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Fed's gloomy economic outlook

“about right”,say economists

Former CEOof Wirecard held in $2.1bnscandal

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WEDNESDAY 24 JUNE 2020

BUSINESS

Differences in the policy responses announced by the GCC sovereigns to date have been, to a degree, proportionate to the size of the likely revenue loss in 2020.

Moody's: Qatar's spending cuts lowest among GCC sovereignsSATISH KANADY THE PENINSULA

Among the GCC sovereigns, Qatar has announced the most modest spending cuts so far as a measure to offset the potential revenue losses against the exposure to a combination of shocks. Qatar’s spending cuts so far, amount to around 4-5 percent of GDP, while other GCC nations’ cuts are some-thing 7.5 percent to 10 percent, estimates Moody’s.

Over the past three months, GCC governments have announced various measures to offset at least a part of the large revenue losses that Moody’s expects will result this year from the combination of sharply lower oil prices and, in most cases, lower oil production. A vast majority of the measures announced so far have been on the expenditure side, reflecting the simultaneous shock to the no-noil economy from the coronavirus pandemic and gov-ernments’ desires not to place an additional burden on the pro-ductive sectors through new or higher taxes and fees.

While GCC sovereigns have provided some targeted support to buffer the economy against the coronavirus shock, most have enacted consolidation measures that significantly exceed the cost of fiscal stimulus with the aim of offsetting expected revenue losses.

In Qatar, cuts include a large reduction in non-priority capital expenditures, which the gov-ernment had announced in early March. It also includes a more recently announced plan to reduce the salaries of expatriates employed in the government sector by 30 percent, which, according to Moody’s, could reduce spending by close to 1 percent of GDP on an annual basis.

Differences in the policy

responses announced by the GCC sovereigns to date have been, to a degree, proportionate to the size of the likely revenue loss in 2020.

Because prices of liquified natural gas-Qatar’s main export- are mostly set in long-term con-tracts and follow oil price move-ments with a lag, Qatar has some room to delay consolidation measures into 2021, when Moody’s expects the impact of the oil price shock on Qatar’s fiscal revenue to peak. Kuwait is an outlier, where the rating agency expects the most significant revenue losses, but where the fiscal adjustment has so far been minimal.

The differences in policy response are, to a degree, pro-portional to the sovereigns’ exposure to the shock, but are ultimately a reflection of differ-ences in their institutions and governance strength (fiscal policy effectiveness in par-ticular), which captures their adjustment capacity and indi-cates how durably lower oil prices are likely to impact their sovereign credit profiles.

It may be recalled Moody’s recently revised down its average oil price assumptions to $35/barrel in 2020 and $45/barrel in 2021, and as a result, expect a very large drop in fiscal revenues for all Gulf Cooperation Council sovereigns.

QIIB awarded prestigious Certificate onInformation Security for 5th year in a row

THE PENINSULA — DOHA

For the fifth consecutive year, QIIB has been awarded the highest certificate in the protection of banking cards data also called the Payment Card Industry Data Security Standard v 3.2.1 (PCI-DSS), granted by SISA, a Forensic driven Cyber security specialist company headquartered in Bengaluru, India.

This certificate is of particular impor-tance given the unusual circumstances that the world is facing this year and the increasing challenges in combating attempts to hack and avoid scams as well as the customers’ growing dependence on payments via bank cards.

On the occasion, QIIB Chief Executive Officer Dr. Abdulbasit Ahmad Al Shaibei said: “We are pleased to meet the excep-tional standards in the protection of our customers’ data. QIIB invested heavily in cybersecurity and its various solutions. Being awarded the PCI-DSS certificate proves that we are on the right track. We will continue to focus greatly on this aspect, which is deemed crucial for our banking operations and our various banking channels."

He said, “Interest in providing tech-nological solutions is no longer a luxury, but rather an urgent need that must be met constantly, while adopting the highest security posture and take advantage of the achievements made in the field of cybersecurity to protect from hacking attempts and electronic crimes, which unfortunately are becoming increasingly complicated and are target various

facilities and institutions. Thus, our response should be above par, so as to protect the data of our customers and the security of our transactions in accordance with the highest standards”.

Dr. Al Shaibei affirmed, “QIIB assures its customers that the security of all their data and transactions is at the top of our priorities, in line with the best global standards, so as to serve the interest of our customers, enhance mutual trust and provide a safe technological environment for the prosperity of the local business environment”.

QIIB CEO thanked SISA, the leader in information security and customer data protection, stressing that the bank will continue to work closely with the company in order to benefit from its

expertise and solutions in the field of cybersecurity.

SISA CEO and Founder, Dharshan Shanthamurthy, said: “Congratulations to QIIB’s team on achieving PCI DSS certifi-cation. Maintaining such an exhaustive international benchmark is not a one-off activity but an ongoing process."

QIIB was established in 1990 as the second Islamic bank in Qatar and is cur-rently the third largest Islamic bank listed on the Qatar Stock Exchange in terms of assets and market value. The bank has several regional and international part-nerships and was able to make a quali-tative leap in the development of its tech-nological structure and alternative channels, thus enhancing the banking services its provides to the next level.

GECF and Opec renew commitment to work closerTHE PENINSULA — DOHA

The Gas Exporting Countries Forum (GECF) Secretariat lead-ership team, led by Secretary General Yury Sentyurin, held discussions with Opec Secretary-General Mohammad Sanusi Barkindo and the Opec delegation for the 1st Technical Meeting of the OPEC-GECF Energy Dialogue on June 22 via a webinar.

The meeting reflected on the impact of the COVID-19 pan-demic on the global economy, oil and gas markets, medium- and long-term energy market assumptions and perspectives, as well as technical collaboration on data and statistics. The two organizations also renewed their commitment to laying the groundwork of closer collabo-ration even under the unprece-dented circumstances being faced by the global economy.

The meeting also reached a consensus on the importance of energy security and maintaining

stability in the energy markets as well as supporting and pro-moting the unique importance of multilateralism.

Barkindo referred to the recent decisions taken by partic-ipants of the Declaration of Coop-eration at the 9th, 10th and 11th (Extraordinary) Opec and

Non-Opec Ministerial meetings held on 9-10, 12 April and 6 June 2020, respectively, to adjust overall crude oil production by 9.7 mb/d for May and June 2020, with a further extension until the end of July agreed at the 11th meeting. Further adjustments are to take place for a total of two

years under the initial agreement, until 31 December 2020 by 7.7 mb/d; and from 1 January 2021 to 30 April 2022 by 5.8 mb/d.

Yury Sentyurin said: “We con-sider the GECF-Opec Memo-randum of Understanding (MoU) to be a milestone in the evolving relationship between our entities.

Since the signing of the bilateral MoU between GECF and Opec in Moscow on the sidelines of the Russian Energy Week in October 2019, our collaboration has been developing incrementally due to the ongoing fruitful dialogue and enabling working contacts between our officials.”

Speaking about the pressing issues facing the oil and gas industry, the GECF Secretary General remarked that, at present, the Forum is elaborating a new post-COVID-19 scenario, which forecasts natural gas demand to decline in 2020 by 2.8 percent in the best-case scenario and up to 6 percent in the worst-case scenario. In the long run though, according to the long-term projections, the natural gas will remain an indispensable fuel for the energy transition.

GECF Secretary General reaffirmed the Forum’s read-iness to formulate a special box on natural gas and LNG supply in the new edition of the Opec World Oil Outlook 2020.

GECF and Opec officials during the meeting.

GTA announces new deadline to file returnsTHE PENINSULA — DOHA

The General Tax Authority (GTA) has announced extending the period for tax returns by another two months. The new deadline date to file returns will be 30 August 2020.

This decision comes in line with the directives of the Amir H H Sheikh Tamim bin Hamad Al Thani to provide the necessary services to cit-izens and residents, foremost of which is to provide safety and protection from

COVID-19 and to ensure the continuation of their healthy life.

GTA Management said, “At GTA, we work closely with the government offices to monitor the current situ-ation. We recognize the chal-lenging times we are encoun-tering, especially in matters of finance. As part of our social responsibility, we are committed to showcasing our assurances to all our investors and partners to tackle the financial consequences. We value our relationship with

our taxpayers and our partners alike, and we are confident that our united efforts with the State of Qatar will help us prevent further outbreaks and exhilarate our economy ahead of time.”

By extending its deadline for the second time, GTA con-firms its social responsibilities towards Qatar’s resilience to fight the pandemic, provide all necessary support to busi-nesses in challenging times and assist the State in the smooth recovery of the economy.

Mazaya appointsSaeed bin AliAl Marri asSenior ManagerTHE PENINSULA — DOHA

Mazaya Real Estate Devel-opment Company (Mazaya) has announced the appointment of Saeed bin Ali Al Marri (pictured) as Senior Manager, Marketing of the company.

The appointment comes at a time when Mazaya is working to complete the restructuring plan of the company’s management capabilities and supporting the competent national talents to manage its current and future operations. The appointment is also part of the plan developed by the Board of Directors to increase the National manpower in the company.

Mazaya Real Estate Devel-opment Company Managing Director Ibrahim bin Jaham Al Kuwari welcomed Saeed Al Marri to the Mazaya team.

Saeed Al Marri will bring a total 25 years of professional expe-rience to Mazaya. He said: “I am proud of my appointment at Mazaya Real Estate Development, and I look forward to serving the company and the Executive Man-agement and I will exert all efforts to achieve the company’s objec-tives and the goals of Mr. Chairman and all Board Members.”

QIIB assures its customers that the security of all their data and transactions is at the top of our priorities, in line with the best global standards, so as to serve the interest of our customers, enhance mutual trust and provide a safe technological environment for the prosperity of the local business environment.

Dr. Abdulbasit Ahmad Al Shaibei, QIIB Chief Executive Officer

02 WEDNESDAY 24 JUNE 2020BUSINESS

Manufacture of Cement & other non-metallic mineral products declined by 22.5 percent, followed by the manufacture of basic metals by 17.1, and manufacture of refined petroleum products” by 15.2 percent.

Qatar’s industrial production remainssolid despite COVID-19 restrictionsMOHAMMAD SHOEB THE PENINSULA

Despite the pervasive lockdown, Qatar’s monthly Industrial Production Index (IPI) in April 2020 stood firm at 98.3 points, showing a month-on-month decrease of only 2.5 percent compared to the pre-vious month (March 2020), official data released yesterday showed. This monthly decline in eco-nomic and industrial production is much lower than many coun-tries, including some advanced economies which witnessed double-digit fall.When compared on annual basis with the IPI of the corresponding month last year (April 2019), the index declined by 3.2 percent, according to preliminary data released by the Planning and Statistics Authority.

The fall in the overall index can be mainly attributed to lockdown due to Coronavirus disease (COVID-19) pandemic which affected the production and other economic activities in several groups, including the “Manufacture of Cement & other non-metallic mineral products” by 22.5 percent, followed by “Manufacture of basic metals”

by 17.1, “Manufacture of refined petroleum products” by 15.2 percent, “Manufacture of bev-erages” by 9.7 percent, and “Manufacture of rubber and plastics products” by 4.1 percent. However, an increase was recorded in, “Manufacture of food products” by 9 percent, and “Manufacture of chemicals and chemical products” by 2.2 percent.

The industrial production index reflects the level of eco-nomic activities in the country. This index details the growth of various industrial sectors in economy such as “Mining”, “Manufacturing”, “Electricity

production”, and “Water pro-duction and desalination”. It is a short-term quantitative index that measures the changes in the volume of productions of a selected basket of industrial products over a given period with respect to that in a chosen period called the base period.

The Industrial Production Index consists of three main components: “Mining” with a relative importance of 83.6 percent, “Manufacturing” with a relative importance of 15.2 percent, “Electricity” with a rel-ative importance of 0.7 percent, and finally “Water” with a rel-ative importance of 0.5 percent.

When analysed by sector wise the index of “Mining” sector index in April 2020 showed a decrease by 2.6 percent compared to the

previous month (March 2020), as a result of the decrease in the quantities of “crude oil and natural gas” by 2.6 percent, while “Other mining and quar-rying” showed a decrease by 13.2 percent. When compared to the corresponding month of the pre-vious year (April 2019), the IPI of Mining decreased by 3.3 percent.

The “Manufacturing” sector index showed a decrease by 2 percent compared to the pre-vious month (March 2020), The groups showed a decreases include: “Manufacture of refined petroleum products”, and “Man-ufacture of Cement and other non-metallic mineral products” by 19.0 percent each, followed by “Manufacture of beverages” by 4.5 percent, “Manufacture of rubber and plastics products” by

2.3 percent, “Manufacture of basic metals” by 2.0 percent, and “Manufacture of food products” by 1.3 percent. However, an increase was recorded in “Man-ufacture of chemicals and chemical products” by 2.5 percent.

As for “Printing and repro-duction of recorded media”, the production was stopped during the month of April 2020, due to the Coronavirus disease (COVID-19) pandemic. The rel-ative weight of this group was distributed to the rest of the sub-groups of the manufacturing sector, and then the index for industrial production was calculated.

In the “Electricity” sector, an increase of 14.4 percent was noticed in the production of power between April 2020 and the previous month (March2020), while the annual basis, it increased by 10.4 percent compared to April 2019 index.

An increase of 6.6 percent was noticed in the production of ‘‘Water’’ between April 2020 and the previous month (March 2020). Comparing with corre-sponding month (April 2019), an increase of 19.9 percent was recorded.

Amazon’s carbon emissions up 15% amid rapid sales growthBLOOMBERG

Amazon.com Inc’s carbon emissions climbed 15 percent last year, a measure of how hard it will be for the company to eliminate planet-warming gases and keep growing rapidly.

Amazon’s activities generated the equivalent of about 51.17 million metric tonnes of carbon dioxide. The company’s sustainability report, released yesterday, pro-vides the first year-over-year data for Amazon’s emissions. The figure includes emissions from its operations and pur-chased electricity, as well as contributions from indirect sources including business travel, delivery contractors and customer trips to the company’s retail stores.

In a move that underlies Amazon’s seri-ousness about tackling climate change, the company said separately yesterday that it is setting aside $2bn to back carbon-reducing technol-ogies being developed by companies in industries from transportation and manufacturing to energy g e n e r a t i o n a n d agriculture.

The world’s largest online retailer last year disclosed its carbon foot-print for the first time, joining many of its peers in publicly reporting and tracking such figures. The company had for years resisted calls from envi-ronmental activists and climate disclose groups to do such standard reporting, which has become a staple of cor-porate sustainability work.

Despite the growth in absolute emissions, Amazon said the latest figures reflect efforts to make its operations more efficient.

Excluding the impact of currency fluctuations, the company’s sales grew by 22 percent, a faster clip than Amazon’s emissions. And carbon intensity, a measure of emission per dollar of merchandise sales, fell 5 percent in 2019 from a year earlier.

“Like many companies in high growth mode, we look at the absolute tonnes of carbon in our footprint, but also at how we are improving our carbon intensity,” Amazon said in the report. “Our first year-over-year comparison shows progress as we con-tinue to make investments in innovation, technol-ogies, and products that will decarbonise our oper-ations over future years.”

Amazon in September said it aimed to become carbon neutral by 2040.

QC to hold conferenceon July 7 to discuss opportunities, challenges of newly-issued PPP lawTHE PENINSULA - DOHA

Qatar Chamber (QC) yesterday announced that it would hold the “Conference on Devel-opment of Public-Private Partnership” (PPP) on July 7 (Tuesday) under the patronage of Minister of Commerce and Industry H E Ali bin Ahmed Al Kuwari and QC Chairman Sheikh Khalifa bin Jassim Al Thani.

QC also said that the con-ference was scheduled to be held in March, but it was post-poned due to the precau-tionary measures taken to curb COVID-19.

The conference, which is being organised by Al Mashoura Advertising via video conference technology, aims at raising awareness among business sectors about Law No. 12 of 2020 regulating the partnership between public and private sectors, issued by the Amir H H Sheikh Tamim bin Hamad Al Thani last May.

On his part, QC Director General Saleh bin Hamad Al Sharqi said that the conference expected to be attended speakers from the public and private parties and will see the participation of businessmen, representatives of government bodies and experts from various countries.

He noted that it aims at examining opportunities and challenges resulted from the law, reviewing the interna-tional best practices and expe-riences in partnership, as well as discussing many research studies on conducted on

partnership and what the private sector expect from the partnership.

He said that the PPP law enhances the economic and investment environment which witnessed great devel-opment, especially after the issuance of many new eco-nomic legislations such as the law regulating the Non-Qatari Capital Investment in the Eco-nomic Activity, the Unified Register Law, the Anti-money Laundering and terrorism Financing Law, the law on sup-porting the competitiveness of national products and com-bating harmful practices to them in international trade, the Law on the regulation of non-Qatari ownership and utili-sation of real estate, the Indus-trial Zones Law and other leg-islation and laws that have contributed to making Qatar a future for global investments.

Al Sharqi pointed out that during the conference, ideas will be exchanged on enhancing the partnership and the sectors that may attract partnership projects between the two sectors.

He expressed his hope that this partnership will accelerate the introduction of govern-mental projects and push forward the economic devel-opment, in addition to bringing local and foreign investments to different economic sectors.

In 2009, the Qatar Chamber held a conference on partnership that recom-mended issuing a law that reg-ulates the public-private partnership.

Fed’s gloomy economic outlook“about right”, say economistsREUTERS - BENGALURU

The Federal Reserve struck the right tone in its first pandemic-era economic outlook, suggesting years of extraordinary policy support for an economy facing a slow and long slog back, according to a majority of econ-omists in a Reuters poll.

While the June 15-22 poll of over 100 economists showed a recovery from the steepest eco-nomic downturn was underway as commerce reopens, the loss of output in the first half of this year was not expected to be recouped by the end of next year.

The central bank at its policy meeting on June 10 pledged to keep monetary policy loose for years to help an economy that has buckled under the shutdowns, restrictions and other measures to battle the coronavirus pan-demic, which has infected around 9 million people worldwide and killed nearly 120,000 in the United States.

While unprecedented fiscal and economic stimulus sparked a rally in stock markets after a trough in late-March, three-quarters of economists polled, or 45 of 60, said the Fed’s somber economic projections and its ultra-easy policy stance was “about right.”

Ten respondents said the Fed’s projections were “too pes-simistic” and only five said “too optimistic.”

Economic data appear to back up the Fed’s economic pro-jections, with jobless claims still more than double their peak during the Fed Chair Jerome Powell has acknowledged it could take years for all the people left unemployed during the pandemic to reacquire jobs.

“I think the Fed is trying to convey a realistic assessment,”

said Steven Englander (pictured), global head of G10 FX Research and North America macro strategy at Standard Chartered. “We have 20.1 million more unemployed people and in the next couple of months a lot of those people are likely to come back to work. So, if that doesn’t happen, it’s a disaster. Because, it means that even with all the stimulus, nothing’s working.”

The May employment report showing a gain of 2.5 million jobs was unexpectedly strong, wrong-footing every forecaster who expected many millions more people out of work.

Asked what best describes that report, over 60 percent of 58 economists who responded said it “overstates the strength of the job market recovery,” while the other 40 percent said it was “about right.” None said it under-stated job market strength.

“The May numbers are a reo-pening bounce with an unem-ployment rate that understates the true level of labour market dislo-cation due to misclassification errors,” said Scott Anderson, chief economist at Bank of the West in San Francisco.

The unemployment rate was forecast to fall gradually over the next two years, but still remain well above pre-COVID levels,

averaging 9.8 percent this year and 8 percent next year, meaning the Fed would not meet its dual mandate , 2 percent inflation and full employment, until at least 2022.

The central bank was expected to keep rates near zero over the forecast horizon and expand its balance sheet, at a little over $7 trillion currently, to $9 trillion by end-2020 and to $10 trillion by end-2021.

U.S. gross domestic product will shrink an unprecedented 34.8 percent this quarter after con-tracting 5.0 percent last quarter, on a seasonally adjusted annu-alized basis, according to the poll, and broadly unchanged from the last survey.

The economy was forecast to grow 18.5 percent in the third quarter and 8.0 percent in the fourth quarter, compared to 16.0 percent and 9.0 percent forecast in the last poll.

In a worst-case scenario, the economy was forecast to grow 3.8 percent in Q3, but shrink 0.9 percent in Q4, compared to a contraction of 2.5 percent and 1.0 percent, respectively, in the May poll.

The median forecast saw the economy on course to contract 5.8 percent this year, but grow 4.1 percent in 2021. In a worst-case scenario, it was expected to shrink 9.3 percent this year and grow just 0.4 percent next year.

“All else equal, an earlier COVID vaccine would likely have a larger economic impact, as prolonged weakness in the absence of a vaccine increases the likelihood of severe scarring effects such as permanent layoffs and business closures that are not reversed even after the arrival of a vaccine,” noted Jan Hatzius, chief economist at Goldman Sachs.

Former CEO of Wirecard held in $2.1bn scandalAP - BERLIN

The former CEO of German payment service provider Wirecard has been arrested, accused of inflating the com-pany’s balance sheet in an accounting scandal that centres on a missing sum of €1.9bn ($2.1bn), prosecutors in Munich said yesterday.

Markus Braun (pictured) resigned on Friday after the company said that auditors couldn’t find accounts con-taining the money. On Monday, Wirecard said it has concluded that the money probably doesn’t exist.

Prosecutors said a court issued an arrest warrant shortly

afterward and Braun, who had been in Vienna, turned himself in on Monday evening.

He is accused of inflating the company’s balance sheet and revenue using sham income from business with third-party acquirers, “possibly in collabo-ration with further perpe-trators,” in order to “portray the company as financially stronger and more attractive for investors and clients,” they said in a statement.

Braun, an Austrian who had led Wirecard since 2002, was arrested on suspicion of incorrect statements of data and market manipulation.

Prosecutor Anne Leiding said it remains to be seen

whether the case may expand to include other offenses, and investigators have yet to determine “how often, for example, these incorrect results were used to obtain loans from other banks.”

After Braun turned himself in, he pledged his cooperation in a first meeting with investi-

gators, Leiding told reporters.Later yesterday, he was

brought before a judge, who ordered that he be released on condition that he post a €5m ($5.7m) bail and report to police every week, prosecutors said. They said it wasn’t considered necessary to keep him in custody to secure the pro-ceedings at present, given that he had turned himself in.

Wirecard AG was once regarded as a star of the growing financial technology sector, but its shares have fallen sharply after the company became the subject of multiple Financial Times reports about accounting irregularities in its Asian operations.