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Saudi Arabia and UAE top wealth contenders in the MENA region

The global wealth index indicates a 6.4 percent growth in the year 2017. The Kingdom of Saudi Arabia (KSA) and the United Arab Emirates (UAE) have secured the first and second place respectively in the region of Middle East as per the report of Credit Suisse Research Institute’s 2017 Global Wealth.

The estimated total wealth of KSA or the net household worth amounted to $772 Billion whereas the UAE came close in second place with the estimated value of $603 Billion. The countries of Kuwait and Qatar show an estimated total net worth of $292 Billion and $218 Billion respectively. The net household worth of Bahrain is calculated to be $34 Billion, and Egypt’s wealth declined to $178 Billion as opposed to the peak of $511 Billion in 2010.

The data for the region of the Middle East and North Africa for the period of 12 months till the period of mid-2017 indicated that the total wealth of the MENA region grew by $ 2.22 Trillion or 156% from the year of 2000 which was over and above the global average of 140%.

The wealth per adult net of debt increased by 1.9% in the MENA region when compared to the global average of 6.4%. The region of Qatar recorded the highest wealth per adult at $102,517 in the mid-2017 and was flowed by Kuwait closely by $97,300. Nevertheless, Kuwait registered an increase in the percentage of wealth per adult at a 1.4% while Qatar had a drop of 0.2%.

The UAE comes in the third position with wealth per adult at $78,800, and its percentage grew by 1.2% since last year. Bahrain shows a steady increase of 2.7% from the mid last year by parking the wealth per adult at $30,800.The leading economy of the MENA region, the KSA registered a growth of 2.8% at $35,000 whereas Egypt saw a substantial drop of 50.2% nearing $3,200 due to the clash against the US Dollar. In the next five years, household net worth of the Mena region is expected to increase by a further 52% or nearly 8.8% annually.

The eighth edition of the Global Wealth Report showed that the Global Wealth has grown at a rate of 6.4% which is the fastest growth since the year 2012 and has reached $280 Trillion with a gain of $16.7 Trillion. This increase is the reflected result of vast profits across the equity markets which were well matched by the rises in the non-financial assets as they moved above the pre-crisis level of the year 2007. The growth of wealth outranked the growth of population which means, that the global wealth grew by 4.9% and created a new record high of $56,540 per adult.

After more than a decade since the start of the global financial crisis, there has been a significant increase in global wealth and the country of Switzerland, the wealth per adult increased by more than 40% and leads in the global rankings.

In this year’s edition of the Credit Suisse Research Institute’s annual Global Wealth Report, we explore the wealth prospects of the Millennial generation, which emerges from a more challenging period than its predecessors,” said Urs Rohner, Chairman of the Credit Suisse Research Institute and Chairman of the Board of Directors of Credit Suisse Group.

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Asia slowly regaining its place as an export powerhouse

Asia is gradually recovering its position in exports of late as there are likely returns which contributed to the real growth of GDP in Q1 and Q2. The Asian countries of China, India, Indonesia, and Malaysia have faced troubled waters and are now slowly recovering with a growing export volume and raise at the prices of commodities. However, the question remains whether this growth is at a continued pace or come to a standstill, given the factors of global demand and local trade, they are likely to stay positive.

According to the opinion of the IMF experts, the global rate is at 3.6 percent in 2018 which is the result of both advanced and emerging economies rise of GDP. The story for emerging economies, particularly in Asia, is even brighter. While China’s strong GDP growth in Q1 and Q2 2017 (6.9 percent) thwarted the fears of a slowdown, India’s growth of 7.0 percent in Q4 2016 and 6.1 percent in Q1 2017, looks as though the demonetization effects have worn off.

Demand is the key:

The growth of Asian export market remains undefeated over the years whose growth was contributed by the developing economies of China and India. At the same time, the flow of goods and services have risen up. Asian companies have briskly moved up the supply chain from being more than an assembly line of semi-finished products. Be it automobiles or smartphones, countries such as China and India are moving up the pyramid and closing the gap, although in different degrees, with cutting-edge manufacturing players like South Korea and Japan and there is an active export link between these countries.

The benefit of elevation:

The prices on the global scale have been on a rebound since the year 2016. For example from the beginning of 2016 till late 2017, the price of Brent Crude went up by 38.3% while the costs of rubber and coal shot up by 49.8% and 78.8%. The Asian countries of Indonesia and Malaysia benefitted from the resurgence of goods prices.

The rise in commodity prices is interpreting into higher prices for refined products and, hence, the accelerated exports of those products. Singapore, in specific, has benefitted, with the country’s export value of petroleum products rising 30.1 percent in Q4 2016, and then by 70.4 percent in Q1 2017; the growth momentum continued into the second quarter of the year as well. This steady trend of commodity exports is likely to continue, given increasing global demand and elevated prices; even though commodity prices have flattened a bit, they remain high compared with 2015 and early 2016.

The effect of currency stabilization:

Stabilizing currencies around the world especially the stabilization of the interest rates by the Federal Reserve has eased the pressure on the Asian currencies. Currencies are also set to benefit from the improving economic fundamentals across the globe. Within the Eurozone, rising inflation is a positive development, especially for the debt-laden economies. This also holds true for Japan which is fighting against long-term deflation.

Trade set to sail away:

With emerging household consumers and the slow and steady growth of the international market, the winds are starting to be in favor of the Asian trade reemergence. The current trend of rising export trade market is a welcome move to thwart the effects of corporate debt, real estate impact and household debts. The critical trade fundamentals are in favor of Asia’s export growth, and it is expected that the trade will be in the winning position in the medium to long term.

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GCC is all set for growth acceleration in 2018

According to a report,the region of GCC is all set for an augmented growth in 2018. This development comes after the turbulent years of low oil prices and the severe measures of the Government. The Global Advisory Firm Oxford Economics released a 2018 forecast where it is predicted that the six members of the GCC will witness a growth of 2.7% as opposed to the mere 0.3% in 2017.
This accelerated growth of GCC is the fastest development in three years, and it is back on the strength of rising oil prices which will help the Government to loosen the grip on the stern measures implemented in the past few years, the report said.

In further findings, the report gave an individual breakdown of individual GCC countries, where the country of Oman will witness a 5% increase when compared to the 0.2% in 2017. The UAE will likely see an increase of 3.3% from the growth of 1.7% in 2017.

The shifting stride is anticipated to be much slower in Bahrain as the growth remains steady at 1.8% which are similar to the levels seen in 2017. Similarly, the Saudi Arabia’s growth will increase by 2% after the warning of 0.3% in 2017. The state of Kuwait is said to grow by 2.4% following the decline of 1.7% in 2017.

Regardless of the positive forecast, the report also highlighted that the factors of potential geopolitical risks in the GCC could undermine its growth in 2018. The reasons attributed to the elements of increased strains between Saudi Arabi and Iran, the ongoing GCC dispute with Qatar, the anti-corruption measures of Saudi Arabia and the resignation of the Government of Kuwait in October.

The report’s conclusions arrived after the announcement of the expectation of the Organization of the Petroleum Exporting Countries who expected that the world oil market would be balanced by late 2018 as they have enforced an agreement with other producers to lessen output and reduce excess oil in storage.

The non-oil part of the UAE is set for a 3% growth this year from the previous growth of 2.7% in 2017. “The recent improvement in oil prices has shed a positive sentiment on the economic activity in the non-oil sector and boosted economic confidence,” the UAE central bank said in its third-quarter review publication.

In the meantime, Dubai has announced a record spending of 56.6 Billion UAE Dirhams($15.6 Billion) for 2018 with the primary focus on infrastructure development for the Emirate’s hosting of the World Expo 2020.

The economy of UAE, which is the second largest economy in the GCC after Saudi Arabia was given an appreciation by the International Monetary Fund officials. They predicted that the UAE is expected to recover steadily in 2018 without any negative impact from the introduction of Value Added Tax of 5% from January 2018.

Natalia Tamirisa, IMF mission chief to the UAE has said that “We see a gradual recovery for the UAE over the next few years on the back of firming oil prices, a pick-up in global trade, investment for Expo 2020 and easing fiscal consolidation.”

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Growth of GCC is projected at 2.8%

The GDP of the GCC will be in an accelerated position and will jump from 0.3% to 2.8% in 2018, and the more extensive the MiddleEast will rise from 3.2% to 1.4% according to a new report of the region.

According to the report of Economic Insight: Middle East Q4 2017” from ICAEW, a world leading professional membership organization, the GDP of GCC and the Middle East is moving towards a productive transition period.

The report published by Oxford Economics, ICAEW’s partner and economic forecaster, mentions that the pool of public finances now seems to be on a sustainable path in the most GCC economies due to these three main reasons of:

  • The introduction of Value Added Tax,
  • Societal changes in Saudi Arabia, where women have been now allowed to drive,
  • Reduction of public spending cut by almost 20% from the 2015-2017 in the whole of GCC.

The other reason that has been related to the restoration of the economy is related to pressure on the household income with the expectation of the raising the VAT by 2.5% in 2018. Nevertheless, the IMF has said the introduction of VAT across the GCC region would rise by the GDP about 1.5%.

The Opec-plus oil production cuts are likely to be maintained through 2018 and reversed in 2019, GDP growth is expected to pick up to 4% in both in the GCC and the Middle East which will carry forward till 2019.

The report also highlighted that even though Oman is benefitting from the trade diversion which arises from the trade blockade of Qatar by the Gulf neighbors, the windfall would be modest and temporary “and does little to address the more fundamental challenges the economy faces.”

ICAEW economic advisor and associate director of Oxford Economics Tom Rogers said: “Economic growth prospects of the Middle East countries, particularly the GCC, are projected to improve in 2018 and the years after. But the political and security risks remain high and could limit or delay the recovery in the region.”

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Saudi Arabia widens its business horizons by issuing licenses to overseas businesses

Saudi Arabia has expanded its horizons as a part of vision 2030 and is planning to branch out and steer the economy into other frontiers thereby stealing the spotlight away from oil.The  Saudi government has thrown its door open for overseas business by introducing business licenses.

In recent times, the Saudi Government are of the view to facilitate the growth of the Small and Medium size enterprises(SME) sector and are doing so by allowing overseas entrepreneurs to create their foothold and obtain business licenses to start their operations in the kingdom.

This revolutionary announcement was announced in the Misk Global Forum annual meeting held in Riyadh by Monsha’at, Saudi Arabia’s SME authority, the Saudi Arabia General Investment Authority (SAGIA), King Abdullah Economic City (KAEC) and the Economic Cities Authority (ECA).To commemorate this announcement, the Minister of Commerce and Investment, Dr. Majid Al-Qassabi issued the first 11 licenses to entrepreneurs at the Misk Global Forum.

It was also said that the licenses would be issued to those who give a patented and innovative service or business to the Kingdom. The permits are issued by SAGIA or by the economic free zones, which provide substantial incentives which includes rent-free premises, transportation, and subsidized housing.

“The new licensing initiative is designed to help build up the private sector, particularly SMEs, and move away from an over-reliance on oil revenues,” said Dr. Ghassan Ahmed Al Sulaiman, Governor of Monsha’at, said while commenting on the government’s attempt to create a flourishing start-up environment in Saudi.

This massive feat was inspired by the Vision 2030 and will help Saudi Arabia in garnering and drawing the best intellectuals and will help in the transference of information and expansion of the economy. This initiative of Saudi Arabia will provide a conducive environment for small- and medium-sized companies which ultimately leads to the increase of GDP and job creation for its citizens.

The reason for launching in this Misk Global Forum is that it is a global event which connects young and experience innovators and leaders to focus on the stimulation and swapping of innovative technologies and its knowledge.

UAE judicial system gets smart E-trials

On 18th  September 2017, His Highness Shaikh Khalifa Bin Zayed Al Nahyan, the President of the UAE, issued Federal Decree No. 10 of 2017 amending the Civil Procedures Law, dispensed by Federal Law Number 11 of 1992 (the “Law”). It introduces the use of remote communication technologies, known as “e-Trials,” into civil proceedings in UAE. The Law will come into force six months after its publication in the official Gazette Law in 28th September 2017.

The newly introduced law aims to endorse the rule of law, ensure effective justice, provide for fast-track civil trials and to keep pace with progressive technological changes in the Civil Procedures Code. From the year 2018, there will be an allowance of video conferencing in civil court trials and the cases of labor, financial, contracting and intellectual property disputes. The UAE economy is keeping its rapid pace with the advancing technologies through the introduction of smart e-trials.

The UAE Ministry of Justice’s strategy is to launch four initiatives, whereby the year 2021, there will be an online dispute resolution mechanism. The UAE judicial system will see a ‘smart leap’ as it plans to conduct electronic trials (i.e., without real courtrooms), initiate video-conferencing during court hearings. There will also be real-time translations in court proceedings via a screen that will connect translators to secretaries of court and judges, and electronic mediation and conciliation services in criminal justice.

The court chief, the competent judge or the person authorized by the involved parties has the right to allow trial proceedings of the remote communication technologies, when it is considered necessary to do so, at every stage of civil proceedings to facilitate trial procedures.

All the electronic communication of a case will be treated as confidential and will not be published or copied without the permission of the court. The parties involved in the altercation can also request for physical hearings, and the court will give access to the physical hearings after a notifying the other party.

The electronic signature and electronic documents shall have the same authoritative effect as the signatures referred to in the provisions of the Law of Evidence in Civil and Commercial Transactions (Federal Law No. 10 of 1992) and Electronic Transactions and E-Commerce Law (Federal Law No. 1 of 2006).

 The implication of this law:

The UAE economy will have an accelerated judicial system that allows video conferencing in seeking foreign legal assistance or using testimonies from overseas experts in foreign countries; by international agreements and treaties, the UAE has signed.  The most feature of this law would be the introduction in Article 343 of a new system for accepting the submission of photocopied documents relating to the civil lawsuits that are held using remote communication technologies. The innovation here is that the opposing party cannot object to the presentation of these reports merely because they are photocopies and not originals unless they disagree on the validity of the papers or assert that they were not issued or related to the party attributed to them.

It is a powerful and significant step forward for the UAE economy in achieving speedy justice where all the assurances for a fair trial are being fulfilled and accomplished. This is also a cost-effective solution and will make court proceedings more accessible, well-organized and on par with best international law practices.

Challenges and opportunities for healthcare setup in the region of MENA

The investment opportunities in the healthcare sector of the province of MENA is attracting investors worldwide, but there are certain restrictions that an investor has to navigate by abiding the local laws that are required for hospital set up in the MENA region.

The licensing requirements for the hospitals differ in Bahrain, Egypt, Iraq, Jordan, Kuwait, Oman, Qatar, Saudi Arabia and the United Arab Emirates which come under the MENA region. It is prudential to know some of the requirements and restrictions imposed under the relevant local law about hospitals operations.

The key players for the licensing requirement are:

The regulatory authorities:

The general regulatory authority that oversees the hospital set up in MENA would be the Ministry of Health. However, the Dubai Health Authority performs this role in the Emirate of Dubai, and the Healthcare Authority of Abu Dhabi plays this role in Abu Dhabi.

The registration requirement:

The MENA region has differences in the registration requirement in its divisions. In Bahrain, hospitals are registered at the Ministry of Industry, Commerce, and Tourism, whereas in Egypt it is done by the Commercial Registry Office. In Kuwait, the Ministry of Commerce and Industry takes care of the commercial registrations of hospitals.

Imposition of local ownership:

The investors have to pay attention to the fact that the most of countries of the MENA region have their licensing requirements of including local ownership. This clause may extend to the properties owned by the hospital or the properties that will be purchased by the hospital.

  • In Egypt, any foreign national can own shares in a hospital, except for some geographical regions (g., Sanai) where the restrictions of foreign investment apply.
  • Under UAE or Kuwait,at least 51% of the entity that operates a hospital must be owned by the local shareholder(s).
  • In Saudi Arabia, before a non- Saudi party acquires shares in a hospital operator, that party will have to secure a license from the Saudi Arabian General Investment Authority.
  • Finally, in some GCC states, there are also specific nationality requirements in respect of medical staff or a Manager/ Director of the medical facility.

These requirements are crucial for a hospital set up in MENA, and there are also the various licensing requirements to be considered by the investors.

The practicality of these conditions:

Even though the legality of setting up a hospital in MENA may look standard; the investors have to pay attention to the practicalities that may arise under the hospital incorporation or acquisition process that might not have been clear under the local law of the specific region. Most of the times, the local shareholder are listed as owners of the hospital by the authorities rather than mentioning the hospital as the license holder or mentioning all the shareholders as the license holders.

When planning to invest in a hospital set up in MENA region, the investor should be well versed in the licensing requirements and the local law. Even though they may appear restrictive, they also help in meeting commercial business objectives and the legal requirements.

Reach our consultant at [email protected] to know more about healthcare setup in MENA region or visit us at www.intuitconsultancy.com

CBB regulates playtime in Sandbox for Fintech firms

The Central Bank of Bahrain introduced a regulatory Sandbox for the Fintech Firms in July 2017 for testing their innovative and customer beneficial technologies in a safe virtual place. The State of Bahrain is the second member state of the GCC to introduce these regimes.

A regulatory sandbox is a place where the startup and established Fintech firms could develop their financial technology (“FinTech”) sector in a safe, measured and practical manner. The Sandbox helps in developing, testing and tweaking the commercial technology of the Fintech firms. This regulatory compliance of Bahrain enables the companies to test and refine their technique without the pressure of the usual regulatory and financial requirements which would otherwise apply to their activities.

The notable features of this sandbox are:

  • The regulatory sandbox is open to existing CBB licensees as well as to entities or firms that do not hold a license issued by the CBB (both Bahraini and foreign). Such non-licensed companies or entities may include financial sector companies as well as technology and telecom companies; professional services firms which work with or service financial institutions; and any other type of applicant working within the financial services industry and considered acceptable by the CBB.
  • The regulatory sandbox is open both to existing FinTech solutions which have already been tested within a lab environment, as well as to ideas and solutions which are yet to be fully developedand
  • The time allotted for an applicant to remain within the regulatory sandbox is a maximum of nine months (with the possibility of an entirely discretional extension of three months).
  • The CBB may limit the testing of the product or service by the applicant regarding the number of volunteer customers and the amounts involved.

 

The eligibility criteria:

  • Innovativeness: the technology should be genuinely innovative or expressively diverse to existing elucidations within the Bahrain market,
  • Customer benefits: it should offer tangible benefits directly or indirectly to the customer,
  • Technical testing: this is only for existing technology, the firm offering with existing technology should have obtained technical testing with the results to be provided to the CBB or produce an external validation from a reputable third party,
  • Ready for regulatory testing:Applicants are obligated to show evidence of a thriving regulatory testing plan which includes highlighting of the key risks the solution poses; details of how these will be alleviated; and details of sufficient safeguards to protect customers.
  • Post-testing deployment in Bahrain. The applicant should exhibit their aim and ability to deploy the projected solution in Bahrain by way of submission of a Sandbox exit strategy (to include specific details of proposed scale-up and future deployment).

 

The application procedure:

The applicants have to submit a written application using the standard template issued by the CBB for the sandbox regulatory compliances in Bahrain, and they should provide the following details:

  • A description of the applicant’s organization as well as its corporate structure, key business lines and centers, and its financial standing and technical expertise;
  • The proposed innovative financial solution, and how it satisfies the eligibility criteria
  • The information as to the type (and number) of volunteer customers to be included in the applicant’s sandbox testing; how they will be sourced, and proposals to protect the volunteer customers and their privacy;
  • Key performance indicators and targets which will be used to determine the success of the testing
  • The cybersecurity and other relevant measures to be applied by the applicant to maintain security of the solution service or product; and
  • The applicant’s exit plan, plans for development and deployment strategy, together with a timeline of steps to be taken to meet the additional legal and regulatory compliances in Bahrain after exiting the regulatory sandbox.

 

The CBB reserves the right to relax the requirements according to the applicant’s situation. The applicants are required to adhere to the relevant CBB regulations with regards to Know Your Customer (KYC), Anti-Money Laundering (AML) and Countering Financing of Terrorism (CFT). Also, the funds received by the applicants from the volunteer customers, required to be entrusted to the handling of CBB licensed retail banks.At the end of the designated period, the applicant can apply for appropriate CBB license depending on the precise activities of the applicant.

The introduction of the new framework and the creation of a dedicated FinTech Unit within the CBB are consistent with Bahrain’s sustained focus on promoting the kingdom as the emerging FinTech and financial services hub of the Middle East region. At the same time, the defenses built into the regulatory compliance in Bahrain will ensure the required level of consumer protection and regulatory oversight which have long established Bahrain as one of the leading financial sector hubs in the GCC.

Visit www.intuitconsultancy.com to know about regulatory compliance

Singapore shows accelerated growth in the third quarter

Singapore has witnessed a rapid growth boost in the third quarter as the Gross Domestic Product(GDP) registered a growth rate of 8.8% over the expected growth rate of 6.3% and the GDP of the year was at 5.2 % than the estimated 5%. The stabilization of the global trade has boosted the growth of the country’s economy like Singapore’s economy is mainly dependent on the growth of the worldwide economy.

The growth of the economy has further spread into the industries like services where there is a boom in the company formation in Singapore thereby enabling the Government to review their projections for the year.

 The Trade Ministry of Singapore is of the view that the growth of the GDP will rise more in the current year by basing the calculations on the new company registration in Singapore and emerging markets worldwide as well as the U.S market. The growth of exports is expected to diminish a little in the year 2018 as per the report of International Enterprise Singapore is supposed to have an increase of only 0 to 2 percent.

The domestic businesses will fare well with Singapore company formation as the labor market is also improving. As the economy of Singapore is mainly supported by the manufacturing industry, company registration in Singapore will prove beneficial for home-basedentrepreneurs. However, the third quarter saw a boom in company registration in Singapore of the sectors of business services and the retail segment.

 Experts also expect the economy of U.S to “pick up slightly.” because of the buoyant labor force and consistent business growth in the Eurozone and the neighboring country of China will have moderate increase.

The hitch to this robust growth of Singapore would be the uncertainty surrounding the U.S policy, persistent protectionist sentiments and high tension surrounding the Republic of North Korea. Experts are of the view that the recovery of Singapore is broadening in various sectors slowly and steadily.

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OECD aware of strengthening Global economy and shifts its focus on the private sector for its unprecedented growth

According to the latest report of OECD, the Global economy has enhanced due to the monetary and fiscal reasons and has shown a broad and coordinated improvement of growth in most of the countries.

Experts estimate that the economic trends of 2018 would also be on the rise, but at a slower pace as the, there are long-term challenges of creating more resilient economies to sustain the challenges of future. OECD is now focusing on the prolonged growth behavior of the private sector which also include investment, production, and trading. The employment levels are far above the pre-crisis level and yet are to produce robust real wage gains. The economic trends of 2018 if not explicit, can spell weakness for the global economy in 2019.

The debt of household and corporate are creating vulnerabilities and making sustainability a questioning factor in the medium term. The Economic Outlook for OECD is advocating an integrated approach while tackling all the issues of macroeconomic policy and a change in the structural systems. The OECD is of the opinion that the Global economy would benefit from healthier and robust financial system that would reduce the tax bias towards debt, open equity markets and clear out the problem of the insolvency regimes. Making the supply of housing more fluid and removal of tax subsidies for housing requirements would alleviate the tendency of sudden boom or fall in the market.

The projection of OECD for the global economy for the current year is at 3.7 percent, while for the year 2017 it was at 3.6 percent and the same percentage is expected for the year 2019.

The OECD has also predicted the percentage of the economic trends of 2018 and 2019 for the following countries:

Countries 2017 2018 2019
The United States of America 2.2 2.5 2.1
Eurozone 2.4 2.1 1.9
Germany 2.5 2.3 1.9
Italy 1.6 1.5 1.3
France 1.8 1.8 1.7
The United Kingdom 1.5 1.2 1.1
Japan 1.5 1 1
Canada 3 2.1 1.9
China 6.8 6.6 6.4
India 6.7 7 7.4
Russia 1.9 1.9 1.5
Brazil 0.7 1.9 2.3

The growth in the United Kingdom is unpredictable as the political situation of the country remains unstabilized, and the growth of Japan is hit due to the reasons of fiscal consolidation and the decline in the working-age population is on the rise. The major economies are on the mend even though China still maintains a softer lead due to a recession in the major export products. The economic trends 2018 of India seem brighter as the Government introduces new age reforms to accelerate the growth of the economy.

OECD is of the view that an integrated policy approach will steady the global economy which will boost growth, moderate risks in the financial sector and increase resilience.

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