Business

AMMAN — Amman Chamber of Commerce (ACC) President Issa Murad on Monday demanded that the government make incentives for companies employing local workers, suggesting a reduction in social security deductions to help create more jobs.

Murad delivered his remarks during a meeting where two agreements were signed with Armoush Tourist Investments Company and Sameh Mall to train and employ 850 young people.

He said the private sector is interested to make use of graduates and their energies, especially when they have necessary skills to do their designated tasks within a friendly and innovative environment, as the fear of unemployment is affecting everybody. 

The ACC conducted practical studies that revealed education output does not match the demands of the labour market, which is one of the most significant reasons behind the increase of unemployment among new graduates, according to Murad. 

The two agreements that Murad signed with the chairmen of both companies include training young people and employing them for a year at the companies' branches, Murad said, adding that the chamber will help in supporting the process.

Signing the agreements is part of the rehabilitation programme for recruitment launched by the ACC last year in cooperation with the Ministry of Labour and the Employment-Technical and Vocational Education and Training Fund to equip new graduates with necessary experience to enter the job market.

The initiative, which cost more than JD2 million, has so far trained around 1,000 young people. 

It includes two parts: the first is theoretical, taking place at the ACC's rehabilitation and recruitment centre, and the second is practical training at the workplace where trainees are paid salaries, part of which are paid from the chamber. 

Labour Ministry Secretary General Hamadah Abu Nijmeh, who attended the signing ceremony, voiced his appreciation of the chamber's efforts in the field of offering facilitations and support to create job opportunities for Jordanians through its 46,000-strong network in Amman alone. 

Moreover, he stressed the importance of the Ministry of Labour directorate, inaugurated six months ago at the ACC premises.

Ahmad Armoush, chief executive officer (CEO) of Armoush Tourist Investments Company, stressed the importance of cooperation among service institutions and the private sector, while Khalid Rababaa, CEO of Sameh Mall, said most of the employees are Jordanians.

CAIRO — "Any rice?" says the woman, leaning into a shop in Cairo and brandishing a green smartcard that carries her family's food credits. The shopkeeper shakes his head: "Only sugar."

Behind him, more than half the shelves are empty. Rice and cooking oil are nowhere to be seen.

Tens of millions of Egyptians rely on state subsidies provided as credits on smartcards they redeem against household staples each month. But in recent weeks, imported commodities like cooking oil have been in short supply as a dollar shortage makes it harder for state importers to secure regular supplies.

Shortages persist across the capital and in cities from Alexandria in the north to Minya in the south.

"When we ask the grocer he says there's nothing but sugar. Every day he says, tomorrow, tomorrow, but we are half way through the month now and it's not resolved," said Samia Mohamed, a housewife, at a grocery in southern Cairo.

"Prices elsewhere are expensive. We don't know what to do," she added.

Affordable food is an explosive issue in Egypt, where millions live a paycheck from hunger and economic discontent has helped unseat two presidents in five years.

The dangers are not lost on President Abdul Fattah Al Sisi, whose government has sought to protect poor Egyptians from the worst effects of double-digit inflation.

The smartcards are accepted at a network of government-run supermarkets as well as 26,000 privately owned grocers and grant each family member 15 pounds ($2) of credits a week plus five loaves of bread a day from participating bakeries.

The supply ministry also oversees a network of stores and kiosks offering subsidised food outside the smartcard system.

Goods of all kinds are available at ordinary supermarkets not participating in the smartcard scheme but poor consumers would have to fork out market prices that many can ill-afford.

But even at the discount shops, stocks are low.

At a kiosk, emblazoned with the Egyptian flag and the words "together against high prices" in a historic part of Cairo, a shelf labelled "local rice, 3.25 per kilogramme" is bare.

"Oil is in short supply. The supplies of oil aren't stable," said the manager of the kiosk, which opened in December as part of a government effort to ease food inflation. "Sometimes we are short of rice, sometimes sugar... Sometimes people don't like the variety. We don't get enough."

Supply Minister Khaled Hanafi said on Thursday that stocks at state food companies were being replenished with dozens of products which would be available to smartcard-holders in March.

‘Like beggars’

Though essential foods are high on the priority list, a foreign exchange shortage has made it more difficult for Egypt's state food importers to pay promptly over the past year. Worst affected by the shortages has been cooking oil, with payment problems putting suppliers off bidding in state tenders.

Egypt's state importers have cancelled three cooking oil tenders in the last three months alone after not receiving enough offers or because prices were too high.

Traders say they now have to factor in the cost of expected delays, particularly after the government brought in measures which mean they are not paid for up to six months.

"You are talking millions of dollars here. These delays are costly," indicated one trader. "They make you feel like a beggar when you chase your money, not answering calls, not responding."

Egypt has struggled to revive its economy since the 2011 Arab Spring uprising drove away tourists and foreign investors. Foreign exchange reserves have more than halved since then, leaving Egypt with scarcely enough to cover three-months worth of imports.

Pressure has mounted on the central bank to devalue the pound but it has resisted a major adjustment for fear of stoking inflation. Instead, it has imposed strict limits on dollar deposits and transfers, making it harder to clear shipments.

A lack of clarity on rice policy has also caused confusion in the market. Egypt banned rice exports in 2008 but lifted the ban in October after a bumper harvest. It issued a rice import tender last month only to cancel it again and grocers say there is not enough rice in state stores.

Bread rations

Occasional shortages have been the norm for the past year, but supply issues were compounded in recent weeks by a change in the rules surrounding unclaimed bread rations.

Participating grocers source most of their goods from the state-run Food Industries Holding Company (FIHC) but until this month would receive cash from the supply ministry equivalent to any unclaimed bread credits. They would then use the cash to buy other goods on the open market to meet the demand.

Since February 1, they have been refused cash and been offered  goods supplied by the FIHC instead.

But grocers say the FIHC is unable to meet demand.

"The issue is not one of oil and sugar. We used to buy 100 products and now we can't find 10... More than 50 per cent of the supply stores are empty and there are no goods," indicated Majed Nadi, spokesman for the General Grocers' Syndicate.

"They expected to be able to meet all the needs but they couldn't," he said.

Hanafi said 2,000 tonnes of rice and 2,500 tonnes of oil were being supplied daily to replenish stocks in addition to goods including pasta, tea and canned tuna, which have not been in short supply.

FIHC bought 42,000 tonnes of sunflower and soy oils on Wednesday. A previous shipment was due to arrive on February 10-20.

Supply ministry spokesman Mahmoud Diab said the change was intended to reduce prices because FIHC could secure economical bulk deals that individual grocers could not.

"The idea is to bring citizens higher quality goods at lower prices," he told Reuters. "It is for the good of the people."

DUBAI — Fuel subsidy reforms by Gulf Arab states will help reduce pressure on budgets, but are not enough to offset deficits resulting from low oil prices, ratings agency Moody's said.

Savings from increased fuel prices in the six Gulf nations will average 0.5 per cent of gross domestic product (GDP), around $7 billion, this year against an estimated deficit of 12.4 per cent of GDP, it indicated.

"Recent moves to reform subsidies signal political willingness to address the damaging effect of low oil prices on budgets," said Moody's analyst Mathias Angonin.

"However, they fall short of the scale of economic and fiscal reform required to achieve budget balance," he added.

All the six Gulf Cooperation Council (GCC) states, which depend heavily on oil income, have reduced generous fuel, electricity and other subsidies to cut spending in the face of falling revenues.

The GCC groups energy-rich Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the United Arab Emirates. All of them posted a budget deficit last year.

Moody's forecast that the price of oil will average $33 a barrel in 2016, way below its price of around $110 a barrel before it began to decline in mid-2014. It estimated the price to be $38 a barrel next year.

"While the GCC governments' balance sheets remain solid on a consolidated basis, we anticipate a sharp deterioration in the governments' net asset position as a consequence of the decline in oil prices," Moody's said.

The reforms will however lead to efficiency gains, reduce distortions caused by very low prices and cut domestic energy consumption, it added.

Moody's expects GCC states to take other fiscal measures such as raising corporate taxes and introducing value-added taxes in the face of a long period of low oil revenues.

Austerity measures, loan negotiations and state asset sales are all on the menu of moves deployed to counter the brutal nosedive in the oil price.

"These are bad times for oil producers and their creditors," Gabriel Sterne, head of global macro research at Oxford Economics, indicated in a note.

National budgets need to adjust further, financial buffers are inadequate and proper adjustment to the new situation may be delayed by weak governance, he warned, calling the assessment "bleak".

In Russia, which depends on oil and gas sales for half of government revenues, Economy Minister Alexei Ulyukayev warned that his country's budgetary situation was "critical", and that it was now urgent to implement a privatization programme that is expected to feature sales of stakes in state-owned companies such as oil giant Rosneft.

"It is no longer possible to wait," he said, just as Russia, a top global producer, was pumping oil at record levels to offset falling prices with increased volumes.

The government in Moscow has already admitted that tumbling oil prices will push it to slash spending as it struggles to keep the deficit to under 3 per cent of GDP. 

'A source of risk'

"Government deficits are growing strongly. And to maintain social peace and military spending, producer countries are in no position to cut public spending," said Olivier Garnier, chief economist at SocieteGenerale.

Trying to reduce spending regardless would be "a source of risk", he told AFP.

Last month, the International Monetary Fund warned that the sharp collapse in the price of oil is proving more of a drag on the global economy than a stimulus, pointing to the dire budgetary situation that oil exporting countries now find themselves in. 

There are big differences between the various oil-exporting countries, many of whom had accumulated vast dollar reserves while the going was good in the commodities markets. 

But even the world's biggest exporter, Saudi Arabia, is feeling the pain.

The kingdom reported last month that its fiscal reserves dropped to a four-year low of $611.9 billion last year, from $732 billion in 2014, as the government sought to finance a budget deficit caused by plunging oil revenues.

In December, Saudi Arabia had reported a record deficit and announced austerity measures, including cuts to fuel subsidies.

African producer Nigeria, meanwhile, boasting no such reserves, is seeking loans from the World Bank, the African Development Bank and other lenders to help cover this year's massive budget deficit, the government and bank officials said on Tuesday.

The budget plan, which includes sharply increased spending to stimulate the economy, calls for 1.8 trillion naira ($9 billion) to be covered by borrowing from multilateral organisations— which the government believes is the cheapest funding option.

The possibility for cash-strapped nations like Nigeria to get a friendly hearing from global lenders means that situation is perhaps not yet dramatic, according to LudovicSubran, chief economist at Euler Hermes.

"Today, exporters in Africa have enough foreign reserves for at least another year. The others are being helped by international institutions," he told AFP.

Limited room for manoeuvre

Maybe so. But while some countries may obtain "soft loans" to tide them over, other credit lines come with strings attached, notably austerity measures or forced asset sales — and therefore the danger of social trouble from already impoverished populations.

"The room for manoeuvre is very limited. Growth is slowing and adjustment is very costly because of austerity and the recession," Christine Rifflart, an economist with French think tank OFCE said in a recent report.

Venezuela, which is sitting on the biggest known oil reserves from which it derives 96 per cent of its foreign revenues, has been devastated by the drop in prices.

"The economic crisis in Venezuela will deepen," analysts from research group Capital Economics wrote in a recent note. "In the absence of a renewed rebound in oil prices a government debt default looks increasingly likely."

AMMAN — The industrial estate in Maan has received a Chinese investment delegation that wanted to check on incentives and investment opportunities available in the governorate, Maan Development Company (MDC) Chief Executive Officer Hussein Kreishan said Sunday.

The visit, related to processing raw material and solar energy, will achieve a quantum leap in expanding the base of investment in the industrial estate, according to Kreishan.

Speaking at a meeting with the representatives of the large-scale Chinese companies, Kreishan highlighted the competitive advantages of  Maan in terms of strategic locations, infrastructure, and financial incentives of the investment law. 

He also showcased investment opportunities in the governorate, for which the MDC conducted feasibility studies. The opportunities lie in the field of silica sand, renewable energy and construction materials, Kreishan said, adding that the delegation's visit included a tour to several factories in the industrial estate as well as the MDC headquarters.  

BERLIN — Germany doubled its arms exports last year to around 8 billion euros ($8.9 billion), government figures showed on Friday, in contradiction to Berlin's pledge to rein in the amount of weapons Europe's biggest economy sells abroad. 

The increase was driven largely by "special factors", Economy Minister Sigmar Gabriel explained when presenting the data.

The economy ministry is in charge of approving arms exports and Gabriel had promised to limit them when he took up his position at the end of 2013. 

In particular, Berlin wanted to curb exports of light weapons and track them closely once they had left the country. 

Gabrial cited big-ticket contracts for tanker airplanes to Britain and guided missiles to South Korea among the "special factors". 

The volume of exports was also inflated by a delivery of Leopard 2 tanks to Qatar, a contract approved by the previous government in 2013, the minister explained. 

If it had been up to him, "I would not have approved them," he insisted. 

Before Gabriel's Social Democrat SPD Party agreed to share power with Angela Merkel's conservative CDU Party, the CDU had been in a coalition with the liberal FDP. 

Gabriel accused the previous administration of "not applying the rules as they should have been applied". 

Overall, Gabriel insisted the government was making progress in achieving its declared goals and in 2014, the exports of light weapons had dropped sharply. 

Detailed arms exports figures for 2015 are to be released in June. 

Official data also showed that Germany clocked up its highest-ever trade surplus in 2015 as both exports and imports powered ahead to new records.

German exports jumped by 6.4 per cent to 1.196 trillion euros ($1.3 trillion) in the whole of 2015 and imports advanced by 4.2 per cent to 948 billion euros, the federal statistics office calculated.

That meant that the trade surplus, the balance between exports and imports, grew to 247.8 billion euros, its highest-ever level, from 213.6 billion euros a year earlier, the statisticians indicated. 

The trade surplus is a key gauge of an economy's comparative strength and underlines the robustness of Europe's biggest economy amid the current global economic uncertainties.

German-made goods were in strong demand all over the world last year, with exports to the European Union (EU) rising 7 per cent and exports to other countries rising 5.6 per cent, Destatis pointed out.

Within the EU, exports to the eurozone climbed by 5.9 per cent, while exports to European countries outside the single currency area grew by 8.9 per cent.

In December alone, however, both exports and imports declined by 1.6 per cent in calendar- and seasonally-adjusted terms, meaning that the trade surplus contracted slightly to 19.4 billion euros, Destatis said.

Separately, German businesses are expecting to see a further drop in exports to Russia this year to their lowest level in 10 years, even if companies continue to regard it as a market with enormous potential, a specialist trade organisation found on Friday.

German exports to Russia plummeted by 25.5 per cent last year, weighed down by the plunging ruble and the economic crisis in Russia, according to data published by the Committee on Eastern European Economic Relations. 

"Compared with the record year in 2012, German exports to Russia have fallen by nearly half in the past three years from 38 billion euros [$42 billion] to 21 billion euros," indicated Wolfgang Buechele, who heads the committee and is chief executive of industrial gases group Linde.

"And according to our estimates, exports will drop by around 10 per cent this year and fall below the 20-billion-euro mark for the first time since 2006," Buechele said.

"At the moment, Germany's foreign trade is booming, helping to offset" the difficulties in Russia, said Rainer Seele, president of the German-Russian chamber of commerce and head of the Austrian oil and gas group, OMV. 

But that might not always be the case, as the outlook for a number of emerging economies clouds over, he warned. 

German businesses have been highly critical with regard to the economic sanctions slapped on Russia by the EU. But they believe the wind will change and the outlook for the country will brighten this year. 

"Our Russian partners insist that cooperation with Europe has a different quality and reliability than with other partners," Seele added. 

Buechele and Seele were part of a delegation of German business leaders who met Russian Prime Minister Dmitry Medvedev on the sidelines of the Munich Security Conference this month.

At that conference, Medvedev said tensions between Russia and the West had sent the world into a "new Cold War". 

But the fact that Medvedev attended the Munich conference alone was a good sign, Buechele suggested, saying Russia was "holding out a hand" to Europe. 

"Everywhere in Russia, we seeing and hearing the same signal: we're re-opening ourselves again to Europe, to cooperation with German companies in particular," said Seele. 

"The German economy is ready and continues to see enormous potential" in Russia, he added. 

TUNIS — A Jordanian delegation held several meetings with Tunisian officials last week, during which they discussed challenges facing the flow of Jordanian products, delays at Tunisian harbours and difficulties to register cosmetics.

They also looked at establishing joint investment projects in the medical equipment and other industries, in addition to enhancing investment partnerships in the tourism sector. 

The delegation, headed by Amman Chamber of Commerce President Issa Murad, tackled ways to benefit from agreements signed between the two countries, exchange expertise in the fields of industrial estates and free zones, and increase exports.

Murad said Tunisian President Beji Caid Essebsi's visit to the Kingdom in October encouraged the Jordanian private sector to penetrate the Tunisian market and search for new markets as alternatives for Jordan's traditional markets.

He added that the Kingdom seeks to benefit from the Tunisian expertise in reaching European and African markets, especially due to the closure of traditional markets because of the security and political events in the region.

Jordan European Business Association's (JEBA) board of directors on Saturday discussed with Confederation of Tunisian Citizen Enterprises' (CONECT) executive office means to enhance bilateral cooperation and drawing up a joint programme to help Jordan penetrate European markets.

JEBA President Jamal Fariz commended the Jordanian-Tunisian relations, stressing the importance for these ties to reflect on the commercial and investment sectors. 

Transportation was among the biggest obstacles for exports between the two countries, which requires considering the establishment of a maritime route and increasing cooperation in air transport, calling for enhancing collaboration in the tourist sector. 

CONECT President Tareq Sharif said there is great potential to enhance bilateral economic cooperation and establish partnerships between both countries' private sectors to contribute to boosting commercial exchange.

RIYADH — The growing pain of plunging oil prices has galvanised Saudi Arabia to look beyond its rivalry with Russia and Iran over regional conflicts and pursue cooperation on production, analysts say.

But there are doubts about whether it will last because mutual suspicions remain deep and the Sunni-ruled Gulf kingdoms are loath to cede market share to Shiite Iran as it emerges from years of sanctions.

The determination of Saudi Arabia, the world's top oil exporter and de facto leader of the Organisation of Petroleum Exporting Countries (OPEC) oil group, to protect its market share has contributed to a slump in oil prices to 13-year lows.

However, in the first sign of OPEC and non-group producers working together since the rout began, Saudi Arabia and Russia said on Tuesday they would freeze output, if other major producers do the same.

The move may be a signal from Riyadh that the fall in oil prices has gone too far, said Jason Tuvey, an analyst at research firm Capital Economics.

"They are obviously feeling the pain, particularly with a fiscal squeeze now well under way," Tuvey told AFP.

Qatar, Venezuela and Kuwait also agreed to the output freeze. Iraq, OPEC's second-largest producer, said it was prepared to cooperate while the United Arab Emirates (UAE) gave its backing.

Iran, which is returning to world markets as sanctions are lifted under a nuclear deal, said after talks in Tehran that it too supported the move, but stopped short of committing itself to any production curbs.

Even so, the rare show of cooperation between the Middle East's foremost Sunni and Shiite powers, which back opposing sides in Syria and other conflicts, sent oil prices soaring on world markets.

Political and military rivalries will not kill the output deal since both sides need money, said oil expert Jean-Francois Seznec of Georgetown University.

They "can cut production, increase income and still fight each other", he added. "A valid [oil] deal would make it easier to talk about a settlement in Syria."

No output cut 

Saudi Arabia said Thursday that the freeze plan did not mean it was considering reducing output.

"If other producers want to limit or agree to a freeze in terms of additional production that may have an impact on the market but Saudi Arabia is not prepared to cut production," Foreign Minister Adel Al Jubeir told AFP in an interview.

"The oil issue will be determined by supply and demand and by market forces. The kingdom of Saudi Arabia will protect its market share and we have said so," he said.

Saudi Arabia, which is also leading a costly military campaign against Iran-backed rebels in Yemen, posted a record $98 billion budget deficit last year.

Riyadh expects a deficit of $87 billion in 2016, forcing it to introduce a series of austerity measures including cuts to subsidies on fuels, electricity and others.

The International Monetary Fund has cut its forecast for Saudi economic growth to just 1.2 per cent in 2016, the lowest in seven years.

On Wednesday, Standard and Poor's downgraded Saudi Arabia's credit rating for the second time since October.

"Saudi Arabia and other Gulf states are certainly suffering from low oil prices although they have strong fiscal buffers," Saudi economist Abdulwahab Abu Dahesh said.

"They need higher oil revenues to reduce pressures on their currencies, domestic consumers and public spending," Abu-Dahesh adde.

Mistrust lingers 

Saudi Oil Minister Ali Al Naimi insisted after announcing the output deal in Doha that low oil prices were not a problem for the kingdom.

Riyadh has fiscal reserves of more than $600 billion. Fellow Gulf countries within OPEC also have large cushions, but other members such as Venezuela, Algeria and Nigeria are not so fortunate.

Iran has suffered huge losses because of sanctions that shut off its access to much of the world oil market, while Russia has seen its recession-hit economy severely damaged by the price slump.

"The fact that Russia and Saudi Arabia are talking is a big plus" for oil prices, Seznec said.

Mistrust and the battle for market share remain the most serious obstacles to a lasting and effective deal, according to analysts.

While Saudi Arabia is willing to cut production if it sees that others will follow, it doubts Russia will do so, Abu-Dahesh remarked.

"Saudi Arabia simply does not trust Russia or Iran because of political and economic rivalries," he said. "I don't think Gulf states want to lose their market shares to Iran. I believe that the fight for market share will only intensify."

DUBAI — Saudi Arabia's financial markets barely blinked on Thursday after its debt was downgraded, a sign that a charm offensive by Saudi economic officials and determined action against speculators, have bought it time in the eyes of many investors.

In the last few weeks, officials of the central bank and ministries of finance, economy and oil have met privately with groups of foreign bankers, and analysts to discuss the kingdom's plans to cope with low oil prices.

The officials have reiterated their commitment to the Saudi riyal's peg of 3.75 to the US dollar and described efforts to diversify the economy beyond oil, participants at the meetings told Reuters, speaking on condition of anonymity.

In contrast to past practice, the Saudis have been willing to provide lengthy answers to questions on the vulnerability of their economy. 

They have also stressed that they are prepared to deploy the central bank's huge foreign assets, which totalled $609 billion at the end of 2015, to withstand economic shocks.

"The core message was that the Saudis are much better prepared to handle low oil prices — reserves are high and debt is low," said one participant. 

"At the same time they are keen to show it's not business as usual and they are making serious reforms to re-energise growth," he added.

The meetings did not eliminate doubts about Riyadh's ability to push through complex and difficult reforms that would boost non-oil revenues, foster new industries and make the government more efficient. 

Saudi Arabia has been drawing down its foreign assets at an annual rate of over $100 billion, suggesting it has a window of only a few years to get the reforms right.

Nevertheless, the meetings have helped to persuade some investors that a devaluation of the riyal is not on the cards, and that the world's top oil exporter faces no imminent economic crisis, participants said.

Late on Wednesday, Standard & Poor's (S&P) cited the damage to state finances from cheap oil when it cut Saudi Arabia's long-term sovereign credit rating by two notches to A-minus, with a stable outlook, from A-plus.

"The decline in oil prices will have a marked and lasting impact on Saudi Arabia's fiscal and economic indicators given its high dependence on oil," S&P said.

But the Saudi riyal firmed against the dollar in the forwards market on Thursday, while prices of Saudi firms' international bonds barely moved and the cost of insuring Saudi sovereign debt against default ticked up only marginally.

The Saudi stock market headed for its fourth straight day of gains, in sharp contrast to S&P's last downgrade of the kingdom in October, when investors sold stocks.

Speculators

Financial markets are firm partly because the Saudi central bank has acted aggressively to deter speculation against the riyal in the forwards market.

The riyal dropped to record lows in that market in January as banks hedged against the risk that authorities might devalue the currency to inflate the value of their dollar oil revenues and reduce capital outflows.

As it fell, investors in other markets became nervous, creating a cycle of worsening sentiment towards Saudi Arabia.

The central bank responded by warning banks not to speculate and urging them not to conduct derivatives trades that would pressure the riyal. 

The threat of getting on the wrong side of the central bank and its huge reserves has worked for now; the riyal is stable at higher levels and forwards trade has slowed.

The officials' charm offensive has also helped because a main message in their meetings with bankers and analysts was that they saw no need to change the currency peg.

Saudi authorities explored the idea of changing the peg in a broad review of economic policy, but concluded this would be counter-productive except perhaps in the distant future, when the economy is much more diversified and could cope better with a surge of import prices, the participant said.

In contrast to the S&P downgrade in October, when the finance ministry quickly issued an indignant statement criticising the agency's action, there was no official Saudi response on Thursday.

However, the markets are aware that the other two major credit agencies have much higher ratings for Saudi Arabia. 

Moody's Investors Service has it at Aa3, three notches above S&P, with a stable outlook; Fitch Ratings has it at AA, four notches above S&P, with a negative outlook.

Inside Saudi Arabia, jitters over the economy have not disappeared. At a store selling watches in the city of Khobar this week, a shopkeeper said he feared a riyal devaluation would ravage his business. 

A Saudi banker said he thought officials might consider devaluation late this year if oil didn't rebound.

But for some months at least, authorities seem to have convinced markets to give them the benefit of the doubt.

"Despite perennial rumours, I believe the government will not depeg or devalue its currency," said John Sfakianakis, a Riyadh-based economist. 

"For the sake of stability, predictability and wealth preservation of the middle class, they haven't done so in previous difficult times in the 1990s and late 2000s, and they won't do it now," he added.

PARIS — The Organisation for Economic Cooperation and Development (OECD) on Thursday lowered its expectations for global growth, saying it was disappointed with the world's economic performance, and urging governments to do better.

Global growth of gross domestic product (GDP) for 2016 is now projected at 3 per cent, down from a previous forecast of 3.3 per cent, as financial instability, sluggish demand and weak investment take their toll, the 34-member OECD indicated in its latest interim outlook.

If confirmed, this would be no better than last year's growth, "itself the slowest pace in the past five years", the OECD quipped, adding that economic actors had failed to make good use of cheap oil and easy credit.

"Global growth prospects have practically flat-lined, recent data have disappointed and indicators point to slower growth in major economies, despite the boost from low oil prices and low interest rates," OECD Chief Economist Catherine Mann told a news conference.

The forecast came in well below a long-run average of around 3.75 per cent, the OECD said, expressing disappointment that advanced economies "in recovery" and emerging economies in "convergence mode" were still failing to produce better results.

The OECD urged governments to adopt a strong collective response to revive sagging global growth by implementing fiscal policies favouring investment-led spending in a climate of austerity.

"Monetary policy cannot work alone," it added, in reference to high-profile action by leading central banks to cut interest rates and inject money into the banking system.

Instead, fiscal policy also needed to become expansionary and structural economic reform accelerated "to strengthen growth and reduce financial risks".

In its November outlook, the OECD had already downgraded its initial 2016 estimate, citing stagnating trade amid a slowdown in China.

But it said it felt compelled to do so again, while also revising downward an initial November projection for 2017 to 3.3 per cent from 3.6 per cent in an environment likely to impact most severely on the United States, the eurozone and economies reliant on commodity exports.

Tackle collectively

"A stronger collective policy response is needed to strengthen demand," indicated the organisation a week before Group of 20 finance ministers and central bank governors meet in Shanghai.

The downgrade reflects "a broad range of disappointing incoming data for the fourth quarter of 2015 and the weakness and volatility in global financial markets", trends "apparent in both advanced and emerging economies", said the OECD, identifying as further risks emerging market currency volatility and debt, notably in Russia, Turkey and Brazil.

It added poor growth prospects were pushing down equity prices, helping to spark recent market volatility.

"Structural reform momentum has slowed," continued the OECD, identifying a combination of negatives affecting the global outlook, with fuel and commodity prices in a trough amid sluggish demand while China stays stuck in third gear.

The body, which repeatedly cut its 2015 outlook from an initial 3.7 per cent, noted that relatively healthy growth in emerging countries had in previous years partially compensated for a slowdown in advanced nations, but this was no longer the case.

"Sluggish growth is reflected in weak trade and has contributed to recent falls in commodity prices," it said.

One means of reviving growth would be to commit to greater public investment, recommended the OECD, which provides policy analysis and advice to its member states.

Although global trade flows are edging back from last year's stormy waters, they "remain subdued" with lower export demand for advanced economies flattening growth last year by around five percentage points.   

On a country by country basis, the OECD reduced its 2016 GDP growth forecast for the United States by 0.5 points to 2 per cent.

For sputtering European Union locomotive Germany, it cut its 2016 prediction also by 0.5 points to 1.3 per cent, compared to Berlin's own forecast of 1.7 per cent.

The forecast for China was unchanged on the November assessment of 6.5 per cent, Japan was revised down 0.2 points to just 0.8 per cent while India got a small upward revision of 0.1 points to 7.4 per cent.

But Brazil, in freefall after being hit severely by plunging commodity prices and falling Chinese-led demand, was downgraded by 2.8 percentage points to a 4 per cent contraction.