HSBC: The World’s Most Ambitious Saudi Economic Transformation

          The bank’s vice chairman said the outlook for the Middle East and North Africa is very encouraging            
           
Martin Trico, Vice Chairman and CEO of HSBC Middle East, North Africa and Turkey, said that Saudi Arabia is home to one of the most ambitious economic transformation programs in the world, noting that these are the future prospects that investors focus on most. The long-term.
Speaking to reporters, Trico said: “The (Covid 19) pandemic was a strong shock to the global economy, at the same time that the Kingdom was dealing with pressures represented by the decline in oil prices.” And he added, “While economists at (HSBC) expect The Kingdom’s GDP contracted by 6 per cent in 2020. In contrast to the global GDP decline of 4.1 per cent, we are confident that Saudi Arabia will return to recovery, thanks to the strong position of its sovereign wealth and its continued commitment to the economic reform program, represented by the ambitious 2030 Vision. .
He added: “Given the Kingdom's strong policies to deal with the challenges that the Saudi economy faced this year due to the (Covid 19) pandemic, especially the 10 percent increase in value-added tax in July, this shows the extent of the Saudi government's determination to restore balance to the budget. Government in the long term ».
He continued: “As Saudi Arabia prepares to host the G20 summit next month, this will give the Kingdom the opportunity, not only to put in place a program to protect lives and restore growth, but also to demonstrate the success of its economic and social reform programs, and the restructuring of the country's corporate portfolio continues at an accelerated pace. ».
He added: “The most prominent example of this is the (Saudi Aramco) acquisition of a 70 percent share of the Saudi Basic Industries Corporation (SABIC) from the Public Investment Fund of $ 69.2 billion, in which HSBC Saudi Arabia played a role. The mediator for both the seller and the buyer ».
He added: “Saudi Arabia issued the first green loan in the Middle East supported by the Export Credit Agency, to finance the purchase of passenger buses from Germany, which will form an essential part of the new integrated public transport system in Riyadh. These operations will play a major role in shaping a new future for the Kingdom. And a more diversified and sustainable economic model to support it. ” 

Future expectations

Regarding the economic future prospects for the region, Trico said, it appears flexible in the long term, noting that the potentials that characterize the region’s economies are equally clear, especially when looking at the extent to which investors are increasingly investing in the region through long-term investments.
In the short term, Trico explained, the dual challenges of the “Covid 19” pandemic and the low level of oil prices appear very clear, at a time when HSBC economists expect that the economies of the Gulf Cooperation Council countries will contract, on average, by 5.6 per cent. On an annual basis in 2020.
He added that future expectations indicate that these economies will grow by 3.9 percent on an annual basis in 2021. This will make them their strongest performance since 2015, and thus these expectations confirm the strong potential of the Middle East region.
He added: “The strength of the potential of the region’s economies is clearly evident from the investor’s perspective, as bonds are purchased in record sizes, and the volume of shares, bonds and other subscriptions exceeded by double the number, in addition to price competitiveness and the widening of maturities, and this only happens when the level of confidence increases. Investors with these strong and long-term fundamentals in the region.

Sukuk and bonds

The Vice Chairman and CEO of HSBC Middle East, North Africa and Turkey confirmed that according to the official listing lists of financial markets for bond and sukuk issuers in the MENA region, the numbers reached their highest level in the first half of the year, It reached $ 69.5 billion between January and June 2020, an increase of 26 percent over the same period in 2019.
He continued: “The activity of mergers and acquisitions shows the investor’s appetite for this type of activities very clearly, driven by the value they see in the region and economic diversification, and the existing economic transformation visions that will support new business opportunities over the coming decades.”
He pointed out that the official listing lists of the financial markets are clear and vivid evidence; The value of Mergers and Acquisitions registered in the MENA region during the first half of 2020 amounted to $ 50.7 billion, which is the third-highest first half-year total on record after $ 112.7 billion in 2019 and $ 58.5 billion in 2007. And what This would have been possible if the investors had not believed in the region’s long-term potential.

Bank strategy

Regarding HSBC Bank’s strategy in this region, Trico said that the future prospects for the region appear very encouraging. “HSBC Bank has a wide geographical spread throughout the Middle East, North Africa and Turkey, which reflects the size of These future prospects enable us to link customers to the available assumptions across 9 markets, where the combined GDP reached about $ 2.9 trillion in 2019. ”
Economists at HSBC expect that economic growth will return to recovery in 2021, and for the economies of the Gulf Cooperation Council countries, economists expect GDP growth of 3.9 percent year-on-year in 2021, which will be stronger. Annual growth rate since 2015.
The volume of bond issuance at the regional level in the capital markets for bonds is on the way up to reach $ 100 billion, and this may only be the third time in history that this number has been recorded. The current pace of issuances indicates that 2020 will also be a record year.
Economists also expect mergers and acquisitions activity to be record for this year as well, driven by the return of investments to the region.

The UAE economy

Regarding the UAE economy, Trico said: “There is a broad consensus that the world has changed due to the Coronavirus pandemic, and that few countries in the world, including the UAE, have successfully demonstrated their ingenuity in absorbing these changes and applying them for the long term, and you can see that confidence in managing The change comes clearly through investor activity in the recent deals completed by the governments of Abu Dhabi and Dubai. He added, “If you look at the latest sovereign bond issuances by both emirates, you find that both of them have succeeded in attracting 5 times more subscriptions than what is offered. But the other important thing that must be taken into account is the length of maturities ».
He continued: “The Emirate of Dubai sold a slice of bonds with a maturity of up to 30 years, while the Emirate of Abu Dhabi sold bonds with a maturity of up to 50 years, thus setting a new standard for issuing sovereign bonds in the Arab Gulf region. Both of these deals demonstrate the confidence of the investors. ”