The GCC forecast is in stark contrast to the International Monetary Fund’s (IMF) global economic outlook, recently predicting that 2023 will be the weakest year for global economic growth since 2009 at 2.7%, down 0.9% from what it predicted in ‘the first part. of 2022 – excluding the impact of the Covid-19 pandemic, says First Abu Dhabi Bank (FAB), one of the largest banks in the UAE and one of the world’s leading financial institutions, in its report 2023 Global Investment Outlook: ‘ Entering a New Cycle’ .
The difference is particularly striking compared to western economies, with the IMF forecasting just 1.0% GDP growth in the US this year, and just 0.5% in the Eurozone.
Egypt growth 4.7pc
Meanwhile, Egypt’s economy is expected to grow by 4.7% in 2022/2023, down from FAB’s previous estimate of 5.7%.
In the financial markets, the economic performance of 2022 may exceed the first quarter of 2023, but the report predicts that the markets should start to recover by the summer.
FAB analysts believe that the US interest rate, which is at 4.33% and which has been causing fear among investors, will rise at the end of this year, and perhaps interest rates will decrease in the first quarter.
Rapidly rising interest rates have made traditional investments such as bonds and equities look less attractive to investors than savings accounts, but when predictions of a U.S. recession materialize, this should act as a way to secure risky assets, especially with stock prices. it may drop soon after it arrives.
Recovery of benefits
Alain Marckus, MD and Head of Asset Management, FAB Private Banking Group, said: “Although as investors we cannot be sure what lies ahead, the negative story of 2022 is now about to be played out and we are very close to the end of what has been a difficult stock market. bearish for stocks and bonds.By the middle of the current year, financial investors will be running their rules on the best returns that can be expected in 2024.
“Equity markets tend to look ahead about 9-16 months. Smart investors also know that unexpected ‘X’ events can and do come to ruin things sometimes. Therefore, it is too late to sell, because investors may not be able to recover until the recovery of A ‘V’ shaped market has set in. Investors should look to deliver in the coming months.”
The FAB’s opinion shows that the GCC region continues to be supported by strong oil revenues for hydrocarbon exporters, which has contributed to the security of the region that does not use oil and gas and has helped to return public funds to higher levels.
However, diversification of the non-hydrocarbon economy, a key component of the GCC’s economic transformation, will be important in cushioning members’ economies from the global economic downturn this year.
Encouraging areas include the growth of tourism, with some GCC countries reporting more tourists in 2022 than before the pandemic. Industrial production has continued to grow throughout the region, including Saudi Arabia and Egypt.
Although the report shows a strong economy, the region is not immune to the global crisis. Inflation is expected to reach 5-6% in the greater GCC region in 2022, reaching levels not seen in more than a decade but nearly half that in most western countries. FAB predicts that GCC inflation will be around 3% in 2023.
The picture of Egypt is very difficult, affected by the high prices of food and energy and the recent depreciation of the Egyptian pound, and inflation will exceed the weight of the country’s economy in 2023. more in May or June in line with further monetary tightening by the US Federal Reserve.
Market trends are shaping future growth
Along with key economic indicators, the FAB Global Investment Outlook looks at a number of factors driving future growth, including a focus on certain industries.
The sections covered in this report are:
• Carbon trading of crude oil
• What is happening in Mena and Egypt
• Trends in emerging markets
• Outlook for developing markets
• Real estate
• ESG (environmental, social and governance)
An upcoming opportunity
Emerging opportunities also include increased financial leverage associated with sustainability. It says that the ‘Green’ bond market reached a value of $2 trillion, and the ‘sustainable’ bonds – including nature, stability, sustainability, and change – reached a combined value of $3.5 trillion at the end of the agreement. the third quarter of last year, according to the Climate Bonds Initiative report sponsored by FAB and launched at COP27.
The GIO report also shows the growth of carbon trading in the Mena economic zone, building on the establishment of the most popular trading platforms in the GCC and MENA regions in the years 2022. This is included in the UAE, where the partnership between Abu Dhabi Global Markets ( GCC) ADGM) and AirCarbon Exchange (ACX) created the world’s first regulated carbon trading system.
The ADGM also became the first regulatory body for carbon credits and offsets as a natural resource, a group of financial instruments, as well as the exchange of licenses and infrastructure that use the land and export markets.
Other regional initiatives include the establishment of a Voluntary Carbon Market in Saudi Arabia, and the Egyptian government’s launch of Africa’s first voluntary carbon market at the COP27 climate conference in November.