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tv   Best Of Bloomberg Markets Middle East  Bloomberg  December 26, 2016 11:00pm-12:01am EST

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>> early data from china indicates the economy is finishing on a firm note with no 3.6% of slowing after growth. climbed.metals prices earnings rose to $11.5 billion. toshiba trading near the lowest level in one month.
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the shortfall followed the acquisition of our services business, by the westinghouse subsidiary last year. there are conflicting estimates of how much. the nikkei news agency says $850 million for the dorchester nhk expects $4.3 billion. a warning about italy's proposed rescue of alien banks. a warning to the government fund should be the last resort, and that the measures are very only offered -- measures should be only offered to lenders that are fundamentally healthy. board meets later today to discuss the ec's assessment. itsformer imf 2 is urging big banks to clean up. it says they cannot lend aggressively when their balance sheets are clocked and are
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laboring under heavy fines. he says the real problem is how to boost growth and an advanced economy. >> europe has to get its act together, institutionally and economically. china has to make a success of its reforms. it is important that u.s. growth takes an upward turn and acceleration in the year to come. >> israel has raised its growth forecast this year and next, while keeping rates a record low. the central banks as the economy 2 quarters of.5%, butter expected growth, better from the production of 2.1%. east, under two hours away from the opening of the emirates market, dubai and abu dhabi. this is how the picture fit across the board in the trading day. saudi arabia rallies off the back of the stronger budget
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announcement. we are watching what is happening in egypt and israel. finally a quick check of the markets in asia. next across the board -- mixed across the board as trade volume comes online. this is bloomberg. ♪ ♪ >> welcome to "best of bloomberg markets: middle east." the major stories driving headlines from the region. the world bank approved a new loan to egypt worth a billion dollars, the second portion of an annual investment for thousands of jobs. that interview coming up. months of cheap oil is forcing consolidation. qatari banks are talks for a
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merger. president putin called for a crackdown on terrorism after the return them ambassador -- after the pressure ambassador to turkey was murdered in ankara monday. our northeast managing editor took us through what happened. >> as you remember last year, the turkish brought down a russian warplanes which crossed briefly into turkey. that really damaged the relationship. the turkey economy suffered. more recently, they have worked hard to bring the relationship that together do a place where they are talking about syria, partly because the situation has changed. they are both saying they don't want that to change, they need to continue working together, especially in view of the situation in syria. yousef: you said the relationship just beginning to recover. a real headwind. what does this imply for turkey going forward?
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riad: the risk for turkey partly is economic as well. turkey has been hit by terrorist attacks recently, especially from kurdish separatists, but also isis related attacks. turkishas been fighting separatists in southeast turkey itself, and has put troops inside syria to stop turkish separatists there and push isis away from the border. economically, the economy shrank in the most recent data. tourism, which is an important part of the turkish economy, was hit hard. more attacks like this will not likely be good. >> is turkey likely going to change policy regarding syria? riad: turkey has changed policy most recently.
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initially they reported -- they supported rebels in syria. they continue to support rebels, however there aims will be much more limited. at first it was regime change. they wanted to get rid of assad and syrian government. in terms of action, it seems more of limiting the kurdish separatists and pushing isis away from the border. that is where they are working with the russians in aleppo to get people evacuated. sean paul, it is great to have you with us on the program. our viewers can bring this chart up on the bloomberg. 2012,back all the way to you can see the trend overall has been a downward one. taking a bit of a breather, not
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only because of the slightly improved relations with russia over the last few months. what does this event mean for turkey? forbig of a setback is this the turkish authorities? >> it is a tragic event for the russian ambassador. it continues this trend in turkey of elevated security risks. that really defined 2816 for this economy. the data has been horrible, and a lot of that has been because of isis attacks, or the field july.- failed coup in july. the confidence has fallen out. the figures were terrible. there was nothing to like. the first contraction since 2009. retail sales, industrial production, pmi figures still point to an economy that was fundamentally weak in the fourth quarter.
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in the past 24 hours, it is another setback for turkey. angie: i want to bring up another bloomberg chart. signals weullish have seen on the turkish benchmark since august. last date and put it was december 20. we are still seeing by side with a strong buy signal. what do you make of this? is this one side of the story that counters the negative one that you just relayed? jean-paul: that is a great question. it is a difficult outlook for turkey in 2017. on top of all of the privileged security risks, you have the broader outlook for turkey in terms of its relations with the eu, in terms of how policy has effectively slipped.
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the global environment as well, when you look at the next 6 to 12 months. i don't think that will be conducive to a recovery. oil prices are trending higher. net oila negative for a importer like turkey. we have things like the u.s. fed hiking rates more in - more progressively than anticipated. that is a negative for any emerging market economy in 2017. yousef: you mentioned pressure on currency. you can see on a total return basis, turkey one of the worst performing currencies. we saw an additional weakness overnight. how is that going to complicate the decision the central bank has to make today? jean-paul: going to bed, it was
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a tough call for myself. i think there is a justification to hold rates steady because of the week economic outlook. heading into last night, i thought a 25 basis point hike was on the chart. waking up to the news of the russian ambassador, that is effectively a done deal. they need to be concerned about the weakness in the turkish lira because of the external debt pile in turkey. yousef: coming up, oil in 2017. jp morgan averages $58 per barrel. we discuss with the head of regional oil and gas next. this is bloomberg. ♪
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yousef: welcome back to "best of bloomberg markets: middle east." oil traded around $52 barrels the new york. our reporter sam wilkins told us why. sam: it is really this u.s. stockpile drop that has driven the price down. it has come down modestly in the last day or so. we have seen a consistent drawdown of stockpiles since the reached. was obviously that supply has not come off of the market.
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the deal will take effect the first of january. it will affect the market and the price. it makes sense for the u.s. to draw down on its stockpiles rather than keep adding to them or buy oil from elsewhere. angie: what does the supply outlook look like next year? sam: we have a couple of interesting bits of news. in the u.s., president obama is a law tonsider using protect areas in the atlantic that hold oil. an attempt to protect those areas in a durable way that will take effect after he leaves office and president-elect trump takes office. we have seen a move to create a durable environmental protection. cap will have an interesting impact on supply next year, when
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we might expect supply in the u.s. to increase under president trump. in iran, we need to think about what they can get foreign investments into the country to increase their oil production next year. they have basically achieved their presumptions output level. -sanctions output level. we think they need for investment to be able to do so. no money has gone into the ground. we need to think about how much can iran add in the next year? angie: all good questions. where do we see oil coming in the coming year? averaget expects oil to at $62 per barrel, but expects coming pressures as well. we talked to the head of gas at j.p. morgan.
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theiruppliers downgrading crude stockpiles. how sustainable are we on these prices at $52? >> over the next three quarters, we think there will be some appearance to the opec cuts. that is why we have a rising oil price outlook to $62. angie: so you are not counting u.s. producers hireling and once the price rises -- you are counting on saudi arabia and everyone else to meet these production cuts. all? scott: not completely all. the u.s. is a good point. we did some proprietary analysis of shell and the u.s.. adds around 200,000 barrels per day.
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if we got to about $65, you could see almost one million barrels per day being added as we go into 2018 from the master proprietary work we've done. yousef: scott, i pulled up discharge that -- up this chart that shows the point that you made. crude stock has declined in a week. this is the price of wti. u.s. -- how quickly can u.s. shale production come back? stock draws,ms of if we are right in terms of appearance of these cuts, you 0.7 7 million barrels per day. i think the market consensus is
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cuts of an endn of next year. yousef: we have heard that the saudis need to cut 2.5 million barrels per day to make sure that this deal works in a worst-case scenario. scott: i think saudi production could well be cut anyway. exports may not. we believe there will be better gas supply and power generation in saudi arabia, and less need for oil burn. production could come down. yousef: what about the libyan variable? they have been exempt from opec freezes. could that be a black swan, an extraneous variable into next year?
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scott: a law of us have limited visibility. if you look at the three conference calls, we heard the same thing about visibility in outlook. for what it is worth, jp morgan forecasts 700,000 barrels per day for libyan output. but we have plus or -200,000 to that. turkey still to come, unexpectedly kept rates unchanged. we have the reaction from ingres coming up. -- from ankara coming up. this is bloomberg. ♪
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yousef: welcome back to the "best of bloomberg markets: middle east." the turkish central bank unexpectedly kept all three of its interest rates unchanged. the overnight lending rate at 8.5%, the borrowing rate at 7.25%. we asked why the bank stayed put? >> it is obvious the turkish central bank is worried about a sharp slowdown in growth. that is formed to be the reason be the reasonto to keep all of the key interest rates unchanged today.
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turkeyd remind you that last week announced a first contraction in seven years due to a slowdown in consumption and investment, following the military coup attempt in july. a week domestic -- a weak domestic demand, which was a sentiment called by the turkish bank is a country force of upsetting the index of a weak lira on inflation. that was what gave the central bank the opportunity to maintain policy unchanged, at least for now. does thist now then say about military policy going forward? onur: the rate setting comity
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will wait to see if there is enough time to rein in inflation. analysts in the financial community say there is a strong possibility that higher interest rates in the u.s. will increase pressure on the lira that the turkish central bank may be forced to raise its own lending cost to bolster currency. a spoke of economists says the pressure might be unbearable by as early as 2017. to sum up, the bank is signaling that it does not intend to rush into action anytime soon. the global backdrop might soon that strategy. angie: thank you so much for that, onur. malaysia says it will not aintroduce capital controls, displayed the test despite the
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slipping to his lowest in september. was the drive to clampdown on currency speculators, what concerns do investors have? have long memories. the asian financial personal -- financial crisis with finance controls. what the listen to minister had to say this time around. >> i don't call it crisis. angie: the ring it has weakened more than 5% donald trump has .ecome president
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what does he have to say about that? shamim: he says there is no reason why the ringgit has weakened in the amount of time. she thinks the fundamentals have changed. he thinks there should be a better value for the ringgit, but did not give what the figure should be. angie: the world bank has approved a $1 billion loan to egypt, the second of a $3 billion deal to support job creation. our middle east economy editor is standing by. where does this leave egypt reserves? >> egypt's reserves jumped significantly after the imf $12 billion loan deal we had earlier. reserves at $19 billion. the last number and $33 billion. that was the highest since 2011.
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with the central bank saying that it will not intervene again, we will likely see reserves jump up again at the end of this month. that puts then again at the highest levels since the revolution at 2011. that eases a lot of pressure on the country. yousef: one of the remaining challenges for egypt's currency situation, there are still plenty of turtles, correct? -- of hurdles, correct? , we: the central bank says are not intervening in the currency market, we are going to build our reserve cushion. commercial banks are trying to attract dollars that were outside the official system. that is why you see the pound weakening to record lows. they are competing with the remaining strains of the black market. until banks build up enough
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dollar deposits, and we see more in those coming to egypt, we will likely see expectations for the pound to find its floor. of sentiment is reflected in the equity market. on can pull out this index bloomberg. the circle line in yellow is a devaluation, you can see how etx has made gains in blue. how sustainable is this? a want of it is foreign investors, right?this is what egypt has been targeting. alaa: becomes a bargain when you move to a free float, not just devaluation. benchmarks, and unfortunately the data comes
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with a lag, is the fixed income market. the local currency fixed income market. this is where you had serious money before the arab spring, about $12 billion. celeste number we had -- the last number we had was about $9 billion in that market. we need more inflows into those trades. okay, so there is a significant rebound in assessment. you also have sdi, which depends on a whole host of factors. egypt needs foreign investments. we are seeing a significant rally sensed closed session. yousef: coming up on "best of bloomberg markets: middle east," bp underpins its place in the gulf with a $2 billion deal. we hear from its ceo next. >> i would like to believe we
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latest firstve the word news. a surge in trading volume of the --n is evident that least inst since its april 2014. up 51% from the first 11 months of the year. the yuan is headed for its steepest annual stump in 2 decades. iran air negotiated a big discount on new planes from boeing. the carrier is replacing its
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antiquated fleet after a lifting of sanctions. the official price is about $60.6 billion. iran air says it will only pay about half of that. president obama lifted section, but donald trump is a vocal critic of the deal. china has released its aims for spacecraft will with the next two years, saying it aims to send a robot mission to the moon in 2018, and one to mars by the end of the decade. beautiful study and develop -- it will develop and study heavy lift vehicles. it will look for future partners for the future of space exploration mission. a quick check of the markets as it stands. at 117, 39 is up a quarter of 1%. mumbai coming back online up a
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quarter of 1%. brent holding after the longest winning streak in four months. global news powered by more than 2600 analysts in 120 countries, this is bloomberg. ♪ yousef: welcome back to the best of "best of bloomberg markets: middle east." bp has cemented its 3/4 of century relationship with abu dhabi with a $2 billion deal for a stake in one of the emirates largest oil concessions. it will issue shares to pay for 10%, giving up without the a 10% stake in between. we ask the ceo white the deal has taken so long. -- why the deal has taken so long. >> this is important work that bp has had. oure honest, given
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disciplined financial framework and meeting our obligations in the u.s., it just took us a while to work to the point where we could make this great investment with abu dhabi. the key element is that we have used bp shares. bp, it will mean another 160,000 barrels a day, in addition to the 95,000 barrels per day that we produce in abu dhabi. a very long-term relationship, that is important for us. the economics are good for us. for bp, it brings in a strategic owner of the company. bp has worked here a long time. i like to believe we have shown that we can do in technology and management. adnoc andrk with bring our best people and resources into it and maximize
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future recoveries of abu dhabi's resources. inhave a lot of experience running oil fields, water falling, and the technical things we will bring. as well as a deep sense of responsibility about the privilege of working with the national resources of abu dhabi. in many ways, they are the crown jewels of abu dhabi. >> should we take this as a sign that now is the time for oil majors to begin ramping up investment? bob: one has to have confidence in price. we have retooled bp. we have rebalanced our uses of funds at a 50 going -- but a $50 oil price. it is clearly insights. i think we are going to remained disciplined about the capital we spend, the projects we select.
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it is time for bp to start growing. we have worked through so many difficulties in the u.s. >> casino next story --you have opeca historic deal with producers, as well as non-opec members in production cuts. bob: it is significant what happened on november 30. you have non-opec companies seriously talking about reducing output. some have said that opec is not a real organization anymore, does not actually bring things together. i think opec is an important organization. this agreement is significant. you can see that already in the notices coming from the middle east. in russia, there is a schedule of producing output. i think it is very serious.
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oil prices between $55 and $60 seems realistic for 2017. growth continues in china and north america. >> donald trump has nominated rex tillerson as a potential secretary of state. you think use the right man for the job? bob: he is an excellent person that knows the world and house to get things done. -- how to get things done. he is a serious person. i think you will do a great job, not just as i have the oil and gas industry. do a great job, not just because i am in the oil and gas industry. >> we know that donald trump has been more friendly to the industry than his predecessors. what does that mean for you? bob: a part of the world has been surprised at what is happening in the u.k. even the referendum in columbia, which has gone back in another
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direction. the elections in the u.s. is a surprise. i think we are in for moore surprises in 2017. we are a long-term industry. we have to think 20 years out. its financial got framework back in disability. >> will pick up right where we left off, getting more on the bp deal with abu dhabi. robin, we were just talking about the structure of the deal, the fact that bp is trading its own shares for a stake in this offshore deal. walk us through the strategy. we solved to tell you something different when it took its own their ownr it -- took take. robin: that was not very far
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into the price of oil companies. bp has paid its stock here. that is a defensive move to bringingits capital, in one of its largest investors. >> i suppose the corolla really is that bp in exchange gets a long-term investor with very deep pockets. we have heard the abu dhabi stake will be held by one of the largest sovereign wealth funds in the world. robin: that was interesting. test investors are dolphin energy and other projects. it makes sense to give them the bp stake. it makes sense for all of those interests to be held there. >> before we go into more
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details, step back and talk about the history between bp and adnoc. bp did have a share in adco that expired in 2014. why did they let it expire and wait for 2 years to buy a new stake? robin: it is an interesting condition. it goes back to the early days of the oil industry in the middle east. bp and exxon all had real stakes and. -- stakes in it. caps on decided not to bid for renewal. has taken a lot longer to bring bp in. >> we still have 40% stake in
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adco that is up for grabs with foreign investors. are we going to get another sale announced anytime soon? total came in, it was necessary to have another super major to balance the partnership. smaller stakes have come in, but they don't have the same weight of bp or total. whether a large company will come in, that is open for question. i thought it was important to always have at least two in th ere. >> jim now we do. -- and now we do. in my discussion with bob dudley, he said now is a good time to ramp up investment. oil potential he has turned a corner. we have seen the historic deal with opec and non-opec producers.
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should we take this particular deal as a sign that we might get to the doctor and investment? -- the big upturn in investment? robin: at some point capital spending has to turn around. there has to be investment in new production. oil prices have recovered somewhat on the back of the opec deal. i don't think the floodgates are going to open. i think this will be cautious and careful. about the outlook more. bp saying that he can cover its own spending and dividends without having to borrow with oil at 55 euros -- $55 per barrel per year. that is down from the previous assessment, $60 per barrel. how is bp achieving that spending? robin: like the other major oil committees, just a focus on
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cost. cutting all of the nonessentials, but also deflation. the cost of drilling rigs has come down dramatically. i think this will be a long multi-your process squeezing out cost. it does take a long time to reduce structural cost. it will prices reduce, some of the cyclical costd return. as i said, there has been vacant of investment -- there has been a cut of investment. the industry has to invest in its future at some point. that has come with high cost six future projects. adco and abu dhabi the opposite of the spectrum. it is on shore, geologically well understood. reserves of oil.
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kind of unique. you might find like this in iran and iraq. yousef: coming up on "best of bloomberg markets: middle east," uber's mid east rival has been valued at $1 billion. we hear from its cofounder next. this is bloomberg. ♪
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yousef: welcome back to "best of bloomberg markets: middle east." uber is facing competition around the world, including the middle east. it's competitor raised a value of $1 billion. we talked about its plans with its cofounder and ceo. >> kareem is focused on the broader middle east region from pakistan to morocco and everyplace enriching. in this span, there are about 20 countries. we are in 11 countries, which leaves at least 9 to be tapped into. even the countries where in, we are still in the major cities with a lot more cities and need to be entered in the markets. yousef: when i look at how many countries you entered in 2016, i think you might go to another five or six in 2017. how many are you targeting?
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four, guess is three or in north africa that are still open. the ones that are open are algeria, tunisia. we just launched turkey a month ago, which has been in the news the country focus is limited, but the city focus is a lot bigger. we launched five cities in pakistan and then last few days. that is what we are going after. angie: a huge fundraiser expected. you also have a lot of foreign investors there who are piling ando invest in careem certainly other middle east technologies. what about exit strategy? are you willing to at some point outsource that and maybe sell to
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a foreign investor? mudassir: the way that we build a business, we are ready to remain independent and remain a driving local business that becomes an institution in the region. that is the way we have built it. we are not really focused on exit. the right time may come for these discussions. as it stands, we are on the path to profitability. that is the current path we are on. careemwhat makes different from uber or other right handling -- other ride hailing apps? mudassir: the differences are at two levels. the region is different from other parts of the world. the first, unlike places like europe and the u.s., which have
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built transport of the structure about 100 years ago. they have trains, buses -- unfortunately we don't have those in our cities. except for dubai, most of the region is in the process of building these. there is a great ability for these ride hailing apps to build that infrastructure in a crowd find kind of way. -- crowd funding kind of way. the region is kind of conservative, and in some places women are not comfortable driving or cannot drive. there is a need to provide women with a safe and reliable means of transportation. overall, if you look at the surface -- at the service compared with others in the region, you will find careem the better in this region. yousef: one of the challenges
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has been fundraising. we understand this may be the last fundraising run before an i po? mudassir: i believe so. i don't think we need any more money than this. this should be the last one. yousef: when will the ipo come? mudassir: we have not thought about that too much. yousef: yeah you have. mudassir: the focus is on growing the business. at the right time, that becomes a possibility. if you want to give an estimate, it is probably the 2018 area where it becomes more feasible. yousef: and a buy listing would make the most sense? mudassir: we would have to speak with our bankers that are open to these investments. dhabi'ssome of the abu his services were suspended -- abu dhabi services were suspended for uber and careem.
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further any considerations? mudassir: the regional governments realize the potential of this platform to createa ton of jobs and investors are that does not exist. yousef: coming up on "best of bloomberg markets: middle east," middle eastern carriers under pressure to adopt. how they are dealing with the challenge. this is bloomberg. ♪
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>> welcome back to the "best of bloomberg markets: middle east." hundreds of jobs cut in the face of slowing growth in years of expansion. facingthis challenge other middle eastern carriers? >> in recent months, it has been difficult times for the gulf airlines in general. they are no longer seeing the same pace of growth that they used to before. that, they are going through a process of restructuring. they are looking for ways they can cut costs and boost revenue. that, that -- part of the airline will reduce their head count. cite, edition and a weaker global economy. yousef: give us a sense of these
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cuts. deena: i am told the range of the total layoffs can be anywhere between 1000 to 3000 jobs. that is quite a bit. that is a figure that the airline itself would not confirm. if you put that into the context of export -- context of employee in up to 26,000 including subsidiaries and staff abroad, these cuts are coming across units of the business. hr in talking i.t. and commercial sales. yousef: looking at neighboring emirates, there are other pressures on net revenue and profits. will we see more of these airlines coming out and say, we are overextended here, we need to bring things in? deena: that is right.
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it is no longer the easy growth of days past. there is a slowdown in growth for the gulf airlines. a couple months ago the emirates announced their first half profit dropped considerably. qatar airways complained that demand from the oil and gas industry, which is the bread and butter of premium seats, has been softening. this comes within a general context and the bigger picture of the gulf economies facing slower growth because of oil prices. even here in the united arab emirates, we have seen a general trend of job cuts with banks. yousef: that is it for this "best of bloomberg markets: middle east." a busy week ahead in the region. more reaction to the saudi budget announcement. and as a turbulent 2016 draws to
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a close, we talk how investors themselves for the months to come. do join me
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yusef: at the latest first word news. toshiba plunged in tokyo and plunging near the lowest of the month because the loss of the ne u.s. nuclear business. that follows the acquisition of service of last year, however there are conflicting estimates as to how much. nhk expects million while $4.3 billion. ernie data from china indicates the economys


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