Exploiting Trade Opportunities in a Volatile Regiondhaman.net/en/wp-content/uploads/sites/3/2019/03/...market j (Saudi Arabia), in dollars, is calculated as supply × demand (corrected

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Exploiting Trade Opportunities in a

Volatile RegionPresented by Riadh Ben Jelili,

Director of Research and Country Risk Analysis

Paris, Wednesday, March 27th 2019

Contents

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3 Regional Economic Outlook

Four Key Themes Dominating the Arab Region in 2019.

25 Commodity Markets Outlook

Grains Agribusiness, LNG & Gas.

7 Three Focus Countries

Saudi Arabia, Iraq and Qatar Opportunities and Risk.

15 A Thorny Question

IFRS 9 Financial Instruments’ Impact on Banks in the Region.

Theme 1: Slowing Fiscal Consolidation in GCC

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• Fiscal consolidation looks set to slow across the GCC in2019 as governments focus increasingly on growth-supportive policies despite oil prices levelling off.

• A growing emphasis on the use of fiscal stimulus toencourage non-hydrocarbon private investment andbusiness activity - an integral part of the various memberstates’ economic diversification programs and crucial forjob creation.

• Saudi Arabia: 7.4% y-o-y spending increase in 2019specifically aimed at developing non-oil sectors andboosting employment

• Abu Dhabi: USD5.4bn in emirate-level fiscal stimulus in2019 alone.

• Qatar and Dubai are continuing to invest heavily ininfrastructure as they prepare to host the 2022 FIFA WorldCup and the 2020 World Expo respectively.

Regional Economic Outlook Three Focus Countries Commodity Markets Outlook A Thorny Question

GCC - Fiscal Balance, % GDP

Source: National sources & Fitch Solutions forecast.

Theme 2: Economic Growth Holding Up

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• Economic growth is expected to hold up in the region over2019, remaining in the 2.3-2.6% range.

• GCC growth will be propped up by government spending(Theme 1), while North African countries, such as Moroccoand Tunisia, are likely to see an uptick in consumption asa result of easing fiscal consolidation and moderatinginflation. The Levant will benefit from improving securityconditions - particularly as the reopening of bordercrossings into Iraq and Syria helps to facilitate exports.

• This level of growth remains firmly below historicalstandards. A key factor preventing a more robust recoveryis OPEC’s restrictions on the region’s oil output.

• The external environment is turning less supportive,posing headwinds to private investment and businessactivity.


Real GDP Growth, % (excluding Libya, Syria & Yemen)

Source: National sources & Fitch Solutions forecast.

Theme 3: Relatively Well Insulated Region Against Global Monetary Tightening and Rising Volatility

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• Rising borrowing costs and greater risk aversion presentsome challenges to the MENA region’s investment andgrowth outlooks (Theme 2); however, we view risks towider macroeconomic stability as broadly contained.

• In much of the GCC, vast foreign exchange reserves andsovereign wealth fund assets, coupled with still-solid oilrevenue inflows, will underpin investor confidence.Moreover, wealthier GCC countries (Saudi Arabia, theUAE, Kuwait and Qatar) will continue to provide financialsupport to their weaker counterparts (Bahrain and, mostlikely, Oman) in order to prop up regional stability.

• Outside of the GCC, the countries with the weakestmacroeconomic fundamentals (excluding thoseexperiencing conflict) are either demonstrating strongcommitment to structural reform or benefitting from strongexternal support, which will help to retain investorconfidence in the quarters ahead.


Egypt and Jordan plan to implement further fiscal consolidation measures in 2019 as per the terms of their respective IMF agreements. Both are also able to draw on support from GCC allies and the US.

Tunisia enjoys strong backing from the West and multilateral lenders, which support its post-Arab Spring democratic transition.

Lebanon can rely on a large and loyal diaspora that for decades has propped up deposits at domestic banks.

Theme 4: Instability Subsiding in Regional Conflict Zones

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• Political considerations will compel rival factionsparticularly in Syria, Libya, Yemen and Iraq to scale backoffensives on the ground. Some are positioningthemselves for the post-conflict era and are reluctant toundertake offensives that could erode their popularsupport or reduce their access to reconstruction funds(Libya, Syria, Iraq). For others, motives may be moretactical than strategic in nature (Yemen) - but the impacton the ground will still be positive in the near term.However, it could still get worse before it gets better.

• Conditions on the ground will remain highly challenging forthese countries’ populations, fueling resource competitionand social unrest and keeping risks of re-escalation alive.


Monthly Fatalities From Violent Events Against Civilians

Source: The Armed Conflict Location & Event Data Project, www.acleddata.com

https://www.acleddata.com/

Saudi Arabia: The Largest Nominal GDP in the Arab Region

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Source: UNCTADstat (http://unctadstat.unctad.org); Generation date: 19 November 2018

http://unctadstat.unctad.org/

Saudi Arabia: Country Risk Summary

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• Saudi Arabia offers relatively low risks to investors with regards to the good quality of its transport network andutilities costs, the comparatively limited bureaucracy surrounding trade flows (reducing the risk of delays andhigh costs), low crime rates and limited employment costs owing to the lack of an official minimum wage.

• Incoming businesses face significant labour market risks due to a small domestic labour force with strongnumeracy and literacy skills and rising government focus on the Saudisation of the workforce, which restricts thenumber of skilled foreign laborers. Investors also face significant risks of interstate conflict and terrorism.

• Tensions with Iran, as highlighted by various proxy conflicts throughout the region, are unlikely to abate anytimesoon, especially as the ongoing Saudi assertiveness is bolstered by support from the Trump administration.

• The diplomatic spat with Qatar, and the ongoing military intervention in Yemen, could fuel discontent among thepopulation.

• We forecast Saudi Arabia’s current account surplus to reduce slightly from an estimated 8.8% of GDP in 2018 to8.7% in 2019.

• Rising oil exports will keep the current account firmly in surplus, but slowing non-hydrocarbon export growth andrising imports are likely to cap further gains.

• Persistent current account surpluses will help support the kingdom’s vast foreign reserves – albeit likely only to alimited extent amid still-large investment outflows.

POLITICAL RISK

ECONOMIC RISK

OPERATIONAL RISK

Saudi Arabia: France-Saudi Bilateral Trade and FDI Projects

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Saudi Arabia's Imports from & Exports to France (Million US$)3% of

Saudi’s Total Imports of

Goods

2.5% of Saudi’s Total

Exports of Goods

Total 19,300m

Prosernat 2,616m

Satorp 2,245m

Engie (GDF SUEZ) 2,100m

V Mane Fils SA 919m

Sodamco 743m

Neovia (InVivo) 400m

Technip 354m

Accor 227m

AXA Cooperative 150m

Top 10 Investing French

Companies in Saudi Arabia

France FDI Greenfield Projects in Saudi Arabia, January 2003 and December 2018

Source: ITC for Trade and FDIMarkets for FDI Projects

Average Share of France

Top 10 Saudi’s Imported Products from France (Average 2013-2017, Million US$)

=76.6% of Total Saudi’s Imports from France

23%

Saudi Arabia: France-Saudi Trade Potential

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• Potential (or standard) export value ofproduct k supplied by country i (France) tomarket j (Saudi Arabia), in dollars, iscalculated as supply × demand (corrected formarket access) × bilateral ease of trade. Theexport potential value is projected by aneconomic model based on the characteristicsof the exporter, target market, and thestrength of the relationship between them.

• The products with greatest export potentialfrom France to Saudi Arabia are Machinery,Pharmaceutical components, and Othercereals. Other cereals shows the largestabsolute difference between potential andactual exports in value terms, leaving room torealize additional exports worth $373.2 mn.

Top 40Source: ITC Export Potential

Saudi Arabia: France’s Best Options for Export Diversification in Saudi Arabia

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• An indicator measuring the likelihood ofsuccessful product diversification intoproduct k of exporter I (France) in market j(Saudi Arabia). While ease and demand aredefined as in the Export Potential Indicator,supply performance is captured differently andbased on density capturing the relativeproximity between products which areexported with a revealed comparativeadvantage and new products. It is calculatedusing the Product Space methodology.

• France’s best options for export diversificationin Saudi Arabia are Ingots of iron & non-alloysteel, Active yeasts and Fresh or driedalmonds in shell. France finds Ingots of iron &non-alloy steel easiest to reach. Floating orsubmersible drilling is the product that facesthe strongest demand potential in SaudiArabia.


Saudi Arabia: Suppliers with Greatest Potential to Export All Products to Saudi Arabia

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• The suppliers with greatest potential toexport All products to Saudi Arabia areChina, United States of America andGermany. China shows the largestabsolute difference between potentialand actual exports in value terms,leaving room to realize additionalexports worth $14.9 bn.


Iraq: The 4th Largest Nominal GDP in the Arab Region

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Iraq: Country Risk Summary

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• Iraq's position at 15th out of 19 countries in Fitch Operational Risk Index in the MENA region reflects its poorinstitutions, infrastructure and security environment.

• Corruption is a major problem: according to Transparency International's 2017 Corruption Perceptions Index,Iraq comes in 169th out of 180 countries surveyed.

• Physical infrastructure is in desperate need of upgrading, having suffered from years of underinvestment andwar, and the financial services sector is unsophisticated.

• Political risks will remain elevated in Iraq despite further progress in the formation of a new government.

• Three key cabinet posts remain unfilled and even when these are decided, the policy-making environment willremain challenging given high levels of polarization.

• There are also risks stemming from President Donald Trump’s announcement that he will withdraw US troopsfrom Syria as this could lead to greater insecurity and confrontation in Iraq.

• Lowered forecasts for Iraq’s real GDP growth in 2019 and 2020 largely due to a deteriorating outlook for the oilsector.

• Oil will come in lower than previously estimated following the OPEC and non-OPEC group production’sDecember 2018 decision to cut production in 2019.

• Despite lower production, rising oil prices and political pressures to boost spending mean that public expendituregrowth will remain robust, mitigating the effects of lower production on headline growth.

POLITICAL RISK

ECONOMIC RISK

OPERATIONAL RISK

Iraq: France Iraq Bilateral Trade and FDI Projects

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Iraq's Imports from & Exports to France (Million US$)

Lafarge 1,200m

Alcatel 133m

CMA CGM 98m

Bollore Group 45m

Technip 22m

Gras Savoye 21m

Alstom 9m

Havas 6m

Publicis Groupe 6m

AICS Consultants 6m


Companies in Iraq

France FDI Greenfield Projects in Iraq, January 2003 and December 2018

1% of Iraq’s Total

Imports of Goods

0.9% of Iraq’s Total Exports of

Goods


Top 10 Iraq’s Imported Products from France (Average 2013-2017, Million US$)


21.8%


Iraq: France-Iraq Trade Potential

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• Potential (or standard) export value ofproduct k supplied by country i (France) tomarket j (Iraq), in dollars, is calculatedas supply × demand (corrected for marketaccess) × bilateral ease of trade. The exportpotential value is projected by an economicmodel based on the characteristics of theexporter, target market, and the strength ofthe relationship between them.

• The products with greatest export potentialfrom France to Iraq are Machinery,Pharmaceutical components, and Motorvehicles & parts. Machinery shows the largestabsolute difference between potential andactual exports in value terms, leaving room torealize additional exports worth $111.3 mn.


Iraq: France’s Best Options for Export Diversification in Iraq

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• An indicator measuring the likelihood ofsuccessful product diversification intoproduct k of exporter I (France) in market j(Iraq). While ease and demand are defined asin the Export Potential Indicator,supply performance is captured differently andbased on density capturing the relativeproximity between products which areexported with a revealed comparativeadvantage and new products. It is calculatedusing the Product Space methodology.

• France’s best options for export diversificationin Iraq are Active yeasts, Cement and Flat-rolled products of iron or non-alloy steel.France finds Cement easiest to reach. Floorcoverings of man-made textiles, made up isthe product that faces the strongest demandpotential in Iraq.


Iraq: Suppliers with Greatest Potential to Export All Products to Iraq

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• The suppliers with greatest potential toexport All products to Iraq are China,Turkey and United Arab Emirates.China shows the largest absolutedifference between potential andactual exports in value terms, leavingroom to realize additional exportsworth $8.5 bn.

Top 20 Source: ITC Export Potential

Qatar: The 5th Largest Nominal GDP in the Arab Region

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Qatar: Country Risk Summary

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• Qatar is a regional outperformer for all pillars, but its best performance is its superior logistics network and saferoperating environment than many of its regional peers.

• Qatar is perceived as less economically open than some of its MENA peers due to its reliance on LNG exportsand various restrictions on FDI.

• Qatar has efficient tax, bureaucratic and legal systems, a low tax burden and lower perceived levels ofcorruption than its regional peers.

• Frictions with Saudi Arabia, the UAE, Bahrain and Egypt could escalate further, leading to a tightening of thesestates' boycott against Qatar.

• Should hydrocarbon prices collapse, hampering the leadership's ability to maintain the population's high livingstandards, then challenges to the leadership may emerge.

• Qatar's hosting of a large US military base could make it a target for attacks by Islamist militants.

• Robust non-hydrocarbon activity will fuel a slight acceleration in Qatari real GDP growth over the coming years,offsetting modest declines in hydrocarbon output.

• We forecast headline growth of 2.3% y-o-y in 2018 and 2.5% in 2019, up from a multi-year low of 1.6% in 2017.

• Over the longer term, these dynamics will reverse as the expansion of gas output from the North Field seesoverall hydrocarbon output return to growth, mitigating an anticipated slowdown in government investment intonon-hydrocarbon sectors.

POLITICAL RISK

ECONOMIC RISK

OPERATIONAL RISK

Qatar: France Qatar Bilateral Trade

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Qatar's Imports from & Exports to France (Million US$)

Engie (GDF SUEZ) (G.. 3,923m

Total Petrochemicals 1,682m

FCB Ciment 159m

Gasal QSC 104m

Qatar International.. 57m

Total 47m

Servair 46m

Nexans 45m

AXA Gulf 43m

Orange Business Ser.. 32m


Companies in Qatar

France FDI Greenfield Projects in Qatar, January 2003 and December 2018

6.7% of Qatar’s Total

Imports of Goods

0.7% of Qatar’s Total

Exports of Goods


Top 10 Qatar’s Imported Products from France (Average 2013-2017, Million US$)


66.3%


Qatar: France-Qatar Trade Potential

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• Potential (or standard) export value ofproduct k supplied by country i (France) tomarket j (Qatar), in dollars, is calculatedas supply × demand (corrected for marketaccess) × bilateral ease of trade. The exportpotential value is projected by an economicmodel based on the characteristics of theexporter, target market, and the strength ofthe relationship between them.

• The products with greatest export potentialfrom France to Qatar are Aircrafts,spacecrafts & parts, Machinery, and Motorvehicles & parts. Aircrafts, spacecrafts & partsshows the largest absolute differencebetween potential and actual exports in valueterms, leaving room to realize additionalexports worth $154.0 mn.

Top 40

Source: ITC Export Potential

Qatar: France’s Best Options for Export Diversification in Qatar

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• An indicator measuring the likelihood ofsuccessful product diversification intoproduct k of exporter I (France) in market j(Qatar). While ease and demand are definedas in the Export Potential Indicator,supply performance is captured differently andbased on density capturing the relativeproximity between products which areexported with a revealed comparativeadvantage and new products. It is calculatedusing the Product Space methodology.

• France’s best options for export diversificationin Qatar are Tubes/pipes, of cast iron,Escalators & moving walkways and Cement.France finds Cement easiest to reach.Tubes/pipes, of cast iron is the product thatfaces the strongest demand potential in Qatar.


Qatar: Suppliers with Greatest Potential to Export All Products to Qatar

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• The suppliers with greatest potential toexport All products to Qatar are China,Germany and United Kingdom. Chinashows the largest absolute differencebetween potential and actual exportsin value terms, leaving room to realizeadditional exports worth $3.0 bn.

Top 20 Source: ITC Export Potential

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• Commodity prices have been driven by a number of factors in 2018, including commodity-specific supplydisruptions, rising U.S. interest rates, an appreciation of the U.S. dollar, growing trade tensions between majoreconomies, and financial market pressures in some emerging market and developing economies.

• Energy prices have risen in 2018, supported by supply concerns, while growing U.S.-China trade tensionsweighed on global growth prospects and depressed metals prices. Agricultural prices softened on strong supplywith the exception of wheat.

Sources: Bloomberg, BP Statistical Review, IEA, USDA, World Bank, World Bureau of Metal Statistics.

Bars denote change in index levels, where January 1, 2018 = 100

Commodity Markets Recent Trends: Prices

Energy prices are expected to average 33% higher in2018 compared to 2017 and stabilize in 2019.

Agricultural prices, whose 2018 average will be similar tothat of 2017, are projected to gain nearly 2% in 2019 asinput costs rise, including energy and fertilizers.

Metals prices are forecast to gain 5% in 2018 andstabilize in 2019, reaching slightly lower levels thanpreviously expected.

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• Over the past two decades, China hasbecome the most important source ofdemand in commodity markets.

• As China’s economy matures and shiftstowards less commodity-intensiveactivities, its demand for commodities islikely to plateau, and other EMDEs areunlikely to fill this gap, suggestinggrowth in commodity demand mayslow.

• For the two-thirds of emerging marketand developing economies that dependon raw materials for government andexport revenues, these prospectsreinforce the need for economicdiversification and the strengthening ofpolicy frameworks.

Commodity Markets Recent Trends: Shifts in Demand

Commodity demand growth, 1997-2017Share of global commodity demand

Sources: BP Statistical Review, World Bank, World Bureau of Metals Statistics, U.S. Department of Agriculture.

Notes: Average annual growth rates over theperiod 1996-2017. Metals includes aluminum,copper, and zinc. Energy includes oil, coal, andnatural gas. Grains includes barley, millet, oats,rice, rye, sorghum, and wheat. Shaded area forgrains indicates contribution from corn, which isheavily used in the production of biofuels.

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Prices are expected to moderate in 2019 as demand slows relative to 2018 and supply rises. Increasing exports of LNG,particularly from the U.S. but also Qatar, will contribute to the gradual narrowing of price differentials between Europe,Japan, and the United States.

Commodity Markets Outlook: Coal and Natural Gas

Natural gas prices Exports of liquid natural gas Energy use, by fossil fuel type

Source: World Bank. Source: BP Statistical Review. Source: BP Statistical Review.Note: Use of fossil fuels in total energy. Excludes use of renewables, nuclear power, and other (e.g. biomass).

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• Trade frictions are an important factor weighing on the outlook for agricultural commodities. The recent imposition oftariffs by China on U.S. soybean imports has already led to a decline in soybean prices, but the longer-term impact willdepend on the degree of trade diversion as well as changing production and consumption patterns.

• Grains consumption are projected to increase moderately in 2018-19. Stocks-to-use ratios for wheat and rice remain atnear record levels. The Grain Price Index is projected to edge up 1 percent in 2019 after an estimated 10 percent risein 2018 resulting from a drought in Europe and Central Asia that affected wheat prices.

Commodity Markets Outlook: Grain

Grain consumption Stocks-to-use ratios for key grains

Sources: OECD, U.S. Department of Agriculture, World Bank.

Food price indexes

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• The French grains harvest was strong in the 2017/18 season, but will be comparatively weaker in the 2018/19 season owing to thebase effects of the previous year. Furthermore, the 2018 summer heat wave in Europe will result in a significantly lower wheat andcorn harvest for the 2018/19 season.

• Other grain-producing countries will compete with France to supply import demand in the MENA region. We highlight Romania,Russia and Ukraine as recurrent competitors. Additionally, Argentina may be a future contender after it made a surprising return tothe export market in December 2015, gaining Egypt's wheat export tender, despite elevated shipping costs.

• FranceAgriMer estimates that French non-EU wheat exports in the 2017/18 season came in at 8.1mn tonnes and will grow byaround 8% to 8.8mn tonnes in the 2018/19 season as Russia's wheat surplus declines.

• France is sending a delegation to Algeria in H119 to ensure its position as the primary wheat supplier to the North African country.

Indicator 2017 2018 2019f 2020fWheat production, '000 tonnes 28 913.0 38 258.0 35 942.0 37 890.0Wheat consumption, '000 tonnes 7 655.0 7 670.0 7 677.7 7 769.8Corn production, '000 tonnes 11 802.0 14 369.0 12 311.0 13 089.0Corn consumption, '000 tonnes 721.0 722.0 729.2 736.4Barley production, '000 tonnes 10 313.0 11 944.0 11 109.0 11 220.1Barley consumption, '000 tonnes 13.0 13.0 13.2 13.5Sources: EuroStat and Fitch Solutions for the forecast

France: Grains Agribusiness Outlook

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Even in years of ample domestic production, Algeria relies heavily on grainsimports from the international market, with wheat being the most prominent. Algeriais expected to maintain elevated levels of grains imports in the coming years as thecountry's chronic wheat production deficit is forecast to expand further out to 2020.More specifically, Algeria will continue to import bread wheat (usually representsaround 75-80% of wheat imports) as it mostly produces the durum variety.

Indicator 2017 2018e 2019f 2020fWheat Deficit, '000 tonnes 8,350.0 8,053.5 7,589.4 7,535.2Corn Deficit, '000 tonnes 4,200.0 4,305 4,449.0 4,590.2Barley Deficit, '000 tonnes 1,050.0 784.8 510.5 622.4A

lger

ia

Volatile weather conditions continue to pose the chief risk to the grain productionforecasts in Morocco. Government support in the form of subsidies is a majorfactor influencing the growth of grain consumption. Morocco will continue to importwheat, corn and barley in vast quantities, despite growing output.

Indicator 2017 2018e 2019f 2020fWheat Deficit, '000 tonnes 7,469 4,154 4,257.9 6,385.3Corn Deficit, '000 tonnes 2,071 2,451 2,534.8 2,594M

oroc

co

Egypt will remain one of the world's largest importers of wheat in the coming yearsas strong output from Europe and the Black Sea region will ensure that Egypt has asteady supply of wheat available to import. The collapse in the local currency'svalue in Q4-2016 will make importing far more expensive in real terms. Egypt'sgrain imports from Ukraine are on the rise as the country looks to secure staplegrains from the Black Sea region.

Indicator 2017 2018e 2019f 2020fWheat Deficit, '000 tonnes 11,300 11,357.4 11,687.2 11,762.7Corn Deficit, '000 tonnes 9,100 9,500 10,085 10,573.4

Sources: USDA and Fitch Solutions for the forecast; Deficit = Consumption - Production

Egy

ptGrain: Import Dependency in North Africa

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Key View:• Demand Side: The five countries where LNG imports

increased the most during H1 of 2018 are all in Asia andall experienced LNG import volumes up at least 12%year-on-year. In China, LNG import volumes grew themost out of other delivery mechanisms (pipeline,domestic production) at 52% p.a. during H1 of 2018.

• Supply Side: Over the course of 2018, new LNG projectsare expected to add 48 bcma of capacity with newadditions primarily coming from the US and Australia; sofar, LNG plant utilization has been stable at around 82%.LNG flows from Qatar to Europe and Egypt decreased tothe benefit of Turkey, South Korea, China, and SouthAsia.

• Pricing Side: Oil and most gas prices rallied in 2018 withthe exception of Henry Hub; as a result, the spreadbetween Asian spot LNG and Asia-landed Henry Hubprices widened to a maximum of USD3.7/mmbtu inFebruary 2018.

• Trade Flow: In the first half of 2018, global LNG flowscontinued to grow at a pace of 8% p.a. vs 12% p.a. in2017. Asia was the main destination for LNG flows, witha share of spot cargoes remaining mostly below 25%.Global tonne-mile demand increased from 930 to 1,070billion, driven mainly by increasing LNG exports from theUS, re-exports from Europe, and rapidly growingChinese demand.

Key change in global flow TANAP officially started inJune 2018, but flows to Turkey are not yet material.Pipeline flows to Europe remained relatively stablefrom January to June 2018, adding up to 89 bcmfrom Algeria and Russia

Key change in global flow China’sstrong gas demand growth is mainlyserved by LNG from Australia, and toa lesser extent from Qatar

Key change in global flowThe US is ramping upLNG exports in 2018 anddelivering 8 bcm to Asia,of which 70% is going toChina and South-Koreaalone

Source: Energy Insights LNGFlow, NDRC, ABB Energy Velocity

Gas & LNG: Market Highlights

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1 Cumulative January-June, including all re-exports except minor flows from Iberia and Japan (both<0.2bcm) in this representation.2 Europe includes EU28 excluding Spain and Portugal plus Turkey, Ukraine, Switzerland, Albania, Belarus, Iceland, and Macedonia. 3 Japan, South Korea, and Taiwan.

Source: Energy Insights LNGFlow

Lower Qatari flows toEgypt and Europewere substituted byincreased volumes toSouth Korea andChina

Over 2017-18, LNGflows grew by 8%p.a., with most flowsdestined for Asia. Asa result, global tonne-mile demandincreased from 930to 1,070 billion,driven mainly byincreasing USexports and re-exports and Chinesedemand

Top 10 exporters 2018

LNG: Flows Between Main Importers and Exporters, 2017-2018

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Over 2017-2022, natural gas demand and supply are expected to grow by 1.6% CAGR, with 50% of the demand growth in Asia

Gas demand growth forecast, bcm. Gas supply growth forecast, bcm.

1

The international gas trade exposure of many countries is expected to be influenced by changes to their domestic supply and demand balances2

Net domestic balance1 in 2017 and 2022, bcm.

1 Defined as total domestic supply minus domestic demand. Indicates import needs or export capabilities

Source: Energy Insights analysis, Energy Insights Gas Intelligence Model, IHS Vantage

Gas and LNG: Medium-Term Highlights

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IFRS 9: What Does it Mean for Banks in General?

The new accounting and regulatoryenvironment has forced banks to face newchallenges that affect the operatingmodels of banks, as well as processes,systems and data.

• The adoption of IFRS 9 will give rise to higher levels ofcredit impairments: an average increase of 13% in lossprovisions compared to the current levels under IAS 39(European Banking Authority).

• It is further expected that the Core Equity Tier (CET) 1ratios will decrease by an average of 45 basis points.

• Smaller banks, which mainly use the standardizedapproach to measuring credit risk, estimate a larger impacton their own fund ratios than the larger banks.

Resolving the weaknesses identified during theglobal financial crisis of ‘too little, too late’ and thiswill hopefully result in a more robust financial systemthat is more resilient and hence better able towithstand shocks.

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IFRS 9: …and Banks in the Region in Particular 56 Listed Banks in GCC

IFRS 9 impact on date of initial applicationincreased the total base provisions by 30.2%.

Out of the total exposure subject to ECL at 31March 2018, 7.9% was in Stage 2.

Average coverage ratio on unimpaired loans(Stage 1 & 2 combined) at 31 March 2018.

9.7% of total assets measured at fair value upontransition to IFRS 9.

CET1 impact of approximately 90 bps from16.0% to 15.1% on recognition of ECL.

Net impairment charge on loans down by 15.1%to US$1.5 billion from Q1’17 vs. Q1’18.

Source: KPMG 2018, FRS 9: Transition impact on banks in the Gulf Cooperation Council. Data represented on this slide excludes Kuwait.

Stage 1 is where credit risk has not increased significantlysince initial recognition. Stage 2 is where credit risk hasincreased significantly since initial recognition. Stage 3 iswhere the financial asset is credit impaired.

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Thanks for Your Attention

[email protected] +965 24959558 / 94022292 (M) www.dhaman.org

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Exploiting Trade Opportunities in a Volatile Regiondhaman.net/en/wp-content/uploads/sites/3/2019/03/...market j (Saudi Arabia), in dollars, is calculated as supply × demand (corrected