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US and Bahrain sign security deal

The US and Bahrain have signed a security and economic agreement, a signal of Washington’s renewed engagement with its Gulf allies and a potential blueprint for follow-on deals with Saudi Arabia and the United Arab Emirates.

The deal, agreed by US secretary of state Antony Blinken and Bahrain’s prime minister, Crown Prince Salman bin Hamad Al Khalifa, on Wednesday, would strengthen military and intelligence co-ordination, the White House said.

Bahrain, which hosts the US Navy’s Fifth Fleet, is already a non-Nato Washington ally regarded by the west as a bulwark against Iranian influence.

UAE Central Bank holds rates with FED

The UAE Central Bank held its benchmark borrowing rate after the US Federal Reserve hit pause for the second time this year as core inflation and the labour market in the US slowed.

The Fed held its policy rate, which is at the highest since 2001, as it aims to bring inflation down to its target range of 2 percent after prices hit a four-decade high in June 2022.

The US central bank left the federal funds rate between 5.25 percent and 5.5 percent at the end of its two-day meeting on Wednesday.

While inflation in the US in August increased 3.7 percent from 12 months earlier and was slightly up from 3.2 percent in July, it has decelerated from its four-decade of 9.1 percent in June 2022.

Wage growth, an important driver of inflation that is a main concern of the Fed has also cooled more than expected last month with unemployment edging up to 3.8 percent last month, according to data from the Bureau of Labour Statistics.

Most central banks in the GCC follow the Fed’s policy rate moves due to their currencies being pegged to the US dollar, with Kuwait the only exception in the six-member economic bloc as its dinar is linked to a basket of currencies.

The UAE Central Bank maintained its base rate for the overnight deposit facility at 5.4 percent, effective from Thursday.

It also maintained the rate applicable to borrowing short-term liquidity from the regulator through all standing credit facilities at 50 bps above the base rate, the regulator said on Wednesday.

The base rate, which is anchored to the Fed’s interest on reserve balances (IORB), signals the general stance of the Central Bank’s monetary policy and provides an effective interest rate floor for overnight money market rates.

United Arab Emirates sees its total revenue surge 32pc

The United Arab Emirates (UAE) saw revenue increase 31.8 percent in revenue in 2022, its finance minister said on Sunday, supporting an overall fiscal surplus last year.

One of the Gulf’s most diversified economies, the UAE has been developing its non-oil sectors, focusing on areas such as trade, tourism, manufacturing and logistics and financial services.

Spending increased 6.1 percent in 2022 on the year to stand at about 427 billion dirhams ($116bn), state news agency WAM said, citing the finance minister, Sheikh Maktoum bin Mohammed bin Rashid Al Maktoum.

“Despite the increase in revenues, the UAE has maintained a cautious and rational spending policy,” it said, adding that the surplus would allow for stronger fiscal buffers to mitigate potential financial risks.

Saudi economy to grow by 3.9pc in 2024

Affirming Saudi Arabia’s strong growth prospects in the near term, the Organization for Economic Co-operation and Development revealed that the Kingdom’s gross domestic product is expected to rise by 3.9 percent in 2024.

The OECD revealed that Saudi Arabia’s inflation rate is expected to average 2.1 in 2024, a sign that the Kingdom is successfully combating price pressures.

Earlier this month, the International Monetary Fund echoed similar views and noted that Saudi Arabia has succeeded in maintaining its average consumer price index despite inflationary pressures faced by several countries across the globe.

The report noted that Saudi Arabia will be among the few countries with economic growth above 3 percent in 2024.

The OECD projected that the US and the UK could grow by 0.8 percent and 1.3 percent in 2024.

Oman’s GDP projected to grow at 2.5pc this year

Oman’s economy entered this year on a positive note, expanding 4.7 percent y/y in Q1, outpacing the average growth rate last year and driven by non-oil output, which expanded 4.6 percent.

While non-oil activities are forecast to grow 2.9 percent, up from 1.6 percent last year, headwinds in the oil sector, driven by Opec+ policy changes, will cause GDP growth to slow to 2.5 percent year-on-year (y/y) compared to the 4.3 percent y/y growth in 2022, according to the latest Economic Insight report, commissioned by ICAEW and compiled by Oxford Economics.

While the energy sector slowed to 3.5 percent, with oil output growing by just 2.8 percent, fishing, building, and construction sectors have rebounded following double-digit contractions last year. Services have also climbed by 4.5 percent, supported by retail, transport, and real estate activity.

Aligned with the Opec+ agreement, Oman is expected to reduce oil output to 1.042mn b/d this year, down 2.1 percent from last year, with further adjustments anticipated in the coming year. Meanwhile, gas production increased by 3.4 percent in 2022 and will continue to inch up as more projects come online, shifting the composition of energy trade further in favour of gas.

Despite hotel occupancy rates hovering slightly below 2019 levels, tourism is expected to be among the key sectors boosting the Sultanate’s non-oil economic recovery, with indicators such as visitor numbers showing promising signs of improvement. Oman is also capitalising on growth and diversification plans in the region, such as the UAE’s Etihad Rail, which will connect Oman, the UAE and Saudi Arabia.