Business

RIYADH — Saudi Arabia unveiled plans on Monday to triple its Value Added Tax (VAT) and halt monthly handouts to citizens, as part of a series of austerity measures, amid record low oil prices and a coronavirus-led economic slump.

      The measures, which state media said would boost state coffers by 100 billion riyals ($26.6 billion), come as the government steps up emergency plans to slash spending to deal with the twin economic blow.

      The austerity drive comes amid an already high cost of living.

      "It has been decided the cost of living allowance will be halted from June 2020 and VAT will be raised from 5 per cent to 15 per cent from July 1," Finance Minister Mohammed Al-Jadaan said in a statement released by the official Saudi Press Agency.

      Jadaan said the measures were necessary to shore up state finances amid a "sharp decline" in oil revenue as the coronavirus pandemic saps global demand for crude.

      The government was also "cancelling, extending or postponing" expenditure for some government agencies and cutting spending on projects introduced as part of the ambitious "Vision 2030" reform programme to diversify the oil-reliant economy, the minister added.

      Jadaan last week warned of "painful" and "drastic" steps to deal with the double shock of the novel coronavirus and record low oil prices.

      Saudi Arabia, the top crude exporter and the Arab world's biggest economy, has shut down cinemas and restaurants, halted flights, and suspended the year-round umrah pilgrimage in a bid to contain the deadly virus.

      Saudi Arabia, along with other Gulf states, imposed a five per cent tax on goods and services in 2018 in a bid to generate additional revenue.

      The country had also introduced handouts worth billions of dollars to citizens, known as the cost of living allowance, to cushion the impact of rising costs.

      But the savings from the austerity measures are unlikely to plug the kingdom's huge budget deficit, which the Saudi Jadwa Investment group said would rise to a record $112 billion this year.

      Riyadh has posted a budget deficit every year since the last oil price rout in 2014.

     In April, the International Monetary Fund projected that the Saudi economy would contract by 2.3 per cent this year.

      Jadaan has said he expected Riyadh could lose half of its oil income, which contributes about 70 per cent of public revenues, as oil prices have fallen two-thirds since the start of the year.

      He said the world's leading crude exporter would borrow close to $60 billion this year to plug the budget deficit.

SINGAPORE — Oil prices were down in Asian trade on Monday after big gains last week on signs of a demand revival as some governments ease coronavirus lockdown measures.

      US benchmark West Texas Intermediate (WTI) was down 2.95 per cent to $24.01 a barrel in morning trade.

      International benchmark Brent was changing hands at $30.27 a barrel, down 2.26 per cent.

      Both contracts were up on Friday, with WTI advancing 25 per cent from the previous week following unprecedented output cuts by major crude producers and hopes of demand returning as some key economies began to ease strict measures to contain the virus.

      It was the first back-to-back weekly gain for WTI since February.

      The number of active US oil rigs also continued to fall in a sign of dampened drilling activity.

      Analysts said traders were locking in profits on Monday, causing prices to fall.

      "Oil prices have eased this morning on light profit-taking flows, helped by data from India suggesting oil demand nearly halved last month," OANDA senior market analyst Jeffrey Halley told AFP.

      Analysts, however, expect the decline to be limited.

      "Crude oil prices continue to find support from increasing supply cutbacks amid the improving macro backdrop," ANZ Bank said in a note.

      "The US shale oil industry has been hit hard by the lower prices, with drilling activity already curtailed sharply."

      Oil markets were battered in April as the virus strangled demand owing to business closures and travel restrictions, with US crude falling into negative territory for the first time.

     But the market found support after some countries from Asia to Europe began rolling back restrictions as they passed the peak of their outbreaks.

      A deal agreed between top producers to reduce output by almost 10 million barrels a day also came into full effect on May 1.

      "While price action is bound to be choppy as economies try to move out of lockdowns, it is probably safe to say that traders have planked a base on oil prices," said AxiCorp global market strategist Stephen Innes.

      "Oil fundamentals are showings signs of improvement by the week."

DAMASCUS — Syria's government on Sunday banned cars with large engines from receiving subsidised petrol in the latest move to curb a hydrocarbon crisis, in the war-torn country, which the government blames on sanctions.

      Heating fuel, petrol and cooking gas have been in short supply over the past two years, with Damascus ordering a series of caps on consumption to try to cope.

      Oil and Mineral Resources Minister Ali Ghanem said there would be no more subsidised fuel for cars with engines larger than 2,000 cc as of Sunday.

      Individuals or companies with more than one vehicle were also no longer allowed to benefit from the subsidies.

      Before these measures, any car owner was entitled to 100 litres of subsidised petrol per month.

      With state help, a 20-litre tank refill used to cost 5,000 Syrian pounds (around $7).

      Now those hit by the new rations will have to pay 9,000 Syrian pounds (around $12) for the same volume.

      Ghanem said the measure "lifted subsidies for only nine per cent" of cars, according to state news agency SANA.

      "Oil derivatives and crude oil supplied to Syria do no just entail international oil prices, but also the cost of transport and financial transactions as a result of the harsh economic measures" imposed on the government, he said.

      Damascus has repeatedly blamed the fuel crisis on Western sanctions.

      The latest petrol rationing has sparked criticism in the streets and online.

      Actress Shukran Murtaja wrote on Facebook: "Can I possibly spend more on my car than on my home? I've decided to sell it."

      Ghanem has said Syria needs 146,000 barrels of crude oil per day, whereas it produces just 24,000 locally.

      Syria used to produce almost 400,000 barrels per day before civil war broke out in 2011.

      But nine years of conflict have ravaged production, and seen US-backed Kurdish-led forces seize control of the largest oil fields in the country.

      Syria is in the grips of a severe economic crisis that has seen the value of the local currency plummet to record lows on the black market, and food prices double in a year, according to the World Food Programme.

DUBAI — Gulf aviation giant Emirates said on Sunday it would take at least 18 months for travel demand to return to "a semblance of normality", despite reporting bumper pre-pandemic profits.

      The Dubai carrier, the largest in the Middle East, posted 1.1 billion dirhams ($288 million) in net profit for the financial year ending March, up from $237 million the previous year.

      It was the 32nd straight year of profit for Emirates, which operates a fleet of 115 Airbus A-380 superjumbos and 155 Boeing-777 airliners.

      It had suspended flights on March 22 before resuming some services two weeks later.

      Emirates Group chief Sheikh Ahmed Bin Saeed Al-Maktoum said the airline had performed strongly in the first 11 months of the fiscal year.

      "However, from mid-February things changed rapidly as the COVID-19 pandemic swept across the world," he said in a statement.

      This caused "a sudden and tremendous drop in demand for international air travel as countries closed their borders and imposed stringent travel restrictions."

      "We expect it will take 18 months at least, before travel demand returns to a semblance of normality," he added.

      Emirates' profits were boosted by a fall in oil prices, causing a 15 per cent decline in fuel costs to $7.2 billion -- around 31 per cent of its operating costs.

      However, the carrier saw its annual revenues decline by six per cent to $25 billion due to the coronavirus pandemic and the closure of a runway at Dubai airport.

      The airline said it had transported just over 56 million passengers in the fiscal year, a drop of four per cent year-on-year, while cargo had declined by a tenth to 2.4 million tonnes.

      The strong US dollar eroded $272 million of profits, while intensive competition also affected the bottom line.

      Even before the coronavirus pandemic paralysed the aviation industry, Emirates had slimmed its orders from both Airbus and Boeing, cutting tens of billions of dollars-worth of aircraft.

      The government of Dubai, whose economy heavily depends on aviation and tourism, said last month it would inject capital into Emirates to help it cope with the impact of coronavirus.

WASHINGTON — With shops and factories closed nationwide due to the coronavirus pandemic, nearly all of the jobs created in the US economy in the last decade were wiped out in a single month.

      An unprecedented 20.5 million jobs were destroyed in April in the world's largest economy, the biggest amount ever recorded, the Labour Department said in a report released on Friday, the first to capture the impact of a full month of the lockdowns.

      That drove the unemployment rate to 14.7 per cent from 4.4 per cent in March -- the highest level since the Great Depression of the last century.

      The United States is home to the world's largest and deadliest coronavirus outbreak, with more than 75,000 fatalities and 1.2 million cases reported as of Thursday, according to Johns Hopkins University.

      The economic damage from the lockdowns to contain the virus has been swift and stunning, despite nearly $3 trillion in financial aid approved by Congress, and there is growing fear that the temporary layoffs will become permanent since some companies will not survive.

      Taken together, 21.4 million jobs were destroyed in March and April, nearly equal to the 23 million positions created during the economy's long expansion from February 2010 to February 2020.

      All major industry sectors felt the pain.

      Leisure and hospitality was the first sector hit and the one bearing the brunt of the impact of the lockdowns, shedding 7.7 million jobs, while manufacturing eliminated 1.3 million positions.

      Those two sectors alone added up to more than the 8.6 million total jobs lost in the two years of the global financial crisis.

      As bad as the data was, the real picture likely is much worse. The Labour Department noted the unemployment rate would have been closer to 20 per cent, but some workers were misclassified as employed when they actually had been laid off because of COVID-19.

Not a good future

      The pandemic has caused many employees to leave the workforce altogether, while others have been forced from full-time jobs into part-time work.

      The measure of the labour force as a share of the total population sunk to 51.3 per cent, its lowest in history, meaning nearly half of working-age Americans are not employed.

      Minorities were hit particularly hard: African American unemployment spiked to 16.7 per cent from 6.7 per cent in March, while the rate for Hispanics was 18.9 per cent, more than triple last month.

      President Donald Trump said on Friday the numbers were expected, and promised: "I'll bring it back."

      "I think it's going to come back blazing," he told reporters on the economy.

      But 57-year-old Sandra Mahesh, who recently lost her job in Maryland and had her unemployment benefits cut off, is not hopeful.

      "I don't see a good future with America right now," she told AFP.

      While Trump proclaimed on Fox News earlier Friday that "even the Democrats aren't blaming me" for the job losses, Democratic presidential candidate Joe Biden lambasted him for his handling of the crisis.

      "Donald Trump utterly failed to prepare for this pandemic and delayed in taking the necessary steps to safeguard our nation against the near-worst-case economic scenario we are now living," Biden said in a statement.

Low-wage destruction

      Echoing the fears of many economists over the fates of small businesses, Biden said, "A lot of them won't open again because they do not have a cushion due to three years of Trump's policies that reward the biggest companies."

      The report showed average wages rose, but economists say that is merely another sign of catastrophe.

      "In April, the job losses were disproportionately concentrated in relatively low-wage sectors like leisure and recreation," Ian Shepherdson of Pantheon Macroeconomics said in an analysis.

      A University of Chicago study based on the huge ADP private payrolls database found that low-wage workers saw employment decline by 35 per cent, a rate three times as high as the nine per cent decline seen by top earners.

      Job losses at the bottom of the wage scale account for one third of the total decline, the authors found.

      "The beginning of this likely 'Pandemic Recession' is unprecedented," co-author John Grigsby said on Twitter.

      "Labour market declines (are) concentrated among low-income workers and small firms, precisely those that are unlikely to have savings to smooth over shock." 

BEIRUT — Lebanon has arrested the head of the money exchange union as it battles to stabilise the value of the country's nose-diving currency on the black market, a security official said on Friday.

      "The head of the money changers' syndicate, Mahmoud Mrad, was arrested (Thursday) at the request of Lebanon's financial prosecutor" on charges of "tampering" with the value of the Lebanese pound, the official said.

      "Money exchange houses have been buying dollars at a very high price," driving up the exchange rate, the source told AFP.

      Mrad is currently under investigation.

      The pound had been pegged to the dollar at 1,500 since 1997, but Lebanon's worst economic crisis in decades has seen its value plunge by more than half on the black market.

      To stem a further devaluation, the central bank ordered exchange offices late last month to cap the rate at 3,200 to the dollar.

      But the pound has since fetched more than 4,000 to the greenback, prompting a government crackdown on incompliant offices.

      To escape prosecution, many money exchange offices have closed their doors.

      But some have continued to operate secretly, sometimes delivering money to their clients' homes.

      "Over the past two weeks, around 50 money changers were arrested," the security source said.

      "Those who have a licence signed a pledge to abstain from tampering with the value of the dollar and were later released," he added.

      "Those without a licence were transferred to the judiciary for investigation."

      The money changers' union called Mrad's arrest a "regrettable incident" and expressed its commitment to central bank orders.

      But it would be "difficult to commit to any pre-determined rate in a fluctuating market controlled by supply and demand", the union said.

      Lebanon is in the thick of its worst economic crisis since its 1975-1990 civil war, compounded by the coronavirus epidemic.

      Forty-five per cent of Lebanon's population now lives below the poverty line, and tens of thousands of people have lost their jobs or seen salaries slashed because of the downturn.

      A liquidity crunch has seen banks halt dollar transfers and withdrawals, forcing depositors to deal in the free-falling Lebanese pound.

      To ease demand for the greenback, commercial banks in April started to allow pound withdrawals from dollar savings at double the official rate.

      But the value of the dollar on the black market has continued to climb.

      "We are forced to buy dollars on the black market to supply dollars to businessmen, especially those who trade in food," one money exchange told AFP on condition of anonymity.

      "The central bank and commercial banks are not giving out dollars, so the only way to find them is on the black market."

      Last week, the Lebanese government adopted an economic reform plan and signed a request for financial assistance from the International Monetary Fund.

      The roadmap is based on an exchange rate of 3,500 to the dollar. It advocates a floating currency that will gradually lose value against the dollar.

NEW YORK — Global stock markets rose on Friday as optimism over the easing of coronavirus lockdown measures and reopening economies outweighed signs that the planet may be headed for its worst downturn since the Great Depression.

      A massive drop in employment in the United States last month, although historic, was not quite as bad as feared and failed to put much of a dent in market confidence.

      Nonfarm payrolls fell by 20.5 million in April, the US government reported, which compares to the 21 million market consensus established by data firm Factset.

      "Brutal though the numbers are, they are marginally better than economists' expectations and this triggered an initial rally in US equities," said Ulas Akincilar, head of trading at Infinox.

      Analysts also pointed to conciliatory statements from Chinese and American officials following talks, which lessened fears of a revived trade war.

      Major US indices were in positive territory the whole session, with the Dow finishing up more than 450 points, or 1.9 per cent, at 24,331.32.

      The gains were the latest instance of markets looking at economic reports that are bad, but not significantly different than expected, and instead focusing on positive news such as the gradual restart of economic activity in some parts of the United States and Europe.

      Art Hogan, chief market strategist at National Securities, said investors believe the economy will bottom out in the second quarter and improve after that.

      Investors do not anticipate a second wave of coronavirus cases bad enough to lead to widespread lockdowns in the US, he added.

       'Darkest day'

      "Markets knew this was coming but it will still go down as the darkest day in the country's economic history," said Ayush Ansal at Crimson Black Capital, calling the data "harrowing."

      In Europe, London's closure for VE Day took much of the usual volume out of the trading day, but Paris and Frankfurt were open and up by a per cent or more at the close.

      But some analysts advised caution against underestimating the depth of the economic crisis, with Michael Hewson at CMC Markets observing that "it almost appears that the worse the US data is, the higher stocks seem to go."

      The easing of lockdowns also provided another boost to beaten-down oil markets.

      "People are getting back in cars to commute or merely to get out of the house, which is excellent for gasoline demand as that is providing the first phase in a bounce to the oil price recovery," said Stephen Innes of AxiCorp.

SAN FRANCISCO — Google and Facebook have told most employees to keep working from home for the rest of the year as part of a response by the tech giants to the deadly coronavirus pandemic.

      Chief executive Sundar Pichai told Google staff at an all-hands meeting that its remote work policy will be extended until 2021, the Silicon Valley giant confirmed on Friday.

      Any return to offices was expected to be incremental and staggered, according to the company.

      The news came along with US media reports that Facebook is also letting workers tend to their jobs remotely for the rest of this year.

      Google employees who need to return to offices will be able to do that in the next month or two, with added safety measures in place due to coronavirus concerns, but most of the staff will continue working from home.

      Facebook's updated plan is to re-open offices in early July, but let people work from home if they prefer until 2021, according to reports.

LONDON — Bitcoin miners, whose computer processors enable the running of the world's most popular virtual currency, will soon face an event that takes place every four years and alters the profitability of the hi-tech industry.

      The so-called halving is when cryptocurrency-mining companies and individuals find out the reduced payment that they will receive in return for their contribution to the system's smooth operation.

      Bitcoin was created in 2008 by a person or group writing under the pseudonym Satoshi Nakamoto as a peer-to-peer decentralised electronic cash system.

      The virtual unit was once the preserve of internet geeks and hobbyists, but it has since exploded in popularity, with mining performed by huge banks of computers.

      - How does mining work? -

      Bitcoins are traded via a decentralised registry system known as a blockchain.

      The system requires massive computer processing power in order to manage and implement transactions.

      That power is provided by miners, who do so in the hope they will receive new bitcoins for validating transaction data. 

      The system poses a complex computer puzzle to decide which miner wins the privilege to validate the block and thus receive the reward.

      "To understand halving, it is important to remember the role of miners, who are basically responsible for the bitcoin network security," ThinkMarkets analyst Fawad Razaqzada told AFP.

      "Each time a block of bitcoin transaction takes place, they need to be verified by miners. The miner that verifies each block gets a reward for its work with more, newly created, bitcoins."

       What is halving? 

      This occurs every four years and basically involves the halving of the reward from bitcoin mining.

      The cryptocurrency's first "halving" occurred in November 2012, and the second in July 2016. The third is widely expected to take place around next Tuesday. 

      "Halving will impact profitability of mining bitcoin because work and resources will need to double in order to achieve the same reward as before," added Razaqzada.

      "However, if the value of bitcoin appreciates significantly then this will offset some of the costs."

      Commercial mining operations often occupy huge hangers or warehouses, and consume large amounts of electricity to power and cool the computers, which is a considerable cost in addition to equipment.

       Why reduce the reward? 

      The reward was originally set at 50 bitcoins but it was subsequently reduced to 12.5 and will likely reach just 6.25 next week.

      The amount has been trimmed over time in order to implement an overall global limit of 21 million bitcoins.

      "With the supply of bitcoins mandated to eventually reach the limit of 21 million, the creator(s) of the digital currency had decided that these rewards must decay exponentially, otherwise supply will not be controlled," added Razaqzada.

      "So, the network is programmed to cut the reward every 210,000 blocks, or about every four years," he said, noting that the halving date depended on mining activity.

      What is bitcoin worth? 

      Bitcoin stood on Tuesday at $9,200 after a choppy few months, linked to coronavirus markets turmoil. 

      That compares with $7,100 at the start of the year, according to Bloomberg data, but it remains far from the record high $19,511 hit in December 2017.

      "February and March were rough months for bitcoin like other risk assets, but the digital currency has staged the most impressive recovery," said Razaqzada.

      "This is partly due to the fact some investors consider bitcoin to be a safe-haven asset, while some have undoubtedly bought speculatively ahead of the so-called 'halving' event in anticipation (that) we may see the value of the cryptocurrency appreciate."

BEIRUT — Lebanese President Michel Aoun said on Wednesday that financial assistance from the International Monetary Fund (IMF) was "mandatory" for an economic recovery, as the country sinks deeper into financial turmoil.

      Lebanon is in the thick of its worst economic crisis since the 1975-1990 civil war, compounded by the coronavirus epidemic.

      Forty-five per cent of Lebanon's population now lives below the poverty line, and tens of thousands of people have lost their jobs or seen their salaries slashed as a result of the downturn.

      Aoun on Wednesday met with most heads of the country's main parliamentary blocs to discuss the broad outlines of an economic reform plan that the government adopted last week but parts of which still require parliamentary support.

      The economic roadmap comes with a government request for IMF assistance, which Aoun called "a mandatory path for recovery if we negotiate well and we are all fully committed to... reform".

      Parliament speaker Nabih Berri and Samir Geagea, head of the Lebanese Forces, a Christian political party, were among the attendees.

      But political heavyweights such as former prime minister Saad Hariri boycotted the session over objections to the current government's approach to the economic crisis.

      Aoun said the rescue plan was not the responsibility of a single group or party.

      "Getting out of the dark tunnel that we are crossing is everybody's responsibility," he said.

      This reform plan, the president said, "aims at correcting the structural imbalances" of a free falling economy, but its success requires "sacrifices"

      The roadmap -- long seen as a prerequisite for external financial aid -- aims to reduce Lebanon's enormous public debt burden from 170 per cent of GDP to less than 100 per cent.

      It calls for a restructuring of the banking sector and the country's enormous debt pile, as a well as tax hikes and a freeze in state hiring, among a raft of other reforms.

      It comes against the backdrop of a series of economic woes, which include a dollar liquidity crunch, soaring inflation, the country's first sovereign debt default and a devaluation of the Lebanese pound.

      The pound has been selling for more than 4,000 to the dollar on the black market in recent weeks in a record low.

      Although the official exchange rate remains fixed at 1,500 to the dollar, the government's reform plan is based on an exchange rate of 3,500 to the greenback.

      "What we are offering is not a sacred text, it can be developed" further, Prime Minister Hassan Diab said at the meeting.

      "We are presenting this plan to you because it is not the property of the government," he said. "It is a work programme for the state."