 2013. As we enter 2014, we will begin with focus on US fiscal and monetary developments. The Abenomics is also expected to continue in 2014. The European Banking Union deal discussions underway and may be ready by early 2014. The recovery in US economy and the impact of fed tapering on Asian and emerging economies will once again be the area of focus in 2014.

Qatar’s macroeconomic performance has sustained and remained stable. According to Qatar economic outlook 2013-14, General Secretariat for development planning: “Qatar’s gross domestic product (GDP) will grow at 5.3 per cent in 2013 however can come down to 4.5 per cent in 2014. Qatar’s fiscal surplus is expected to be at 8.1 per cent of nominal GDP and Current account surplus as a per cent of nominal GDP is expected to be at 26.5 per cent of nominal GDP. Growth will continue apace in the non-oil and gas economy as diversification picks up. Growth in the non-oil and gas economy will rise to 10.3 per cent in 2014.”

The author is the group chief executive officer at Doha Bank. Views expressed are his own and do not reflect the newspaper’s policy