CHINA OUTFLOWS | Page 6 BOE STUCK | Page 14 Yuan crunch Odds stacking spurs banks to up against the hoard abroad pound for 2016 Wednesday, December 30, 2015 Rabia I 19, 1437 AH GULF TIMES EXCLUSIVE: Page 2 GULF TIMES Islamic banking assets grew 16% in 2015; Qatar among BUSINESS the key markets Qatar private sector may feel heat if QCB Qatar oil demand to fi rm responds to Fed liftoff By Santhosh V Perumal Business Reporter up in 2016 on transport Qatar, which has not yet responded to the liftoff of interest rate by the US Federal Reserve, can aff ord to wait in the short term, but will have to eventually reciprocate, which may slowdown the private sector that is increasingly becoming a growth engine for the country, according to experts. “Given that consumer price index inflation is benign and strong growth has to emerge, especially from the non-hydrocarbon and industry, says Opec sector, conventional wisdom suggests continuing with an expansionary monetary policy (in the short term),” a banking By Pratap John source said. Chief Business Reporter Highlighting that the 2016 budget has itself spelt out the need for raising finance from domestic markets to plug the more than 26% decline in expected revenues; he said in such a scenario an inter- il demand is expected to grow fi rm- est hike would put additional burden on the exchequer. ly in Qatar in 2016 with transporta- Saudi Arabia, the UAE, Kuwait and Bahrain had increased interest Otion fuels, especially gasoline, and rates, following the Fed’s decision to hike the rate by 25 basis industrial fuels such as diesel and residual points, after keeping it near zero for the last seven years. fuel oil playing a “signifi cant part” in the “We might not need to increase the interest rates based on the overall oil demand growth, an Opec report liquidity and looking at our domestic environment,” Qatar Central has shown. Bank (QCB) Governor HE Sheikh Abdulla bin Saoud al-Thani had Oil demand growth in the region is pro- said in October. jected to reach 0.19mn bpd in 2015, while An investment analyst, who tracks fixed income markets, said the in 2016 it is anticipated to record around QCB’s overnight deposit rate is lower than the US benchmark by 0.21mn barrels per day of growth. 50 basis points despite the 0.25% hike in Fed rates. Oil demand grew strongly in Qatar and “This, along with the accumulated comfortable buff ers, could the UAE this year, shows Opec’s latest aff ord (the QCB to) delay a rate hike,” he said. ‘Monthly oil market report’. In both coun- QCB’s policy rates such as QMR deposit rate stands at 0.75%, tries, transportation fuels – notably gaso- QMR lending rate at 4.5% and repo rate at 4.5%. The deposit and line – dominated the increases. lending rates are announced by the QCB on overnight deposit Elsewhere in the Middle East, solid de- and loan deals between it and local banks through Qatar Money mand requirements have been registered in Market Rate Standing Facility (QMR), respectively. October with oil demand growth in Saudi The Federal Open Market Committee projections suggest that Arabia hitting the highest level in 2015. the rate is expected to rise to about 1.4% by the end of 2016, sug- Oil demand in Saudi Arabia contin- gesting four more increases over the coming 12 months. Qatar ues its positive momentum, growing by The report also showed world oil de- while Europe and Asia Pacifi c are seen de- sia, Russia, China and Colombia has been banking sources said in the long term, it will eventually prompt around 0.34mn bpd, or 15% year-on-year. mand in 2015 was estimated to grow by clining. more than off set by lower-than-expected the QCB, whose monetary policies are linked to riyal’s fixed peg All products recorded positive gains during 1.53mn bpd, around 300,000 bpd higher In the non-OECD region, growth is ex- growth in Canada due to the wildfi re in with dollar, to reciprocate. the month, without exception. than the initial forecast in July 2014. pected to be around 1.1mn bpd, with China Alberta in Q2, 2015, the unexpectedly The Ministry of Development Planning and Statistics, in its Qatar Direct crude burning recorded highest The upward revision has been support- showing slightly lower growth. sharp decline in Mexico, and higher de- Economic Outlook 2015-17 Update, had said domestic interest gains in both percentage and volumetric ed by lower oil prices in the main demand Steady oil requirements are expected in clines in Australia and from Caspian pro- rates in Qatar are likely to rise during 2015-17 on rising funding basis, it said. Transportation, industrial centres, particularly the Organisation for Asia, the Middle East and Latin America. ducers. needs of government and the commercial banks and “accentu- fuels and direct crude burning were the Economic Co-operation and Development Nevertheless, the demand forecast for US oil output increased by a lower- ated” by the Fed liftoff . contributing elements in rising Saudi Ara- (OECD), Americas and Europe. 2016 is subject to considerable uncertain- than-anticipated 810,000 bpd, the report “Over the outlook period, and in circumstances where oil and gas bian demand in 2015, which continues to Motor fuel consumption in the US and ties, depending on the pace of economic said. revenues have ebbed and public sector deposits in the commer- be the pattern of consumption during Oc- Europe was encouraged by cheaper prod- growth, development of oil prices, and In 2016, non-Opec oil supply is fore- cial banking system have fallen, domestic interest rates are likely tober this year. uct prices, along with improving car sales. weather conditions, as well as the impact cast to decline by 380,000 bpd. Growth is to feel upward pressure from rising funding needs of government Demand grew solidly also in Kuwait, Petrochemical consumption also contrib- of substitution and energy policy changes. seen coming mainly from Canada and Bra- and the commercial banking system, which must now comply particularly lifting road transportation and uted to the higher growth. Non-Opec supply growth in 2015 has zil, with declines also expected in the US, with tighter regulatory standards,” the update had said. industrial fuels, gasoline and gas diesel In the non-OECD, demand growth came been revised down by 310,000 bpd since Mexico, Russia, Kazakhstan, the UK and Given the fiscal austerity measures currently being contem- oil. Iraqi oil demand continued its positive mainly from China, India and the Middle the initial forecast to now stand at 1mn Azerbaijan. plated; the private sector, which ought to play a bigger role in the growth trend which started in June, with East. In contrast, Brazilian oil require- bpd. This has been mainly due to the im- Opec’s natural gas liquids (NGLs) are country’s growth story, will face more heat if the rates were to most gains being observed in fuel oil and ments slipped back into a contraction as pact of low oil prices and declining invest- seen increasing by 170,000 bpd in 2016, harden, sources said. gasoline. economic momentum slowed. ments in the oil industry. following a growth of 160,000 bpd in 2015. Considering that government plans to increasingly tap the But, the report said Middle East oil de- In 2016, world oil demand is expected to The adjustment is also attributable to As a result of the current forecasts, the domestic debt market and that the country has now elongated mand growth may be challenged in 2016 grow by 1.25mn bpd, partly supported by downward revisions in both the OECD demand for Opec crude in 2016 is expected maturities for instruments, the sources said the time has come to by some downside risks, which relate to the improvement in global economic ac- and developing countries of 420,000 bpd at 30.8mn bpd, which represents an in- systematically develop the corporate debt market, which could the continuing geopolitical turbulence in tivities. The OECD region is anticipated to and 40,000 bpd, respectively. Higher- crease of 1.5mn bpd over the estimated augur well for the infrastructure development in the country. some countries. rise by 150,000 bpd, led solely by the US, than-expected growth in the UK, Malay- level for 2015. Saudi plans unprecedented subsidy cuts amid oil fall Bloomberg Salman, who ascended to the throne in more than 35% over the past year, Riyadh January, and for an economic council straining the public fi nances of pro- led by his son, Deputy Crown Prince ducers from Venezuela to Iraq. The for- Mohammed bin Salman. In its fi rst eign reserve assets of the Saudi central onfronting a drop in oil prices, months in power, the new administra- bank dropped more than $95bn in the Saudi Arabia reduced energy tion brought in swift changes, over- fi rst 11 months of this year to $627.7bn. Csubsidies and allocated the big- hauling the cabinet and merging min- Signifi cant progress in economic di- gest part of government spending in next istries. versifi cation relies largely on policies year’s budget to defence and security. The new measures are the begin- put in place before the price shock, ac- Authorities announced increases to ning of a “big programme that the eco- cording to an International Monetary the prices of fuel, electricity and water nomic council will launch,” Economy Fund study released in December 2014. as part of a plan to restructure subsi- and Planning Minister Adel Fakeih told It cited Dubai as the main successful dies within fi ve years.