Business

KUWAIT CITY — Stock markets in the energy-rich Gulf states ended 2015 in negative territory on Thursday, following a massive decline in oil prices and regional turmoil.

The Saudi stock market, the largest in the region, led the slide by shedding 17 per cent in 2015 followed by Dubai which dipped 16.5 per cent.

The market value of the seven bourses dropped by $110 billion to $930 billion in 2015.

Gulf Cooperation Council (GCC) states were forced to cut back this year after oil prices fell by more than 60 per cent since mid-2014 to below $40 a barrel.

GCC nations Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the United Arab Emirates all depend on oil for more than 70 per cent of their revenues.

"The persistent decline in oil prices, though expected, hit the domestic economies very hard," M.R. Raghu, head of research at Kuwait Financial Centre Markaz, said. "It negatively affected spending and private investors."

"Stock markets were also impacted by geopolitical factors which pushed investor confidence down," he added.

The Saudi-led military intervention against Iran-backed Houthi rebels in Yemen, conflicts in Iraq, Syria and Libya, and attacks by the Daesh group all caused instability in the Gulf states. 

The Chinese slowdown and the hike in US and domestic interest rates also fuelled the slide, Raghu continued, with most losses taking place in the second half of the year.

Trading was highly volatile on most bourses, which dropped to multi-year lows.

And there is no cause for optimism for next year, Raghu noted.

"2016 will be a very challenging year," he indicated. "Nobody is hopeful of any recovery in oil prices, which are expected to remain below $50 a barrel, and corporate earnings are expected to be flat."

The Saudi Tadawul All-Shares Index (TASI), the largest bourse in the region, shed 17.06 per cent at 6,911.76 points, dropping for the second year in a row.

During December, the TASI dropped to a three-year low, despite new rules allowing foreign institutions to trade directly on the Saudi bourse.

The market was pulled down by the leading petrochemicals sector, which dipped 27 per cent. Most of the remaining 15 sectors also dropped.

The Dubai Financial Market Index posted its first annual loss after four years of sustained gains, ending the year down 16.5 per cent at 3,151.00 points.

The Abu Dhabi Securities Exchange was the best performer among the Gulf bourses, but still shed 4.5 per cent to finish the year on 4,307.3 points.

The Qatar Exchange, the second largest in the Gulf, fluctuated sharply during the year to close at 10,429.4 points, down 15.1 per cent. 

The Kuwait Stock Exchange dropped 14.1 per cent to close on 5,615.12 points, after dipping to an 11-year low in December.

The Muscat Securities Market ended 2015 down 14.8 per cent at 5,406.22 points, while the tiny Bahrain bourse dropped by a similar percentage to close on 1,216 points.

JAKARTA — Southeast Asian nations officially launched a European Union (EU)-inspired economic bloc Thursday aimed at boosting the region's trading clout and attracting more investment, but analysts said a true single market was still a long way off.

The ten-member Association of Southeast Asian Nations (ASEAN) hailed the project as a "milestone" in combining the economic force of a resource-rich and growing market of more than 600 million people. 

The vision for the ASEAN Economic Community (AEC) is a single market with a free flow of goods, capital and skilled labour, which should help the region compete with the likes of China for foreign investment. 

The new bloc "will contribute significantly to the region's growth and create developmental opportunities for all", said Vivian Balakrishnan, the foreign minister of ASEAN member Singapore.

But experts say such an idea is difficult, if not impossible, to achieve in a region marked by extremes in development levels, democratisation, and institutional capability. 

The official launch of the AEC has no practical effect, and diplomats have said ASEAN, regularly criticised for a lack of concrete achievements, was keen not to miss its own deadline of 2015, set several years ago.

Research group Capital Economics said in a note that the establishment of the AEC was "no game changer", and it was likely to fall short in tackling major challenges such as reducing non-tariff barriers and improving infrastructure.

"ASEAN, with its tradition of non-interference into the affairs of member countries, an absence of penalties for non-compliance, and a lack of a powerful central bureaucracy, is ill-equipped to tackle these obstacles," it indicated.

John Pang, a senior fellow at Singapore's S. Rajaratnam School of International Studies, said there would be only "slow and incremental progress" in integrating the economies of Southeast Asia.

"The AEC will not be raising the curtain on any radical change," he wrote in a commentary.

Diplomats have conceded the single market vision is many years away, but insist the project will help change mindsets and provide momentum.

ASEAN leaders signed a declaration to establish the AEC at the group's annual summit in November but there was no official ceremony on Thursday to mark the new bloc's establishment.

Southeast Asia has already made progress on lower-hanging fruit like cutting tariffs and removing other hurdles such as clashing customs systems but significant non-tariff and other barriers remain.

ASEAN includes wealthy Singapore, one of the world's most developed countries, oil-rich Brunei, developing states such as Malaysia, Indonesia, Thailand, the Philippines and Vietnam, and poorer nations like Cambodia, Laos and Myanmar.

Its members range from free-wheeling to controlled democracies, communist-ruled states and an absolute Islamic monarchy.

Although ASEAN's plans were inspired by the developed single market of the 28-member EU, officials insist they want to pursue integration in a way suitable to the region's circumstances, and have ruled out a common currency.

DUBAI — An austere state budget released by Saudi Arabia this week is likely to mark the end of an era for the Gulf's lavish cradle-to-grave welfare systems, encouraging governments around the region to roll back costly handouts to their populations.

Struggling to narrow a huge budget deficit created by low oil prices, Riyadh on Monday announced government spending cuts, reforms to energy subsidies and a drive to raise revenues from taxes and privatisation next year.

Gulf governments have tightened their belts in the past during periods of slumping oil prices. But the Saudi budget went further than usual by including steps that will directly hit the purchasing power of citizens — in particular, raising domestic gasoline, kerosene, water and electricity prices.

It was the biggest step a rich Gulf Arab oil exporting state has taken so far to change an arrangement in which governments heavily subsidise fuel, water, food and other essentials for their populations in exchange for social peace.

Because of Saudi Arabia's role as the political leader of the Gulf Arab states and the biggest Arab economy, other Gulf governments are now expected to follow suit as they impose their own austerity programmes in response to the prospect of years of shrunken oil and gas revenues.

"The initiatives announced in the Saudi budget will be game-changers in the Gulf," said Kristian Coates Ulrichsen, a political scientist at Rice University's Baker Institute in the United States.

"If the reforms can be implemented without a significant backlash, that would boost the political courage of governments that hitherto have been hesitant to introduce such sensitive changes," he added.

In postings on Twitter, ordinary citizens in the Gulf also saw the Saudi budget as signalling tougher times for the region.

"Saudi Arabia's budget deficit is terrifying! We fear that it will be echoed around the Gulf," tweeted a Kuwaiti high school teacher who identified himself as Bu Dujan, noting that fuel price hikes in the region would raise the costs of goods.

Political will

Some countries had already launched reforms before Riyadh made its move. 

In August, the United Arab Emirates (UAE) abandoned a system of fixed gasoline prices in favour of one linked to global oil prices; gasoline has barely risen, but the way is clear for it to do so in future when oil eventually recovers.

Bahrain more than doubled prices of beef and chicken in October as it removed subsidies on them, and this week the Bahraini cabinet approved a new system for diesel and kerosene that would allow prices to rise gradually in coming years.

Bigger changes are on the way. Governments in Bahrain, Kuwait, Qatar and Oman, which face financial squeezes of varying intensity, have all said they are conducting broad reviews of their subsidy systems, though they have not yet committed to specific reforms.

Because of political sensitivities, governments are likely to move cautiously; Saudi officials stressed this week that they wanted to minimise the impact on the living standards of lower- and middle-income people.

Although the Saudi price of 95 octane gasoline jumped 50 per cent, it remained very low by global standards, at 0.90 riyal ($0.24) per litre. Water and electricity price hikes were structured to impose most of the burden on big corporate users.

Nevertheless, Riyadh made clear that the price hikes were only the first in a series, saying it would adjust subsidies for water, electricity and petroleum products over five years.

Once governments start cutting subsidies, it may be hard for them to resist the huge savings available from more reforms. 

The International Monetary Fund estimates Riyadh spent $107 billion on energy subsidies this year, more than its entire budget deficit of $98 billion.

"We think that the Saudi consumer fuel price changes will be the first of many to come over the next few years around the Gulf,” said Mohammed Al Hajj, associate at investment bank EFG Hermes in Dubai.

In the wake of the Saudi budget, Kuwait's Finance Ministry Undersecretary Khalifa Hamada told the Al Qabas newspaper that his ministry would present a proposal to "rationalise" subsidies to an economic committee in the cabinet at the end of this week.

The proposal would save the government 6.2 billion dinars ($20.5 billion) over the next three years, Hamada indicated, estimating that without reforms, Kuwait would spend 16 billion dinars on subsidies over three years.

Saudi tax policy is also expected to influence the Gulf, because of the close ties between the region's economies.

In its budget announcement, the Saudi finance ministry said it planned to introduce value-added tax in coordination with other countries in the region — a measure that would directly affect the spending power of ordinary consumers, even if it is mitigated by exemptions for items such as food.

Officials have said countries would need to introduce the tax jointly to avoid smuggling and loss of economic competitiveness, but Gulf Arab governments have been discussing the idea inconclusively for years.

Previously, the main impetus for the tax came from the UAE. Saudi Arabia's decision to endorse it publicly means the project looks likely to go ahead in the next few years.

Separately, an economic report said Wednesday that Saudi economic growth is set to slow further in 2016 after the heavyweight in the Organisation of Petroleum Exporting Countries announced record deficits due to the slump in oil prices.

Jadwa Investment forecast the Saudi economy would grow by just 1.9 per cent next year, down from 3.3 per cent this year and 3.5 per cent in 2014.

The world's top oil exporter announced Monday a record budget deficit of $98 billion in 2015 and projected a shortfall of $87 billion next year. 

Jadwa expects the oil sector to grow by a meagre 0.9 per cent on an average crude production of 10.2 million barrels per day.

To finance the budget, the Saudi government withdrew from its huge fiscal reserves and issued bonds on the domestic market.

The reserves dropped from $732 billion at the end of 2014 to $628 billion in November, Jadwa pointed out.

The kingdom is estimated to have issued domestic bonds worth around $30 billion since July, raising public debt to $38 billion, or 5.8 per cent of gross domestic product (GDP), Jadwa indicated.

This year also saw the first deficit in the kingdom's current account since 1998, at $41.3 billion or 6.2 per cent of GDP, it said. The slide is expected to continue next year.

To counter the shortfalls, Riyadh introduced unprecedented hikes to the prices of fuel, electricity and other utilities by as much as 80 percent, reducing decades-old subsidies.

Jadwa estimated the cost of energy subsidies at $61 billion this year, of which diesel accounted for $23 billion and gasoline for $9.5 billion.

Jadwa estimated the oil price used to calculate oil income in 2016 at $40.3 a barrel, down from $64.8 a barrel this year. The actual price of Saudi oil in 2015 averaged $49 a barrel.

It said that investment spending in next year's budget was cut by 19.3 per cent to $59 billion. 

Revenues in 2015 dropped to $162 billion, the lowest since the global financial crisis in 2009, due to a massive $123 billion fall in oil revenues.

The contribution of oil income to revenues dropped to just 73 per cent in 2015, from an average of 90 per cent in the past decade.

Jadwa expected the Saudi government to announce a National Transformation Programme in January to outline further plans to boost non-oil income.

FRANKFURT — Global economic growth will be "disappointing and patchy" in 2016, the head of the International Monetary Fund (IMF), Christine Lagarde, wrote in an article published in the German business daily Handelsblatt on Wednesday. 

Rising interest rates in the United States, the economic slowdown in China, the persistent fragility of the financial system in a number of countries and the effects of low oil prices on producer countries "all mean that global growth in 2016 will be disappointing and patchy", Lagarde wrote. 

"And the medium-term outlook has clouded over, too, because low productivity, ageing populations and the fallout from the global financial crisis are putting the brakes on growth," she continued. 

The US Federal Reserve (Fed) rang in the end to an era of ultra-cheap money by raising its key interest rates earlier this month. 

"The Fed is treading a tightrope: normalising interest rates, while at the same time seeking to avert any risk of disturbance on the financial markets," Lagarde said. 

Generally speaking, outside the highly developed economies, "other countries are better prepared than in the past for higher interest rates," she wrote. 

"Nevertheless, I'm worried about their ability to absorb shocks" that could be triggered by tighter monetary policy, Lagarde cautioned.

"A lot of countries have taken on more debt, much of which is denominated in US dollars," she argued. 

"Rising interest rates and a stronger dollar could push companies into insolvency and banks and governments could become infected," she warned. 

Earlier this month, the United Nations cut its forecast for global economic growth in 2015 by 0.4 percentage point to 2.4 per cent, largely due to lower commodity prices, increased market volatility and slow growth in emerging market economies.

There will be a slight pick up next year, the world body said in its annual World Economic Situation and Prospects report.

"The world economy is projected to grow by 2.9 per cent in 2016 and 3.2 per cent in 2017, supported by generally less restrictive fiscal and still accommodative monetary policy stances worldwide," the UN said in a statement accompanying the report.

The IMF also said in October that it had cut its global growth forecast for this year by 0.2 percentage point to 3.1 per cent. The IMF also cited declining commodity prices and weaker economic prospects for large emerging market economies.

"Given the much anticipated slowdown in China and persistently weak economic performances in other large emerging economies, notably the Russian Federation and Brazil, the pivot of global growth is partially shifting again towards developed economies," the UN statement said.

The UN report indicated that growth in developing and transition economies was at its weakest since the global financial crisis of 2008-09.

In addition to macroeconomic uncertainties and weak commodity prices, the UN report cited rising volatility in exchange rates and capital flows and stagnant investment and productivity growth as factors behind slowing global growth.

DUBAI — Saudi Arabia's planned cuts in spending and energy subsidies signal that the world's largest crude exporter is bracing for a prolonged period of low oil prices.

The heavyweight member in the Organisation of Petroleum Exporting Countries (OPEC) shows no signs of wavering in the long-term oil strategy it has orchestrated since last year. Instead, it appears willing to continue tolerating cheap crude to defend market share and wait for the market to balance without cutting supplies, oil sources and analysts say.

In one of the strongest signals that the kingdom will stay the course despite the impact on its finances, Saudi Aramco's Chairman Khalid Al Falih said it could outlast others.

"We see the market balancing sometime in 2016, we see demand ultimately exceeding supply and soaking up a lot of the excess inventory and prices in due course will respond regardless of when and by how much," Falih told a news conference late on Monday detailing next year's budget.

"Saudi Arabia more than anyone else has the capacity to wait out the market until this balancing takes place," he said.

According to analysts, the plans announced on Monday to shrink a record state budget deficit with spending cuts, reforms to energy subsidies and a drive to raise revenues from taxes and privatisation showed Riyadh was expecting lower revenues.

"We don't see any changes to Saudi Arabia's oil policy — in the context of oil production," said Amrita Sen, chief oil analyst at consultancy Energy Aspects.

"The budget changes suggest they are expecting oil prices to stay low for some time and the reforms are a small step towards addressing that," he added.

Belt-tightening

The 2016 budget and reforms announcements marked the biggest shake-up to economic policy in the kingdom for over a decade and aimed to cut the government deficit to 326 billion riyals, down from 367 billion riyals or 15 per cent of gross domestic product (GDP) in 2015.

Next year's budget projects spending of 840 billion riyals, down from 975 billion riyals spent in 2015.

The government also said it was hiking prices for fuels, water and electricity as well as gas feedstock used by industry, as part of politically sensitive subsidy reforms.

"Saudi Arabia can either spend its way out of the current scenario or start belt-tightening. In the past, the country has spent lavishly on health, education and infrastructure in difficult times knowing that oil prices will be supportive," said Asim Bakhtiar, head of research and investment advisory at Saudi Fransi Capital.

"If oil has entered a down cycle then belt-tightening will prevail," he added.

Falih, who is also the health minister, became chairman of Aramco, the world's biggest state energy firm, earlier this year after more than 30 years in the company.

As one of a handful of Saudi figures whose views are closely watched by traders and analysts for any insight into the kingdom's oil thinking, Falih has long been considered a possible successor to Saudi oil minister, Ali Al Naimi.

His appearance at the news conference with two other ministers, during which he shared his views on oil prices and market assessment, was seen as a possible signal he could be named oil minister when Naimi, 80, eventually retires.

OPEC rolled over its year-long strategy of pumping at will at its December 4 meeting, raising the stakes in its survival-of-the-fittest market strategy.

Riyadh was the driving force behind OPEC's shift in policy last year, rejecting calls to reduce output to support oil prices that are trading this month at their lowest since 2004. It chose instead to defend market share against higher-cost-rivals.

Falih noted that the policy had borne fruit.

"Over the last year we have seen the down cycle in the oil markets have a significant impact on both supply and demand. Supply has plateaued in North America and started declining by significant amounts, and we expect that to continue or perhaps accelerate in 2016," he said.

Brent was trading at around $36.85 a barrel on Tuesday, a sharp drop from a high of $115 a barrel in June 2014 before OPEC's policy shift.

The finance ministry did not disclose the average oil price assumed in its 2016 budget calculations but economists estimated it was about $40 a barrel and saw crude production remaining high at above 10 million barrels per day next year.

"We do not see Saudi Arabia cutting production in order to support upward movement in prices. So far, Saudi policy of gaining market share has worked, with lower prices undercutting both OPEC and non — OPEC competitors in key markets," wrote analysts at Jadwa Investment, a leading Saudi financial firm, in a note on Tuesday. 

Long accustomed to cheap utilities and some of the lowest petrol prices in the world, Saudis woke to a shock Tuesday as authorities made massive subsidy cuts after falling oil prices caused a record deficit.

In a clear departure from its decades-old generous welfare system, Riyadh announced prices would rise on fuel, electricity, water and even plane tickets and cigarettes.

Residents of the oil-rich Gulf kingdom have long enjoyed cheap prices on basic goods and services, but officials made clear that was no longer sustainable after the stunning drop in crude prices over the last 18 months.

"We have to rationalise unnecessary spending. This requires changes to focus on essential expenditures," Finance Minister Ibrahim Al Assaf was quoted as saying Tuesday by the Al Eqtisadiah newspaper.

After years of high spending, authorities moved swiftly to impose unprecedented cuts after announcing Monday a 2015 budget deficit of $98 billion, the largest in Saudi history and a whopping 15 per cent of GDP.

Prices on fuel products were raised by up to 80 per cent as of midnight, including a 50 per cent jump in the price of the most commonly sold petrol to 0.90 riyals ($0.24) per litre.

Vehicles thronged petrol stations in Saudi Arabia Monday evening to fill up tanks at the old rates.

Abu Othman, a 63-year-old motorist, noted that despite the increase, petrol prices remained "reasonable".

"It is natural to expect such measures in these circumstances," he said while filling his car.

'Wrong economic policies' 

The swift action to cut subsidies was unexpected, even if there had been no doubt Saudi Arabia would post a deficit this year.

With oil prices expected to remain low, Saudi authorities also projected a shortfall of $87 billion in the 2016 budget.

Revenues in 2015 dropped to $162 billion, the lowest since the global financial crisis in 2009, due to a massive $123 billion fall in oil revenues.

The contribution of oil income to revenues dropped to just 73 per cent in 2015, from an average of 90 per cent in the past decade.

The budget and price increases dominated talk on Saudi social media on Tuesday, with Twitter user Fahad Al Owain saying many would suffer from the price hikes.

"Rich people can overcome the rises but the poor depend on the government," he wrote.

Another Twitter user, writing under a pseudonym, blamed "wrong economic policies for the record budget deficit".

But others said it was time for Saudis to tighten their belts.

"I believe this budget will teach us the art of rationalising consumption," Twitter user Udai Al Dhaheri wrote.

Authorities announced other measures aimed at reducing Saudi Arabia's reliance on oil revenues by diversifying the economy, including by increasing charges on public services.

Non-oil revenues rose by 29 per cent this year to $43.5 billion, contributing 27 per cent to public revenues. 

But Saudi economist Abdul Wahab Abi Dahesh said much more needed to be done.

"This remains a very small contribution and needs to be increased," he said. "I expect that the government will be able to easily raise non-oil revenues above the 200 billion riyal [$53 billion] mark next year with the introduction of the new fees." 

That would boost non-oil income to around 40 per cent of public revenues, a new landmark for the kingdom.

In a speech to cabinet on Monday, King Salman, overseeing his first budget since taking over the country in January, emphasised the need for diversification.

"This budget represents the beginning of a comprehensive programme to build a strong economy... with various sources of income," he said.

The International Monetary Fund has warned Riyadh that failure to cut spending and implement reforms will eat up the country's fiscal reserves in just five years.

The kingdom withdrew more than $80 billion this year from the reserves, which stood at $732 billion at the end of 2014, and issued bonds worth around $20 billion.

RIYADH/DUBAI — Saudi Arabia, its finances hit by low oil prices, announced plans to shrink a record state budget deficit with spending cuts, reforms to energy subsidies and a drive to raise revenues from taxes and privatisation.

The 2016 budget, released by the finance ministry on Monday, marked the biggest shake-up to economic policy in the world's top crude exporter for over a decade, and includes politically sensitive reforms from which authorities previously shied away.

The plan suggests the kingdom is not counting on a major recovery of oil prices any time soon but is instead preparing for a multi-year period of cheap oil. The International Monetary Fund (IMF) warned in October that Riyadh would run out of money within five years if it did not tighten its belt.

"Our economy has the potential to meet challenges," King Salman said in a speech, adding the 2016 budget launched a phase in which his kingdom would diversify its revenues.

The government ran a deficit of 367 billion riyals ($97.9 billion) or 15 per cent of the gross domestic product (GDP) in 2015, officials said. 

The 2015 deficit is the highest in the history of Saudi Arabia, which relies on oil for 90 per cent of public revenues, but was not as big as some expected.

The IMF had projected the 2015 deficit to be around $130 billion and other reports also put it above $100 billion.

The 2016 budget plan aims to cut that to 326 billion riyals ($87 billion), reducing pressure on Riyadh to pay its bills by liquidating assets held abroad and issuing bonds.

The 2016 budget projects revenues at 514 billion riyals ($137 billion), down from 608 billion riyals ($162 billion) in 2015, when oil revenues accounted for 73 per cent of the total.

Income for 2015 was 15 per cent lower than projections, the lowest since 2009 when oil prices dived as a result of the global financial crisis, and 42 per cent less than in 2014, after oil prices fell by more than 60 per cent since mid-2014 to below $40 a barrel.

The Brent oil price averaged about $54 a barrel this year but is now around $37.

The dive is largely due to Saudi Arabia's own policies and those of other states grouped in the Organisation of Petroleum Exporting Countries (OPEC), which are refusing to cut oil production as they seek to drive less-competitive players, including US shale producers, out of the market

Spending was envisaged at 840 billion riyals ($224 billion), slightly below 2015 projections of $229 billion, and down from 975 billion riyals actually spent this year.

The ministry said it would review government projects to make them more efficient and ensure they were necessary and affordable.

The success or failure of the budget plan will be key to maintaining the confidence of financial markets in Riyadh.

As the deficit has swelled, the riyal has dropped in the forwards market to its lowest since 1999 because of fears Riyadh may eventually have to abandon its peg to the US dollar.

Subsidies

In its budget statement, the ministry said it would adjust subsidies for water, electricity and petroleum products over five years. That is a politically sensitive step since the kingdom has traditionally kept domestic prices at some of the lowest levels in the world as a social welfare measure.

Changes will aim to make energy use more efficient and conserve natural resources, while minimising the negative effects on lower- and middle-income Saudis, the ministry added.

Authorities moved quickly after the budget figures were released, with the official SPA news agency reporting the increase of petrol prices and saying the government would also cut subsidies for electricity, water, diesel and kerosene.

Such subsidies are a highly sensitive issue in Saudi Arabia, where residents have grown accustomed to low utility and fuel costs.

The price of higher-grade unleaded petrol will rise to 0.90 riyals ($0.24) per litre from 0.60 riyals, a hike of 50 per cent, though it remained very low by global standards.

The price of lower-grade petrol will surge by 67 per cent to 0.75 riyals ($0.20) from 0.45 riyals per litre.

National oil conglomerate Aramco said on Twitter it was immediately closing petrol stations until midnight on Monday, when it will resume sales at new prices.

The ministry outlined other reforms including "privatising a range of sectors and economic activities", although it did not give details, and raising taxes on soft drinks and tobacco, without giving a timeline.

It is also considering plans to raise charges on public services and to apply value-added tax (VAT) in cooperation with other Gulf Arab nations, which are facing similar pressure from the oil price drop.

The United Arab Emirates has said it expects a regional VAT to take about three years to introduce.

The economic and fiscal reforms seek to make the budget more sustainable, including a programme to contain spending growth, especially for wages and benefits which accounted for half of the 2015 budget.

Private analysts said markets could react positively to Monday's budget announcement because the 2015 deficit was lower than the 400-450 billion riyals which many investors had feared.

"It seems the levers of fiscal discipline were put into action in the second half of this year, rather than waiting," said John Sfakianakis, regional director of asset manager Ashmore Group in Riyadh.

But GDP growth, which was 3.3 per cent this year, is expected to suffer as state spending cuts hurt the construction industry and higher fuel and electricity prices dampen consumer spending.

"We see real GDP growth decelerating sharply in 2016, albeit remaining positive," said Monica Malik, chief economist at Abu Dhabi Commercial Bank.

The finance ministry did not disclose the average oil price assumed in its 2016 budget calculations but economists estimated it was about $40 a barrel. The figure is an accounting device and does not necessarily mean Riyadh expects oil at that level.

Figures given by Economy and Planning Minister Adel Fakieh indicated the cost of Saudi Arabia's military intervention in Yemen was not a major factor in the budget. 

He said Saudi Arabia had increased its military and security spending in 2015 by about 20 billion riyals because of the conflict.

A quarter of next year's spending, or $57 billion, has been allocated for defence and security expenditures, the ministry pointed out.       

Tapping reserves

The statement noted that the budget "comes amid challenging international and regional economic and financial conditions" including "very low oil prices".

Riyadh tapped into the huge fiscal reserves it accumulated when oil prices were high to maintain high spending this year and launch a military intervention against Iran-backed rebels in Yemen.

The IMF has warned Riyadh that failure to cut spending and implement reforms will eat up the country's fiscal reserves in just five years.

The kingdom withdrew more than $80 billion this year from the reserves, which stood at $732 billion at the end of 2014, and issued bonds worth around $20 billion.

LONDON — Uranium prices are expected to outperform other commodities in 2016 and beyond as a global climate change deal and growing demand from Asia bolster the prospects of the nuclear industry.

The metal that powers nuclear reactors has been gradually recovering from a sharp decline in the wake of Japan's Fukushima disaster in 2011, and has gained this year as several other commodities slumped due to oversupply and concerns about Chinese economic growth and US monetary tightening.

It is expected to climb further, according to analysts, after governments forged a landmark agreement to reduce green gas emissions at a global climate summit in Paris last month, a move that supports nuclear power generation and in turn uranium.

Nuclear power stations currently provide around 11 per cent of the world's electricity but the share is likely to increase as China and India expand their capabilities.

China, seeking to reduce its dependence on polluting coal, plans to build six to eight nuclear power plants a year for the next five years, and India aims to generate 25 per cent of its electricity from nuclear by 2050, up from 4 per cent in 2013.

Meanwhile, Japan is restarting four reactors, which may accelerate the country's return to atomic energy.

"The China boom is only now happening and while 'nuclear' might still be a toxic word, nuclear power generation is recovering towards pre-Fukushima levels," said Macquarie analyst Stefan Ljubisavljevic.

"It might not be popular, but it does provide the clean and consistent base-load power generation that many nations are seeking," he added.

Prospects of higher demand and strategic stockpiling from US utilities sent spot prices  to an average of $39 a pound in 2015, up 18 per cent from $33 last year, making it the best-performing metal of the year and one of the few commodities to post a yearly increase.

Crude oil, the most traded commodity by far, lost 35 per cent of its value this year, while benchmark base metal copper fell 26 per cent and gold dropped 9.4 per cent. Cocoa bucked the trend, with a 12 per cent rise.

Both Bank of America-Merrill Lynch (BofA-ML) and BMO Capital forecast uranium prices will rise to test $60 a pound by 2018.

Uranium deals

Kazakhstan, the world's biggest uranium producer, has just signed cooperation agreements with Chinese companies to build a nuclear fuel plant in the central Asian country, while Canada's Cameco, the world's largest listed uranium mining company, signed a five-year deal in April to supply fuel to Indian nuclear reactors.

BofA-ML analyst Oscar Cabrera expects uranium prices to continue to advance after 2018, thanks to the increasing demand from emerging markets China and India.

Uranium prices plunged after a major earthquake and tsunami in Japan disabled the power supply of three Fukushima reactors, causing a meltdown and the release of radioactive material in March 2011. From around $60 before the disaster, they hit a nine-year low of $28 in 2014.

Although the steep price decline resulted in mining cuts and delays and cancellations of projects, stockpiles remain large.

Analysts' estimates of the global market surplus range from 20 million to 27 million pounds in 2015, which they say is likely to fall to between 7.5 million and 10 million by 2020.

Around 150 million pounds of uranium are estimated to have been consumed in 2015, according to data from the World Nuclear Association.

Kazakhstan is the world's biggest uranium producer, followed by Canada and Australia, while the United States is the biggest consumer, followed by France and China.

BofA-ML forecasts consumption will rise to just below 200 million pounds by 2020.

"Uranium has proven to be a pretty good place to hide for resource and energy-focused investors," said BMO Capital Markets analyst Edward Sterck, adding: "I think it will continue."

SYDNEY — Global miners are battling to stay afloat after enduring one of the toughest years in recent times, with tumbling commodity prices and supply gluts set to force more closures and massive cuts in 2016, analysts say.

China's once insatiable appetite for commodities, boosted by an unprecedented investment boom in the world's second-largest economy, has waned, with its shift towards consumption-driven growth dampening demand.

At the same time, large producers have continued to lift output levels, which critics say is designed to flood the market and push out smaller competitors, accelerating the decline in prices.

The iron ore price sank below $40 in early December, its lowest since May 2009, thermal coal prices are 80 per cent off their 2008 peak, while world oil prices have spiralled down to an eight-year low. 

The sharp falls have ravaged the bottom line of miners across the world, pushing smaller players to the brink while tearing billions of revenue out of the government budgets of resources-dependent economies such as Australia.

Even major players such as London-listed Anglo-American has had to slash its workforce by almost two-thirds and shut loss-making mines amid the deepening rout, while Swiss giant Glencore is planning to trim its debt by cutting investment and selling assets.

"You only need to look at any share price to know it's been an absolutely shocking year for commodity markets and for mining companies," indicated CLSA's head of resources research Andrew Driscoll.

Anglo-Australian BHP Billiton, one of the world's largest miners, has seen its Australian share price dive by more than 40 per cent this year, while stocks in rival Rio Tinto have dropped by 26 per cent.

Rio's Chief Executive Sam Walsh said the firm's competitors were in so much trouble that they were "hanging on by their fingernails".

"Sooner or later the adjustment will take place," Walsh told Bloomberg Television this month.

End of commodities super-cycle      

The slump comes on the back of a commodities supercycle over the past decade, led by China but also fuelled by other resources-hungry developing nations growing their economies at a rapid pace, which pushed prices to record levels.

But as miners borrowed heavily and ramped up output, they overestimated the growth in demand, analysts said.

"They've added far too much capacity for that new, more moderate demand outlook, so we have surpluses in every commodity," indicated UBS commodities analyst Daniel Morgan.

"I think it's definitely one of the toughest years the mining industry has faced in many years," he said, noting that the woes were comparable to previous slumps sparked by the 2007-08 global financial crisis, the 1997 Asian financial crisis and even the 1991 fall of the Soviet Union.

Goldman Sachs said last week the iron ore sector might need to "hibernate for an extended period", predicting that prices would stay below $40 for three years.

The International Energy Agency said in mid-December that "the golden age of coal in China seems to be over", with demand slowing as the East-Asian nation turns to cleaner energy sources.

Meanwhile, the Organisation of Petroleum Exporting Countries recently left its output ceiling unchanged despite crashing energy prices in a move likely to further depress the market.

"We had the big party from 2005-2011, and now we are suffering the big hangover," said Breakaway Research senior resources analyst Mark Gordon. 

"The so-called supercycle was a real anomaly in history, so the upward trend was an anomaly, and the downward trend is also an anomaly," he added.

More shutdowns, cost-cutting      

With demand projected to soften along with China's slowing economic growth, the adjustments have to come from the supply side, according to analysts.

They warned that miners have been too slow to shut operations even as their revenues and cash reserves are severely eroded, in part due to the dive in energy prices that have helped push down costs.

This meant shutdowns were likely to accelerate next year as cash losses become too significant to avoid.

"I think that sets us up for some sort of supply-driven improvement in markets in the second-half of the year as sufficient supply exits, the markets rebalance and prices can start migrating up the cost curve," Driscoll indicated.

"[There's] a bit of light at the end of the tunnel but if you are a high-cost producer, if you've got too much debt, then things will remain very challenging," he said.

Separately,  the Tongmei Group is typical of the lumbering and inefficient state-owned firms that dominate cities in China's industrial heartlands

Coated in thick black dust, hundreds of miners emerge from deep underground after another shift gouging out the coal that fuelled China's boom and its choking pollution, an industry now crippled by oversupply, but whose companies are seen as too big to fail.

The firm is the lifeblood of Datong, a city of 3 million people. It employs some 200,000 staff with nearly a million family dependents, housing and entertaining its workers and even running hospitals.

And it is in trouble.

For decades coal has been the backbone of the northern province of Shanxi, providing livelihoods for millions of miners, while private jet owning bosses became notorious for their nouveau riche lifestyles.

China's consumption of the fuel doubled in the decade to 2014 as the economy soared, reaching more than four billion tonnes a year.

Now some observers say China's coal demand may have peaked, a confluence of economic growth slowing to its lowest rate in 25 years and Beijing starting to reduce the carbon-dioxide-spewing fuel's share of the national energy mix.

That has dragged coal prices down to their lowest level in a decade, putting the squeeze on Tongmei.

But manager Liu Congying says despite the shrinking market, he has little choice but to supply even more, the mine operates 24 hours a day with a maximum output of 6,000 tonnes an hour.

"If we didn't increase production, we could not continue to run the business as we do now... including paying wages," said Liu. "It's clearly not a sustainable policy".

Social stability 

Relatively poor Shanxi's population is nearly 40 million, more than Canada's, and official statistics show its gross domestic product grew just 2.8 per cent this year.

Many of China's giant state-owned enterprises (SOEs) are unviable and plagued by overcapacity, with reports in September saying a mining group in the northeastern province of Heilongjiang will sack 100,000 workers, in what analysts called a taste of the pain to come.

Liu, who began toiling in the pits five decades ago, denied that Tongmei planned layoffs, telling AFP: "We need to preserve social stability."

But the firm is "probably running out of money", said industry analyst Zhang Zhibin.

He and other industry insiders think that China's coal consumption has peaked and may even decline in the next few years.

That is a potential boon to China's attempts to reduce smog and cut greenhouse gas emissions, but a disaster for cities such as Datong.

"We will see bankruptcies in the sector in the next few years," Zhang added.

China's Premier Li Keqiang this month called for a "cut back on overcapacity in traditional industries as well as a large number of zombie enterprises", in remarks state-run media said were directed at coal and steel.

But there are few signs the government is willing to turn off the financial taps and risk widespread unemployment, with the potential for anger and unrest, anathema to the Communist Party.

"The state sector is inefficient and wasteful," indicated Joe Zhang, an SOE manager turned commentator. "But it has a central role in the Chinese social fabric."

Golden carp

In his company-funded flat, equipped with central heating and an aquarium for golden carp, a miner surnamed Xu said: "Our homes are much better than before."

His daughter played in front of a flat-screen television.

Xu's pay rose nearly tenfold in the good years after the late 1990s to peak around 6,000 yuan ($930) per month, but this year he has seen a 15 per cent cut.

Shanxi officials are trying to diversify by boosting tourism and luring manufacturers away from China's coast.

Meanwhile, Tongmei is moving into electricity and chemical production.

Even so, the buzzcut 38-year-old scoffed at the idea that service industries such as tourism could be his city's future.

"Who will we serve? If tens of thousands of us start up businesses, who will buy our products?" he asked. "We have nothing here apart from coal."

BELEK, Turkmenistan — Turkmenistan hailed last week the completion of a $2.5 billion gas pipeline connecting its abundant eastern gas fields to the Caspian Sea while potentially expanding Europe's energy security options.

The approximately 800-kilometre long East- West pipeline could connect the isolated state possessing the world's fourth largest gas re-serves with markets in the West via an ambitious link that would traverse the Caspian.

"With the completion of the East-West pipe-line, cooperation with our European partners acquires a new quality," said Turkmenistan's President Gurbanguly Berdymukhamedov at the opening ceremony at the Belek compressor station, some 500 kilometres northwest of the capital, Ashgabat.

The East-West pipe-line may prove an important component of a bigger link planned by the European Union (EU), Azerbaijan, Turkey and Georgia that would funnel natural gas along the floor of the Caspian before connecting with pipelines threading into Europe.

The Trans-Caspian pipeline is expected to cost around $5 billion and could carry as much as 30 billion cubic metres of natural gas annually in the direction of the EU. The pipeline would provide Europe with an opportunity to lessen its dependence on Russia- sourced gas.

'Strength of companies' Berdymukhamedov said the East-West link had been built "by us on our own thanks to the strength of our national companies" despite previous foreign interest in building the vital link.

"This clearly demonstrates our economic and financial potential and the capacity of our country," Berdymukhamedov added. Turkmenistan's lack of infrastructure has left it dependent on pipelines connecting it to Russia and China for the bulk of its exports in the past.

Brussels' energy chief, Maros Sefcovic, said during a May visit to Ashgabat that the Trans- Caspian pipeline might come online by the end of 2019, although it is unclear who will build a link that faces opposition from littoral states Russia and Iran.

Other efforts to involve Turkmenistan in the EU's energy system including via the long-planned Nabucco pipe-line have come to nothing in the past. Turkmenistan, which sends up to 90 per cent of its natural gas east to China, has also begun building a $10 billion Turkmenistan-Afghanistan-Pakistan-India link expected to help ease energy deficits in South Asia.

The country's once- booming energy relationship with former master Russia has virtually collapsed since energy giant Gazprom confirmed its intention to wind down imports of Central Asian gas, with Turkmenistan blasting the company as an "un-reliable partner" earlier this year. But Igor Sechin, who heads Russia's top oil company, Rosneft, and is known as a close ally of President Vladimir Pu-tin, attended the opening of the East-West pipeline.

AMMAN — The Jordan Chamber of Commerce (JCC) is scheduled to hold the activities of the Jordanian-Saudi economic forum and the eighth meeting for the Jordanian-Saudi Business Council on January 5, on the sidelines of the 15th session meetings for the joint Jordanian-Saudi economic committee.

JCC President Nael Kabariti said the forum will be a platform to enhance Jordanian-Saudi cooperation and boost relations among private sector commissions.

He stressed the importance of benefiting from such meetings to showcase available investment opportunities, especially in the sectors of IT, tourism, health, economic consultation, finance, real estate, contracting, infrastructure and education.

Kabariti voiced the Jordanian private sector's appreciation of Saudi Arabia's supporting stance and continuous backing to Jordan through grants, investments and employment. He said the value of Saudi investments in the Kingdom surpassed $10 billion, distributed on several vital sectors.