G7 finance leaders will call on Israel to maintain correspondent banking links between Israeli and Palestinian banks to allow vital transactions, trade and services to continue, according to a draft joint statement seen by Reuters on Saturday.

The statement, to be released at the end of a Group of Seven finance ministers and central bank governors' meeting in northern Italy, also calls for Israel "to release withheld clearance revenues to the Palestinian Authority, in view of its urgent fiscal needs"

"We call on Israel to take the necessary measures to ensure that correspondent banking services between Israeli and Palestinian banks remain in place, so that vital financial transactions and critical trade and services continue," the draft statement said, Reuters reported.

The G7 finance leaders also called for the removal or relaxation of other measures "that have negatively impacted commerce to avoid further exacerbating the economic situation in the West Bank."

The statement echoes a warning on Thursday from U.S. Treasury Secretary Janet Yellen, who said the failure to renew a soon-to-expire banking waiver would cut off a critical lifeline for the Palestinian territories amid a devastating conflict in Gaza.

The international credit rating agency" Moody's" has affirmed Saudi Arabia's credit rating at “A1" with positive outlook.

In its latest report report, the agency said the rating affirmation is based on its assessment of the government's significant progress that achieved in implementing broad-based reform agenda since 2016 and the track record of macroeconomic and fiscal policy effectiveness that will support the sustainability of the economic diversification.

The agency said it expects the continued implementation of large diversification projects in the Kingdom will support non-hydrocarbon real GDP growth as they are designed to be modular and commercialized in phases.

It also also said the positive outlook is a reflection of the reforms and investments in various non-oil sectors that will, over time, lead to a material decline in the Kingdoms economic and fiscal reliance on hydrocarbons.

Fitch Ratings has upgraded Saudi Electricity Company's (SEC) Long-Term Foreign- and Local-Currency Issuer Default Ratings to 'A+' from 'A', and removed the ratings from Under Criteria Observation (UCO). The National Long-Term Rating was also upgraded to 'AAA(sau)' from 'AA+(sau)'.

The agency also said in its reports that all the outlooks are Stable.

The upgrade follows a reassessment of SEC's links with the Saudi Arabian government under Fitch's recently updated Government-Related Entities (GRE) Rating Criteria.

SEC's ratings are now equalized with those of Saudi Arabia (KSA, A+/Stable), as the new support score assumes 'Virtually Certain' support from the state, based on GRE Criteria definitions.

Following the shock of war, the Israeli economy found itself at a crossroads, as it witnessed a clear slowdown in commercial, investment, and service activity.

These challenges did not only impact the economic situation, but posed social and political challenges that obstructed the path of continuous growth that had lasted for almost two years.

A report issued by Moody’s rating agency said that the ongoing war costs Israel $269 million daily. The report was based on a preliminary study that took into account the estimates of the Israeli Ministry of Finance. This means that the war has cost Israel $61.9 billion since its eruption around 230 days ago.

According to data from the Israeli Ministry of Finance, the fiscal deficit rose to 7 percent of GDP in 4 months of the current year, reaching $35.7 billion since April 2023, which is higher than the government’s estimate of 6.6 percent for the entire year of 2024.

It is also an unprecedented number since the global financial crisis in 2008, according to the Ministry of Finance, which indicated that the fiscal deficit in April amounted to $3.16 billion.

The war forced the government to increase defense spending significantly, which accounted for about two-thirds of total spending in four months. In contrast, revenues declined by 2.2 percent, due to a decrease in tax payments.

The government plans to raise about $60 billion in debt this year and increase taxes to meet its financial needs. The average monthly bond sales tripled after the outbreak of the war, according to Bloomberg estimates, which indicated that the government had collected about $55.4 billion since October, from domestic and foreign markets.

In light of the growing financial burdens resulting from the war, Israel was receiving blow after blow from international rating agencies, which of course affected its attempts to raise external financing. After Moody’s lowered its sovereign rating for Israel by one notch to A2, Standard & Poor’s joined in in April and lowered the rating from AA- to A+.

In light of the uncertainty about the extent of the impact of the ongoing war with Hamas, it is widely expected that the Bank of Israel will leave short-term interest rates unchanged during its meeting on Monday, for the third time in a row.

In January, the Monetary Policy Committee reduced the key interest rate by 25 basis points, which followed 10 consecutive increases in interest rates, in a strong tightening cycle from the lowest level ever at 0.1 percent in April 2022, before a temporary pause in July.

According to a Reuters poll, further cuts in interest rates during the rest of 2024 are at risk due to inflation pressures.

The annual inflation rate continued to rise in April to 2.8 percent, after falling to 2.5 percent in February.

In light of talk about a possible Israeli military rule in Gaza, Yedioth Ahronoth newspaper reported, citing an official document, that such strategy in Gaza would cost Tel Aviv no less than 20 billion shekels ($5.4 billion) annually. The newspaper reported that the Israeli security establishment prepared an analytical document to study the financial consequences of establishing a military government in the Gaza Strip.

The fate of the Israeli economy in the war period and beyond depends largely on several factors, including political and security stability, transformations in various economic sectors, and developments in regional conflicts. Despite the existing challenges, some expectations indicate that the Israeli economy will recover at a moderate pace, but this does not replace the need to better promote growth and stability, especially in light of the turbulent geopolitical conditions that the region is witnessing.

In an interview with the Jerusalem Post newspaper, the former governor of the Bank of Israel, Karnit Flug, said that the government response to the economic challenges resulting from the conflict between Israel and Hamas were not commensurate with the situation.

She explained the proposed measures (some of which were approved in the Knesset, while others were postponed or planned to be implemented in the future) are not sufficient to address the current challenges.

The fiscal situation of the Palestinian Authority, which runs the West Bank, has worsened in the last three months, "significantly raising the risk of a fiscal collapse," the World Bank said on Thursday.
"The rapidly widening gap between the amount of revenues coming in, and the amount needed to finance essential public expenditure, is driving a fiscal crisis," it said.

“As of the end of 2023, this financing gap reached $682 million. This gap is projected to double within the coming months, reaching up to $1.2 billion,” it said in a report.

“Increased foreign assistance and the accumulation of further arrears to public employees and suppliers are the only available financing options for the Palestinian Authority,” it added.

According to the World Bank, the Palestinian economy continues to be under a massive shock in the first months of 2024.

“While the outlook for 2024 remains highly uncertain, a further economic contraction of anywhere between 6.5 and 9.6% is projected,” said the report.
 

British retail sales slid by far more than expected in April as rainy weather kept shoppers away, in more mixed economic news for Prime Minister Rishi Sunak ahead of a national election, data showed on Friday.
Sales volumes dropped by 2.3% in April alone after a 0.2% fall in March, which was downwardly revised from a flat reading, the Office for National Statistics said.
The data was worse than any economist predicted in a Reuters poll, which had pointed to a drop of around 0.4% on the month.
Overall the data added to a mixed picture of economic data in recent days. Earlier on Friday, market research firm GfK said consumer confidence rose in May to its highest in nearly two-and-a-half years, but business surveys disappointed on Thursday.
Sunak, whose Conservatives are trailing badly in opinion polls ahead of the July 4 election, hopes to persuade voters that the economy has turned a corner after exiting recession that lasted through the second half of 2023.
"Sales volumes fell across most sectors, with clothing retailers, sports equipment, games and toys stores, and furniture stores doing badly as poor weather reduced footfall," the ONS said.
The stats agency was confident that it had adjusted the figures for the timing of the Easter holidays.
The earlier date of Easter this year meant spending in the run-up to the holiday took place in March not April, which affected British Retail Consortium data published earlier this month.
Analysts said there were reasons for optimism in future months.
"Retailers will be hoping that the better weather in May and the start of a summer of sport with the Euros, Wimbledon and the Olympics will provide a fillip for trading after a highly disappointing start to 2024," Lisa Hooker, leader of Industry for consumer markets at accountants PwC, said.
This month food and department store retailer Marks & Spencer reported a 58% rise in annual profit, while clothes and fashion chain Next sounded upbeat about its prospects after previously predicting a pickup in consumer sentiment.
Some home improvement stores however reported weakening demand.
Compared with a year ago, sales were 2.7% lower in April, the ONS said - again far short of the consensus for a 0.2% drop.
Surveys published by Barclays and the British Retail Consortium earlier this month showed consumers kept a tight rein on their spending in April.

Expanded sanctions on Russia and enhanced pressure on countries that Moscow considers friendly are hurting Russian firms' export revenues and creating oil payment issues, the Bank of Russia said on Friday.

The United States has hit Russia with waves of Ukraine-related sanctions and threatened secondary sanctions on foreign banks aiding transactions with Moscow. That has prompted some Chinese banks to limit dealings with Russian companies, Reuters reported.

"The widening of sanctions and pressure on friendly countries leads to companies' reduced export revenue," the central bank said in a report on financial stability in a section titled "main vulnerabilities.”

Russia distinguishes between countries that imposed sanctions over its actions in Ukraine and those that did not by calling them 'unfriendly' and 'friendly'.

"Unfriendly countries are hindering not only the sale of hydrocarbons, but also the realization of major investment projects," the bank said. "Against the backdrop of secondary sanctions, supply chains and payment mechanisms are becoming more complicated, which leads to higher import prices and supply disruptions."

The threat of secondary sanctions has also slowed Russian banks' increasing the number of correspondent accounts in friendly jurisdictions, the central bank said. Since the start of 2022, the number of correspondent accounts in US dollars and euros has dropped by 55%, it said.

US Treasury Secretary Janet Yellen on Tuesday said Washington's new authority to hit banks with secondary sanctions if they aid Russian military-related transactions had helped to frustrate, opens new tab Russia's efforts to procure goods needed for the conflict in Ukraine, but that more work was needed.

The OPEC+ group of oil producers, comprising the Organization of the Petroleum Exporting Countries (OPEC) and allies led by Russia, has pushed back its output policy meeting by a day to June 2 and will convene online.
The meeting was to have been in Vienna on June 1, but will now be held online a day later, OPEC said on Friday.
OPEC+ oil producers are making voluntary output cuts totaling about 2.2 million barrels per day (bpd) for the first half of 2024, led by Saudi Arabia rolling over an earlier voluntary cut.
The curbs are on top of earlier reductions of 3.66 million bpd to the end of 2024, announced in various steps since late 2022. That brings total pledged cuts to 5.86 million bpd, equal to about 5.7% of daily world demand, Reuters calculations show.
Sources from countries that have made voluntary supply cuts told Reuters this month that an extension was likely.
The OPEC+ supply cuts since late 2022 have been against a backdrop of rising output from the United States and other non-member producers while worries over demand have remained in focus as major economies grapple with high interest rates.

Ukraine is negotiating to maximize possible imports of electricity from European Union countries to compensate for the generation capacity destroyed by the Russian attacks, Ukrainian energy minister said on Friday.

Russian missile and drone attacks on Ukraine's energy sector have intensified since March, resulting in significant damage and blackouts in many regions.

The attacks have caused more than $1 billion of damage to the sector, leading to the loss of 8,000 MWh of generating capacity from the energy system, the government says.

Currently, Ukraine can import from the EU states no more than 1,700 Mwh of electricity simultaneously.

"We're negotiating. Our task is to maximize this figure," Energy Minister German Galushchenko told parliament.

"Technically, we can receive (import) more than 2,000 Mwh, even 2,400 Mwh. I'm sure a decision will be made," he added.

Volodymyr Kudrytskiy, the head of Ukraine's national power grid operator Ukrenergo, told Ukraine's Telegraf that 1,700 Mwh is "the ceiling for now".

"Everything will depend on how quickly our European colleagues - energy system operators of neighboring countries - will be able to implement projects to expand the capacity of their grids," Kudrytskiy said.

He said that European grid companies need time and money to reinforce some of their substations, install additional transformers or build new transmission lines.

"We think 3,500 to 4,000 Mwh of interstate interconnector capacity is something we can have in the horizon of five years," Kudrytskiy noted.

Energy minister Galushchenko did not say exactly how much imports are being discussed now, but Maxim Timchenko, the head of Ukraine's largest private energy company, DTEK, said earlier this month that an increase to 2,200 Mwh could significantly improve the situation.

DTEK has lost about 90% of its power generation capacity due to Russian missile attacks in recent months.

DTEK data showed that Ukraine consumed around 13,000 Mwh before the attacks as of March 17 but after a series of Russian attacks on the energy system, consumption fell to 9,100 Mwh.

Due to power shortages, Ukrainian power grid operator Ukrenergo has been forced to introduce regular shutdowns of industrial consumers and households and maintain high import rates.

Problems with power generation can have a "potentially negative impact" on industry, especially the largest electricity consumers, the economy ministry said this week.

Turkish Minister of Treasury and Finance Mehmet Simsek called on Arab countries not to be afraid to conclude free trade agreements with Ankara, stressing that such deals would strengthen relations between Türkiye and the Arab world.

Speaking at the International Arab Banking Summit in Istanbul on Thursday, Simsek said the customs union agreements between Türkiye and the European Union contributed to the development of the manufacturing industry in his country.

“I believe that we should take advantage of the opportunities provided by free trade agreements. We are open to cooperation with our Arab neighbors. Together, we can develop ports and create new facilities, tourism can be revived, and we can also support each other with regard to human resources,” he remarked.

The minister went on to say that Türkiye is a country with a diversified economy, capable of competing in the areas of production, added value and technology, and acts as a bridge between Europe and Central Asia.

He added that the Arab world has rich and diverse resources, and enjoys a budget surplus, especially in the Gulf countries.

Simsek noted that Ankara and the Arab capitals can develop strong partnerships in the fields of tourism, construction and defense industries, and can implement mutually beneficial projects in trade and investment.

Meanwhile, Türkiye’s Central Bank on Thursday left the benchmark one-week repo rate unchanged at 50 percent for the second consecutive meeting, matching with market expectations.

“Considering the lagged effects of the monetary tightening, the (Monetary Policy) Committee decided to keep the policy rate unchanged, but reiterated that it remains highly attentive to inflation risks,” the bank said in a statement.

The bank added that it terminated the securities maintenance practice, within the scope of simplifying the macroprudential framework and enhancing the functionality of the market mechanism.