The US economy led a global recovery from the coronavirus-induced slowdown, with its “aggressive” fiscal stimulus helping it to rebound at a quicker pace than it did after the 2008 financial crisis, said the Institute of International Finance.
The world's largest economy made the most complete recovery, compared with other Group of 10 industrialised economies, with both consumption and investment in the third quarter of 2021 rising above their levels at the end of 2019, the IIF said in its Global Macro Views report.
“This remarkable accomplishment is due primarily to substantial fiscal stimulus, which dwarfs in size what was done after the Great Recession,” the IIF report authors said.
The report also surveyed the global recovery from pandemic-induced slowdown and assessed 21 advanced economies and 23 emerging markets.
The US economy last year grew at the fastest pace since Ronald Reagan's presidency in the 1980s, bouncing back with resilience from 2020's brief but devastating coronavirus-induced recession.
The country's gross domestic product expanded 5.7 per cent in 2021. It was the strongest calendar-year growth since a 7.2 per cent surge in 1984 after a previous recession.
The economy ended the year by growing at an unexpectedly brisk 6.9 per cent annual pace from October through to December as businesses replenished their stocks, the US Commerce Department reported on January 27.
The US economy is estimated to have expanded 5.6 per cent last year, according to the International Monetary Fund. It is forecast to expand 4 per cent in 2022, which is a 1.2 percentage point lower than the IMF’s October projection. The fund expects US growth to reach 2.6 per cent in 2023.
“The US staged a remarkable recovery from Covid, especially given that the pandemic is far from over,” the IIF said.
Real private consumption returned to its pre-Covid levels in the third quarter of last year, a “truly remarkable feat that was never accomplished in the wake of the 2008 crisis”, they said.
Fixed and residential investment in the US have similarly made “remarkable” recoveries.
“The US stands out vis-a-vis its G10 peers also in terms of gross fixed capital formation, where it is again the best performer,” the IIF said.
However, the global economic recovery from the pandemic is “highly uneven”, with an investment slump weighing on medium-term growth prospects outside the US, according to the IIF.
The euro zone appears to be headed for a major investment slump, on par with what is playing out in some emerging markets in Africa, South America and Asia, the IIF survey found.
“The euro zone seems to have entered a disinvestment cycle, comparable in severity to EMs like South Africa, Colombia, Malaysia and the Philippines,” the IIF said. “This disinvestment cycle runs the risk of transforming the Covid shock into a medium-term drag on growth.”
The euro zone is also on the “weaker end of the spectrum”, compared with other G10 nations, in terms of real private consumption and gross fixed capital formation, the survey found.
“It is true that the euro zone saw a more pronounced run-up in investment ahead of Covid, so perhaps part of the weaker picture now simply points to overinvestment before the pandemic,” the IIF said.
“We are not inclined to believe this explanation, however, and see mounting risk that the euro zone may be entering a prolonged investment slump, which could extrapolate the Covid shock to weaker medium-term growth,” they said.
Advanced economies, which are estimated to have grown 5 per cent in 2021, are now set to grow 3.9 per cent this year, 0.6 per cent lower than estimated in October, the IMF said in its latest World Economic Outlook report in January.
The growth is expected to moderate further to 2.6 per cent, which is still a 0.4 per cent improvement from the previous forecast.
The biog
Born: High Wycombe, England
Favourite vehicle: One with solid axels
Favourite camping spot: Anywhere I can get to.
Favourite road trip: My first trip to Kazakhstan-Kyrgyzstan. The desert they have over there is different and the language made it a bit more challenging.
Favourite spot in the UAE: Al Dhafra. It’s unique, natural, inaccessible, unspoilt.
In The Heights
Directed by: Jon M. Chu
Stars: Anthony Ramos, Lin-Manual Miranda
Rating: ****
What the law says
Micro-retirement is not a recognised concept or employment status under Federal Decree Law No. 33 of 2021 on the Regulation of Labour Relations (as amended) (UAE Labour Law). As such, it reflects a voluntary work-life balance practice, rather than a recognised legal employment category, according to Dilini Loku, senior associate for law firm Gateley Middle East.
“Some companies may offer formal sabbatical policies or career break programmes; however, beyond such arrangements, there is no automatic right or statutory entitlement to extended breaks,” she explains.
“Any leave taken beyond statutory entitlements, such as annual leave, is typically regarded as unpaid leave in accordance with Article 33 of the UAE Labour Law. While employees may legally take unpaid leave, such requests are subject to the employer’s discretion and require approval.”
If an employee resigns to pursue micro-retirement, the employment contract is terminated, and the employer is under no legal obligation to rehire the employee in the future unless specific contractual agreements are in place (such as return-to-work arrangements), which are generally uncommon, Ms Loku adds.
THE LIGHT
Director: Tom Tykwer
Starring: Tala Al Deen, Nicolette Krebitz, Lars Eidinger
Rating: 3/5
White hydrogen: Naturally occurring hydrogen
Chromite: Hard, metallic mineral containing iron oxide and chromium oxide
Ultramafic rocks: Dark-coloured rocks rich in magnesium or iron with very low silica content
Ophiolite: A section of the earth’s crust, which is oceanic in nature that has since been uplifted and exposed on land
Olivine: A commonly occurring magnesium iron silicate mineral that derives its name for its olive-green yellow-green colour
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Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.
Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.
“Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.
Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.
“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.
Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.
From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.
Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.
BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.
Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.
Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.
“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.
Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.
“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.
“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”
The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”
Key findings of Jenkins report
- Founder of the Muslim Brotherhood, Hassan al Banna, "accepted the political utility of violence"
- Views of key Muslim Brotherhood ideologue, Sayyid Qutb, have “consistently been understood” as permitting “the use of extreme violence in the pursuit of the perfect Islamic society” and “never been institutionally disowned” by the movement.
- Muslim Brotherhood at all levels has repeatedly defended Hamas attacks against Israel, including the use of suicide bombers and the killing of civilians.
- Laying out the report in the House of Commons, David Cameron told MPs: "The main findings of the review support the conclusion that membership of, association with, or influence by the Muslim Brotherhood should be considered as a possible indicator of extremism."
