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PARIS — North African cities are leading the way as the continent and its growing middle class lay down “solid economic roots” which are very appealing to investors, according to a new report published Tuesday.

The report highlighted 20 African “cities of opportunity” with the Egyptian capital Cairo heading the list, with Tunis, Casablanca and Algiers also in the top five.

Coming in third place only Johannesburg, the largest city in South Africa, breaks northern Africa’s monopoly of the top five cities as ranked in the report by accountancy firm PricewaterhouseCoopers (PwC).

“The preponderance of North African cities at the top is mainly due to the length of time they have been established. This has given them time to develop infrastructure, regulatory and legal frameworks as well as establishing socio-cultural ecosystems,” the report indicated.

Johannesburg, formed more recently in 1886, “was developed rapidly for political reasons,” allowing it develop infrastructure and services are comparable to the more established African cities.

“With five per cent growth, dynamic demographics and a growing middle class, Africa is exceptionally appealing to investors,” said the PwC report, launched Tuesday at the Africa CEO Forum 2015 in Geneva.

‘Historic crossroads’ 

Africa is at “an exceptional, historic crossroads, if there was ever a moment for an entire continent to seize the day, this is it,” it added.

In choosing its 20 “cities of opportunity”, limited in the report to one city per country, the researchers considered four main indicators: economy, infrastructure, human capital and demographics.

Along with technical advances and demographic change, a major trend identified by the report was urbanisation.

“By 2030, half of Africa’s population will live in cities which are where economic activity and growth will be focused as well as becoming communication centres and a hub for social trends,” the report indicated. 

PwC’s Africa Business Group Leader Paul Cleal said the study should help answer the questions of potential investors in the continent and help city politicians and officials improve their competitiveness.

Cairo’s infrastructure was particularly praised, while Tunis ranked top in the “human capital” category, which included health systems, graduate numbers and literacy and numeracy.

The report also looked at other criteria such as the gross domestic product growth, ease of doing business and the ability to attract foreign direct investment.

In this list, Dar Es Salaam, Lusaka, Nairobi, Lagos and Accra polled well.

“Most of the African cities with promise can [and will] climb to join those cities at the top of our overall ranking, with a little effort and organisation,” the report said.

“Moreover, many of them have already become key regional platforms such as Dar es Salaam and Douala as ports, Accra for telecommunications, Lagos for culture and Nairobi for financial services,” it pointed out

But the report also said Africa still has “fundamental problems”.

These challenges ranged from “disease [whether AIDS, Ebola, or river blindness] to internecine conflict” as well as a decline in commodity prices down to the most basic requirements of urban infrastructure, clean water, ample electricity, public transport.

The complete top 20 list of Africa’s “cities of opportunity” was: Cairo, Tunis, Johannesburg, Casablanca, Algeria, Accra, Nairobi, Lagos, Addis Ababa, kampala, Dakar, Abidjan, Kigali, Lusaka, Dar es Salaam, Douala, Antananarivo, Maputo, Kinshasa and Luanda.

STOCKHOLM — China has eased ahead of Germany and France to become the world’s number three arms exporter after the United States and Russia, a Stockholm-based think tank said Monday.

The volume of the multibillion-dollar world arms trade rose 16 per cent during the period 2010 to 2014 over the previous five years, the Stockholm International Peace Research Institute (SIPRI) indicated in its annual report.

The figures show that “the United States has taken a firm lead” with 31 per cent of global exports of conventional weapons, SIPRI pointed out, with Russia in second place at 27 per cent.

The next three arms exporters are far behind with about 5 per cent each, and China is only slightly ahead of fourth-ranked Germany and fifth-ranked France.

Three Asian countries accounted for more than two-thirds of Chinese exports, with Pakistan buying 41 per cent of the total, followed by Bangladesh and Myanmar. Beijing also had 18 client nations in Africa during the period.

Russia’s top client was India, the world’s leading arms importer, with 70 per cent of its purchases coming from Russia.

The United States had the most diverse clientele. South Korea, its top client, accounted for only 9 per cent of total US business.

Among leading suppliers, China’s sales were up 143 per cent compared to the previous five-year period. Ukraine and Russia also saw surges in exports, while those of Germany and France declined.

“China is always prudent and responsible in arms exports,” foreign ministry spokesman Hong Lei told reporters.

“We insist on the principles that it [arms exports] should be conducive to the legitimate self-defence capability of the recipient country, not impair international and regional peace and stability, and not interfere in the domestic affairs of other countries,” he said.

The data reflect the volume of arms deliveries, not the financial value of the deals, SIPRI notes.

Among importers, India was far ahead of second- and third-placed Saudi Arabia and China, purchasing some 15 per cent of the total volume, despite ranking 9th in terms of military budgets, compared with 5 per cent each for the next two.

According to the latest SIPRI figures, the US retains the world’s largest military budget at $640 billion (608 billion euros), far ahead of China ($188 billion) and Russia ($87.8 billion).

African arms imports shot up 45 per cent in the period, SIPRI found. 

“Algeria was the largest arms importer in Africa, followed by Morocco, whose arms imports increased 11-fold,” it indicated. “Cameroon and Nigeria received arms from several states in order to fulfil their urgent demand for weapons to fight against the militant Islamist group Boko Haram.” 

While the arms trade has been on the rise for the past decade, the volume remains about one-third below its post-war peak reached in the early 1980s.

KUWAIT CITY — Kuwait has sought help from the International Monetary Fund (IMF) to introduce corporate taxes in a bid to diversify revenue in the face of falling oil prices, a minister said Monday.

“The IMF will prepare a preliminary report on how to impose taxes on companies in Kuwait,” Commerce and Industry Minister Abdul Mohsen Al Mudej said after a meeting with IMF representatives, the official KUNA news agency reported.

The two sides discussed ways of introducing corporate taxes for Kuwaiti and foreign companies operating in the oil-rich Gulf state after the recent introduction of a new corporate law, the minister added.

Kuwait currently imposes no taxes on local companies, Kuwaiti citizens and expatriates but it requires foreign firms to pay 15 per cent tax on their profits.

The IMF has in the past advised Kuwait to subject local companies to corporate tax as part of a series of measures aimed at boosting non-oil revenues and cutting spending.

Kuwait has posted a budget surplus in each of the past 15 fiscal years due to high oil prices but has also increased public spending from under $13 billion (12.4 billion euros) to more than $77 billion this fiscal year, mostly on wages and subsidies.

Earlier this year, the emirate stopped diesel, kerosene and aviation fuel subsidies and the finance ministry is considering similar measures for petrol, electricity and water.

Oil income contributed around 94 per cent of Kuwait’s public revenues but the sharp drop in prices is expected to substantially reduce its income.

Kuwait’s revenues in the first 10 months of the current fiscal year dropped 16 per cent to $74.5 billion compared to $88.8 billion last year, according to finance ministry figures.

In the same period, oil income dived 17.3 per cent to $68.3 billion from $82.5 billion.

The emirate is however forecast to end this fiscal year with a surplus, albeit smaller than usual, for the 16th year in a row.

The government has announced the 2015/2016 budget with a $24 billion deficit despite slashing spending by 17.8 per cent to $65.1 billion.

There are about 1.25 million Kuwaitis in the tiny gulf kingdom, in addition to 2.9 million foreigners. It pumps about 2.8 million barrels of oil per day.

Last month, Kuwait’s parliament approved a five-year development plan that envisages spending of 34.15 billion dinars ($116 billion/103 billion euros) on projects despite a sharp drop in oil prices.

The vote on the plan, which starts in April and ends March 2020, was 33-4, with one abstention.

State Minister for Planning and Development Hind Al Sabeeh said the plan is part of Kuwait’s efforts to become a regional trade and financial hub by 2035.

The plan aims to boost gross domestic product, increasing the private sector share in the economy and raising the number of Kuwaitis in the private sector, the minister added.

The private sectors share of the economy is projected to increase from 26.4 per cent at present to 41.9 per cent, Higher Planning Council officials told MPs during the debate.

Among projects envisioned is the construction of 45,000 housing units, a metro system, a railway network and a large number of mega oil projects, including a new refinery.

The plan also aims at increasing the number of Kuwaiti employees in the private sector from 92,000 to 137,000 at the end of the plan. The number of foreign workers in the sector is around 1.2 million.

Several MPs criticised the government for failing to implement the previous five-year plan, and others expressed doubts over its capability to implement the new one.

“The projects listed in the plan are fantastic and look like a sweet dream,” independent MP Abdul Hameed Dashti said. “But it is not possible to implement them because the government administration is weak.”

Shiite MP Faisal Al Duwaisan demanded that all ministers resign if they fail to implement the plan.

The government proposed the plan despite the sharp drop in the price of oil, which contributed about 94 per cent of Kuwait’s revenues over the past 16 fiscal years and which all ended in the black.

The government, which has enormous cash reserves, has insisted that the fall in revenues will not affect spending on projects.

LONDON — British Finance Minister George Osborne offered a sweetener to pensioners on Sunday, less than two months before a national election, but promised there would be no big giveaways for voters when he sets out his final pre-vote budget.

With many opinion polls showing the governing Conservatives neck-and-neck with the opposition Labour Party, Osborne will be looking for a chance to boost his party's re-election prospects at his annual budget statement on Wednesday.

While his hopes of delivering major tax cuts have been frustrated by slow progress in bringing down Britain's budget deficit, Osborne has been given some room for manoeuvre by a sharp fall in inflation that has lowered the cost of interest payments on some government bonds and welfare payments.

In a move which may help win support from older voters, Osborne said in a statement on Sunday pensioners would be given the freedom to cash in their annuities in exchange for lump sums, an extension of pension reforms announced last year.

But in an interview on BBC TV, Osborne also reiterated there would be "no giveaways, no gimmicks" in his budget.

"Everything we do in this budget has to be paid for," he said. "This country is still borrowing too much, and so we have to go on making difficult decisions."

Among other measures expected on Wednesday are tax breaks for the North Sea oil and gas industry, which is struggling to cope with the plunge in global oil prices.

Osborne may use some of his inflation savings windfall to reduce the scale of planned austerity in the next five years, potentially dampening Labour's line of attack that the Conservatives plan ideologically driven cuts to the state.

Britain's independent budget office has said a pledge by Osborne last year to achieve a 23 billion pound surplus by 2019/20, would take public spending as a share of the economy to its lowest level in 80 years.

Asked about the £23 billion number on Sunday, Osborne declined to repeat his previous forecast but said: "We have set out our plans and we intend to fulfil our plans."

Labour finance spokesman Ed Balls said Osborne wanted to go "way beyond the difficult task of balancing the books.

"The difference is a big ideological plan for a surplus ... from the Tories [Conservatives] or a sensible, balanced, fair plan from Labour," he told the BBC.   

Separately, the Organisation for Economic Cooperation and Development (OECD) said Britain should continue to cut its budget deficit after May's national election, and might need to rethink plans to shield healthcare and schools spending.

With May 7 shaping up to be one of the closest and most unpredictable elections in modern British history, all main parties have promised to maintain spending on schools and health. But the Paris-based think tank said this might impose unacceptably high cuts in other areas.

"[Britain should] continue to pursue the medium-term fiscal consolidation path... and ensure consolidation efforts are fair," the OECD said in a report.

Labour plans to balance the government's books, excluding investment spending, within the next parliament. The Conservatives say it intends to balance the budget completely and return a small surplus.

The OECD cited research suggesting that protecting areas such as health and education from spending cuts would imply average spending cuts elsewhere, in real terms, of almost 40 per cent between the financial years 2010-11 and 2019-20.

"Hence, the composition of fiscal adjustment should be reviewed to ease pressure on public services that have already contributed to consolidation," the OECD report said.

Other think tanks have disagreed with the austere approach of the current government.

Earlier this month, a review of the government's record by the National Institute of Social and Economic Research concluded that austerity had been an unnecessary risk that had caused significant damage to the economy.

The OECD predicted Britain's economy would grow 2.6 per cent this year, slightly above the 2.4 per cent forecast by the government's independent fiscal watchdog, the Office for Budget Responsibility.

But the OECD said Britain needed more private-sector infrastructure spending to deliver the rise in productivity that was necessary to make the economic recovery sustainable.

SHARM EL SHEIKH, Egypt — President Abdel Fattah Al Sisi was so confident after Egypt signed billions of dollars of deals at an investment summit that he publicly joked on Sunday about haggling with the world's top chief executives. Yet the real challenge has only just begun.

 "To Egyptian and international partners, if you really want to contribute to developing this country, you must work night and day and, as for the cost, please give us a break," he said in his closing speech at the Sharm El Sheikh resort, to applause and laughter.

Corporate giants such as General Electric, Siemens  and BP signed major deals, Gulf Arab allies pledged $12.5 billion and top Western officials provided political support for the man who ousted Egypt's first freely elected president. Egypt's prime minister said deals worth a total of $36 billion were signed at the summit.

Sisi is riding a wave of nationalism, with Egyptians betting he can deliver stability and economic growth with a series of mega-projects such as an expanded Suez Canal.

During his speech, he was flanked by young Egyptians taking "selfies" with the former army chief.

At times Sisi had to ask his supporters to stop cheering so he could speak. Many foreign businessmen and bankers attending were impressed.

"What I can gather from this is the momentum behind this president is extraordinary," said Alex Thursby, chief executive officer of Abu Dhabi National Bank.

But difficult times still lie ahead in a country where more than half the population live below the poverty line.

Egypt's economy is only just starting to recover from political upheaval triggered by the 2011 uprising that ended the 30-year rule of Hosni Mubarak and will require a lot more than populism to prosper.

"Egypt needs at least $200-$300 billion to [develop]... I know Egypt and its problems," Sisi said.

With the high-profile, glitzy three-day summit in Sharm El Sheikh, Egypt aimed to send a clear message that it is serious about reforming the economy and creating big opportunities for investors.

Foreign investment

A celebratory mood dominated the conference, with one of its highlights a party hosted by billionaire businessman Naguib Sawiris and a famous Lebanese pop singer.

Cairo wants to double foreign investment in this fiscal year to $8 billion, despite an Islamist insurgency in northern Sinai and frequent militant attacks across the country.

Sawiris, one of Egypt's top businessmen, said it was high time for the government to fire inefficient members of the bureaucracy, about 7 million civil servants who eat up 25 per cent of the budget.

"Bureaucracy and corruption are married. You end bureaucracy, you kill corruption," he told Reuters in an interview.

Sherif El Helw, the managing director of Akanar Partners, an Egyptian investment firm that advised the government on investment strategies, said an original list of 120 proposals had been whittled down to 22 for the economic summit.

He questioned the wisdom of mega-projects such as the Suez Canal at the heart of Sisi's agenda.

"I think smaller projects, a realistic project that can be completed in short periods of time, these are what the economy needs today," he added.

One of the most ambitious projects is a new administrative capital with a price tag of $45 billion located east of Cairo. It is scheduled to be built in five to seven years.

Separately, new Tourism Minister Khaled Ramy said on Sunday in an interview that Cairo hopes to generate $20 billion in revenue from tourism by 2020 by attracting 20 million visitors.

An uprising that toppled Mubarak four years ago hit the economy hard, discouraging investors and tourists and slashing economic growth. Egypt hopes the conference will project an image of stability and help attract billions of dollars.

Ramy told Reuters that the goal was part of strategic plans that include creating two new resorts through nearly $1 billion of investment over five years and hiring a private company to run a three-year advertising campaign.

He said he wanted to counteract the negative news of the last few years which has hampered tourism, a major source of revenue and foreign reserves for Egypt.

More than 14.7 million tourists visited Egypt in 2010, dropping to 9.8 million in 2011. They rose the following year to 11.5 million but shrank back to about 10 million last year.

Ramy said he expected numbers to grow by 15 per cent this year.

"The message is right on my face: it's 7 o'clock in the morning and we already have this beautiful sunshine here in Sharm El Sheikh," he said in a poolside interview at a luxury hotel.

Ramy, 56, was appointed minister this month in a Cabinet reshuffle.

He added that Egypt was on track to have enough hotel rooms to accommodate 20 million tourists, but needed investment in restaurants and shopping malls.

Egypt will seek investment for two new investment projects, Ramy said: an 8-million-square-metre resort on the Red Sea worth 5 billion Egyptian pounds and a 1-million-square-metre resort on the Mediterranean worth £2.5 billion.

Ramy added that the ministry would use its $40 million a year marketing budget to contract a global advertising campaign this summer.

Security is a concern for tourists in Egypt, which is facing an Islamist insurgency based in the northern Sinai that has launched small bombing attacks across the country. Blasts usually target security forces but more recently have hit civilian targets such as restaurants and stores.

Asked what the government was doing to secure tourists, Ramy pointed to heavy security for the weekend conference.

"As you have seen here in Sharm El Sheikh, I don't think even a rat from the desert could come in and do anything," he said.

Security has been tight during the three-day event, attended by kings, heads of state and top officials including US Secretary of State John Kerry.

Checkpoints on major roads are manned by machine-gun wielding soldiers in combat gear, while military helicopters buzz overhead. Plainclothes police line more isolated desert roads.

In an another interview, Sawiris said he was ready to invest $500 million in Egypt and was diversifying his telecoms business into infrastructure, energy and transportation, sectors which need major funds in the country.

Sawiris, a billionaire from a powerful Coptic Christian family, said the investment conference in the Red Sea resort had been a success but that the government would need to make efforts to follow up with investors.

"We all know the minute the decisions go down to our famous and most regarded bureaucrats you see one sign only: stop. They need to have a pusher, and the minister of investment is a pusher," said Sawiris, 60, chairman and chief executive of Orascom Telecom, Media and Technology.

He emphasised that the government should form a committee to firmly thrust the investment agenda forward and help revive Egypt's economy, laid low by four years of political turmoil triggered by the 2011 revolt.

"My advice... is the prime minister should initiate a small office headed by the investment minister with some drivers who continue the dialogue with the investors who committed to the projects in this conference," added Sawiris.

Egypt clinched investments worth billions of dollars from top global companies such as General Electric, BP  and Eni at the conference, which ends on Sunday.

Gulf Arab allies also pledged $12.5 billion.

Sawiris said Orascom Telecom would diversify into new sectors including infrastructure, logistics and energy projects alongside its core business.

"I am going to be extremely aggressive here in my investments. We have firepower right now of $500 million. Today we signed $100 million out of this 500," Sawiris told Reuters in the interview at the investment conference. "We are the first and the only Egyptian company till now to sign the solar power energy 50 megawatts today."

Sawiris also saw opportunities in Tunisia.

"We are willing to duplicate our investments in Egypt in Tunisia, because it's stable, because the political Islamists are more wise than ours here," he said.

Sawiris said Egyptians had set aside concerns over human rights, which he described as "not ideal", to focus on the economy, but stressed Egyptians should not abandon hopes generated by the 2011 uprising.

"We will concede to the will of the people that we need to build the country first, but once the country stands on its feet, we will not accept less than a true, total, liberal, democratic [society]," said Sawiris, founder of the liberal Free Egyptians Party.

Turning to one of the most sensitive issues in Egypt, Sawiris was adamant that the military should not have a role in the economy.

The armed forces said to control up to 40 per cent of the economy. Sisi told Reuters last year it was more like 2 per cent.

"It distracts the main focus because we are under a lot of threats. They will not like what I say now but that's my opinion," said Sawiris. "An army should focus one and only task and that is defending Egypt. Where else in the world do other armies have businesses?"

AMMAN — The Jordan Phosphate Mines Company’s (JPMC) board of directors on Saturday re-elected Amer Majali as JPMC chairman representing the Social Security Investment Fund. In his previous term, he represented the government of Brunei.

Elections took place after a board’s session to discuss the 2014 financial report by the audit committee. JPMC Vice Chairman Abdul Karim Malahmeh said the board endorsed bylaws related to death and compensation as well as human resources, which aim at increasing the production capacity of the company and its competitiveness in the international fertiliser market. 

AMMAN — Despite the Kingdom's attractive economic climate, the business environment requires more stability in terms of laws governing taxes, Saudi Ambassador to Jordan Sami Al Saleh said on Saturday during a meeting with Planning and International Cooperation Minister Imad Fakhouri.

The diplomat underlined the importance of giving investors in Jordan the confidence in terms of  economic legislation to  ensure  their business  sustainability, according to a statement received by The Jordan Times. 

Saleh stressed the need to identify investment opportunities for Saudi investors, especially that Saudi Arabia is "aspiring for further economic and investment cooperation with Jordan". 

The diplomat also voiced his country's commitment to support Jordan's efforts to prepare the Jordan Response Plan 2015 (JRP) that seeks to address the repercussions of the Syrian crisis on the Kingdom.

Fakhouri noted that JRP measures Jordan's financial needs to alleviate the impact of the Syrian crisis on the country this year, which stands at $2.9 billion. 

He expressed Jordan's appreciation for Saudi Arabia's continuous support to the Kingdom, citing its contribution to the Gulf Cooperation Council's grant to Jordan by $1.25 billion and the Saudi grant to renovate the Zarqa-Azraq-Omari border road. 

Separately, economic experts and officials called during a gathering organised by the Amman Chamber of Commerce (ACC), for eliminating obstacles hindering the flow of commodities between Jordan and Saudi Arabia and activating the joint businesses council to improve the role of businesspeople in fostering bilateral economic cooperation.   

They also called for facilitating measures that allow Saudi patients to come to Jordan for treatment. 

ACC President Issa Murad noted that Saudi investments in Jordan reached around $10 billion through 800 companies or partnerships, while Jordanian investments in the Gulf country stand at $3 billion.

Industry, Trade and Supply Minister Maha Ali underlined the importance of attracting foreign investments, especially from Saudi Arabia, as a top priority to Jordan.

Jordan's exports of cattle amounted to 200,350 tonnes in 2014, according to Agriculture Minister
Akef Zu'bi.

DUBLIN — Ireland's economy grew at the fastest rate in the European Union (EU) last year, data showed Thursday as the eurozone nation added it would repay more International Monetary Fund (IMF) bailout loans early.

Output soared 4.8 per cent in 2014, boosted by both domestic demand and strong exports, after Ireland emerged from an international bailout in late 2013, the Central Statistics Office (CSO) said.

That was far higher than the EU average of 1.3 per cent and the eurozone average of just 0.9 per cent.

It represents the strongest Irish growth rate since 2007, the year before Ireland's then-booming economy collapsed.

The economy had expanded by just 0.2 per cent in 2013, which was unchanged from the prior estimate.

Ireland enjoyed strong growth after it became the first of the financially-rescued eurozone countries to exit its bailout programme following deep cuts in state spending, hefty tax rises, structural reforms and the sale of state assets.

"Economic growth is now more broadly balanced, exports are contributing due to competitiveness gains while the domestic economy is now also contributing positively too," said Finance Minister Michael Noonan.

"All sectors of the economy grew last year. We will now build on this recovery by continuing to introduce measures that drive growth and create jobs," he added. 

Ireland was rescued by the EU and the IMF with an 85-billion-euro bailout in November 2010.

The country's economy crashed in 2008 after a decade of almost double-digit growth fuelled by a cheap credit and a booming construction and property sector in what became known as the "Celtic Tiger".

Domestic demand

There were other positive indicators at a domestic level, with consumer expenditure growing 1.1 per cent last year.

"That's a really big deal," said Stephen Kinsella, senior lecturer in economics at the University of Limerick. "A large amount of the built-up demand that's been there over the last number of years is being released and that's a sign of confidence." 

On a more downbeat note, the CSO also revealed Thursday that the Irish economy experienced a sharp slowdown in the final three months of 2014.

The economy expanded by just 0.2 per cent in the fourth quarter of last year, after 0.4 per cent growth in the previous three months.

The European Commission also forecasts Ireland's economy will be the fastest growing in the EU again this year with growth of 3.5 per cent.

The Dublin government's official 2015 growth forecast stands at 3.9 per cent but this figure will be updated next month, Noonan said.

According to economist Alan McQuaid of Merrion Stockbrokers, Ireland will benefit from growing economies in its two largest trading partners, the UK and the US.

"The sharp fall in the euro will be a huge plus for Ireland too. Taking all the relevant factors into consideration, it now looks like growth will be 4 per cent plus again this year," he said.

IMF loans 

Noonan also confirmed Thursday that Dublin will proceed with repaying a further 5.5 billion euros ($5.84 billion) to the IMF several years early, as Dublin replaces expensive bailout debt with more favourable debt.

Dublin will now have paid over 18 billion euros of the 22.5 billion euros borrowed from the IMF at a cheaper cost than planned. 

"This early repayment of the majority of IMF loans will deliver savings of over 1.5 billion euros over the lifetime of the loans," Noonan indicated.

Earlier Thursday, Ireland raised 1 billion euros of debt with a maturity of 30 years at a yield of 1.31 per cent. 

Dublin is selling the economic recovery as its key message ahead of next year's general election but many people have yet to benefit, with unemployment still above 10 per cent.

A number of large anti-austerity protests last year coincided with a drop in support for the government parties in opinion polls.

PARIS/LONDON — The relentless slide in the euro is proving a major boost to European earnings after years of stagnating profits, just when US results start to lose steam.

As Europe's earnings season draws to an end, companies have reported a 15.9 per cent surge in fourth-quarter profits, the biggest rise in European earnings since mid-2011 and well ahead of a 6.8 per cent rise in US quarterly profits, with European firms starting to reap the benefits from a lower currency.

The euro has fallen by about 25 per cent against the dollar over the past year. This is set to give a major lift to European companies as roughly 50 per cent of eurozone earnings are coming from outside the region.

"Clearly, the weakening of the euro is a tailwind for most of Europe's corporate world," said Paras Anand, head of European equities at Fidelity Worldwide Investment.

"Earnings expectations for Europe have been very low. Now, the weakness of the euro versus the dollar could continue for quite an extended period of time, and this will prompt investors to upgrade their earnings forecasts not only for 2015, but also for 2016 and 2017 as well," he added.

Strategists have said a drop of 10 per cent in the euro  versus a basket of currencies will translate into a 6 to 8 per cent rise in European profits. With the euro down 16 per cent against the other currencies, profits are poised to get a 10-13 per cent boost.

The single currency has been retreating on prospects of a quantitative easing campaign from the European Central Bank, which was launched earlier this week, contrasting with the trajectory of monetary policy in the United States where the Federal Reserve is seen raising interest rates in mid-2015.

With the dollar on the rise, a number of US bellwethers, including the world's No. 2 PC maker Hewlett-Packard, have started to warn on the potential negative impact from exchange rates.

According to data from Thomson Reuters I/B/E/S, US corporate outlooks for the first quarter have been negative. Overall, there has been 5.2 negative pre-announcements for each positive one, much higher than a long-term average ratio of 2.6, with the strong dollar the most frequently cited negative factor.

"US corporate earnings are clearly getting hurt by the dollar," said Toby Campbell-Gray, head of sales trading at Tavira Securities.

The growing divergence in European and US earnings is starting to show up in analyst forecasts.

European profits are seen rising about 5 per cent in 2015, a relatively low figure due to the steep drop in profits seen for oil companies, while US profit growth is seen grinding to an halt this year, up 1.6 per cent, I/B/E/S data showed.

This makes the differential in favour of European profit growth the widest in six years.

Andrea Williams, European equities fund manager at Royal London Asset Management, said European earnings are set to improve even more later in the year as the benefits of the lower euro, as well as lower oil prices, has not yet been felt by many companies.

"Many firms would have hedged for this in the first half, so the positive effects may well come through later on in the second half," she added. "On a relative valuation, a lot of people are switching out of the US and into European equities."

The emerging divergence in earnings trends on the two sides of the Atlantic has started to have an impact on share prices, with Europe's STOXX 600 benchmark up 16 per cent since the start of 2015 while the S&P 500 is down 0.9 per cent.

RIYADH — Saudi Arabia is trying to minimise the impact of plunging oil prices on its economy, King Salman said Tuesday in a wide-ranging address which promised a more diversified economy.

"The low prices witnessed by the oil market are having an effect on the income of the kingdom. However, we are working towards minimising the impact on development," Salman, 79, said in his first major speech since acceding to the throne on January 23.

Over the second half of last year the global price of crude oil dropped by about half, from above $100 a barrel.

Yet the kingdom in December announced a 2015 budget that included a slight rise in spending to $229.3 billion with a projected fall in revenue to $190.7 billion. Those numbers leave the country with its first budget deficit since 2011.

Saudi Arabia is the Arab world's largest economy, and much of its spending is on health, education and social services as well as infrastructure.

Officials have said the kingdom's reserves, estimated at $750 billion, enable it to withstand the global crude price drop.

Saudi Arabia is the world's biggest crude exporter and oil makes up about 90 per cent of government revenue.

Salman told government officials and other dignitaries that the search for new deposits of oil, gas and other natural resources in Saudi Arabia would continue.

"High petrol prices during the past few years have had a positive effect on the economy of the kingdom, in the development of projects," the king said.

But the plunge in oil prices has emphasised the need for economic alternatives, and Salman indicated that the kingdom's future economy "will be based on a number of foundations", with a growing number of small and medium enterprises.

"The next few years will be full of important accomplishments aimed at emphasising the role of the industry and the service sectors in the national economy," he added.

Continuity 

Salman delivered his wide-ranging palace address in front of Crown Prince Moqren, Deputy Crown Prince Mohammed Bin Nayef, provincial governors, the top cleric Grand Mufti Sheikh Abdul Aziz Al Sheikh, other religious leaders, the Shura Council which advises the monarch, military officers and citizens.

"I have committed myself to continuing the work on the immutable foundations on which this blessed country has stood since its unification," he said, mentioning adherence to sharia Islamic law and preservation of unity and stability.

"We shall work continually towards the integrated, balanced and comprehensive development in all regions of the kingdom," added Salman, the latest in a line of ruling sons of King Abdul Aziz Bin Saud, who founded Saudi Arabia in 1932.

The conservative Sunni-majority kingdom has a Shiite minority which has complained of marginalisation.

Salman urged officials to "be attuned to the citizens", and indicated that he wants the fight against corruption stepped up.

The kingdom's foreign policy "is based on the teachings of our religion that call for peace and kindness", Salman said, but "extremism and terrorism" will be fought at their roots in cooperation with others.

"Defence of Arab and Islamic causes, and in the first place the right of the Palestinians to a state with Jerusalem as its capital, will remain at the top of Saudi Arabia's demands," Salman added.

Analysts have expected the new king to maintain a steady course for the kingdom's oil and foreign policy after his half-brother king Abdullah died aged about 90.