From China... The European Central Bank defends expanding liquidity lines in the euro

The bank can strengthen the euro's global role and expand the influence of its monetary policy by providing liquidity safety nets for foreign countries, European Central Bank chief economist Philip Lane said on Wednesday.

Speaking at a closed event in Shanghai entitled “The Post-Dollar Monetary System,” Lin said that demand for the euro liquidity facilities recently expanded by the European Central Bank was strong, with more than 30 central banks expressing interest in them.

He added, according to the prepared text of his speech: “Liquidity lines enhance confidence in the currency and reduce the risks associated with it, which supports its wider use.” The event was part of the annual Bond Summit (BOND).

These statements come at a time when policymakers around the world are wondering about the sustainability of the dollar’s ​​dominance in the long term, in light of the unexpected economic policies of US President Donald Trump.

Lane believed that increasing international use of the euro would strengthen the European Central Bank's ability to fulfill its inflation mandate, by expanding the global influence of the euro area's monetary policy.

He explained that the European Central Bank's EUREP mechanism, which allows foreign central banks to obtain the euro in exchange for guarantees denominated in the single currency, could support bond markets in the 21-nation bloc, especially by increasing purchases by official reserve managers.

The President of the European Central Bank, Christine Lagarde, recently said that the bank is also reviewing its network of currency swap lines, which allow major central banks, including the US Federal Reserve and the People's Bank of China, to swap their local currencies for the euro.

Lane said such arrangements could encourage borrowing in euros, but should be limited to central banks in economies with close financial ties to the eurozone and a clear ability to repay euro-denominated obligations.

Driven by the momentum of the private sector and the expansion of non-oil activities, Saudi Arabia is heading to lead the G20 economies in terms of growth in 2027, ahead of India, which is expected to record growth of 7 percent, compared to 7.9 percent for the Kingdom, according to International Monetary Fund forecasts issued last week. The difference in expectations reflects the transformations taking place in the Saudi economy, supported by regulatory and legislative reforms, and the expansion of investment opportunities. According to the Saudi Ministry of Investment, the Kingdom’s topping of the growth expectations of the G20 countries in 2027 at 7.9 percent reflects the strength and flexibility of the economy, and opens broader horizons for investment and growth, supported by the momentum of the private sector and the expansion of non-oil activities, moving towards a more diversified, sustainable, and investment-attractive economy.

The International Monetary Fund had raised its forecast for real GDP growth in the Kingdom to 7.9 percent, compared to 5.5 percent in its estimates issued in July, an increase of 2.4 percentage points, in a review that reflects the prospects for recovery after the repercussions of the war, and trade and energy disturbances. This performance reflects the structural transformations that the Saudi economy is witnessing within the framework of “Vision 2030”, with the growing contribution of non-oil sectors in driving growth and enhancing the Kingdom’s ability to confront global economic challenges, at a time when attention is turning to sustaining this momentum and translating it into new investment and job opportunities.

Former Shura Council member and economic expert, Dr. Fahd bin Juma, believes that Saudi Arabia’s topping of growth forecasts among the G20 economies reflects a structural transformation in the economy, going beyond the traditional reliance on oil revenues, with the growing role of the private sector as one of the main engines of economic activity, benefiting from regulatory and legislative reforms, expanding investment opportunities, and an increasing contribution of non-oil activities.

Bin Jumaa told Asharq Al-Awsat that this transformation embodies the gradual transition of the Saudi economy from the stage of direct government stimulus to building a more diversified production base and the ability to generate growth.

He added that the momentum witnessed by the private sector is linked to major government investments that contributed to creating the economic environment and opening new sectors to local and international investors.

He explained that strategic projects in the sectors of tourism, industry, logistics and technology have begun to stimulate economic activity that goes beyond the scope of the projects themselves, with the effects of investment spending extending to supply chains and small and medium enterprises, expanding business opportunities and enhancing the contribution of broader segments of the economy to growth.

In his estimation, the real value of this performance does not lie in topping the growth ranking among major economies as much as it lies in the ability to sustain it in the coming years. He said, “The main challenge is to transform economic expansion into long-term productivity gains, by increasing the efficiency of national facilities, enhancing non-oil exports, developing skills, and raising the contribution of private investments independent of government spending.”

Bin Jumaa pointed out that continuing to work on these paths puts the Saudi economy at a more advanced stage of diversification, where progress is not limited to achieving high growth rates, but extends to building a more flexible, competitive economic base capable of generating added value and sustainable job opportunities.

In turn, the head of the Saudi Governance Center, Nasser Al-Sahli, believes that Saudi Arabia’s progress in growth expectations among the G20 countries reflects the cumulative impact of the economic reforms that the Kingdom has implemented over the past years, and not just a passing improvement in the performance of a particular sector.

Al-Sahli told Asharq Al-Awsat that developing legislation, facilitating doing business, expanding investor participation, and restructuring a number of sectors all contributed to building an economic environment more capable of attracting investments and turning them into productive activities, noting that the growth of the role of the private sector represents an indicator of the impact of these reforms being transmitted to the real economy.

He explained that the importance of these transformations is increasing in light of the geopolitical challenges, global trade and energy disruptions, and the risks associated with the strategic sea lanes in the region.

He added that the expansion of the base of non-oil activities enhances the economy's ability to diversify sources of income and reduce its vulnerability to external fluctuations.

Al-Sahli said, “Economic diversification does not mean complete separation from global changes, but rather building a production and investment system capable of adapting to them and maintaining business continuity in different circumstances.” He added that the next stage will test the ability of the Saudi private sector to move from benefiting from the opportunities provided by government projects to leading an independent and sustainable investment expansion.

According to Al-Sahli, this requires raising productivity, enhancing competition, expanding access to financing, stimulating innovation, and increasing the presence of national companies in foreign markets. He stressed that the strategic importance of the Kingdom’s progress in growth expectations is not limited to its position among the G20 economies, but rather is linked to its ability to transform this momentum into a more diversified and efficient economy, led by a private sector capable of generating quality jobs and sustainable added value.

According to the latest International Monetary Fund report, India ranked second among the G20 countries, with an expected growth rate of 7 percent, followed by Indonesia with 5.1 percent, then China with 4 percent, and Turkey with 3.6 percent, according to Fund data reviewed by the ministry. Argentina ranked sixth with an expected growth of 3.5 percent, followed by South Korea with 2.8 percent, then the United States with 2.3 percent. Expectations for Brazil were 1.9 percent, Mexico 1.8 percent, Canada 1.7 percent, Australia 1.6 percent, South Africa 1.3 percent, and the United Kingdom 1.2 percent. Germany recorded an expected growth of 1.1 percent, Russia 0.9 percent, while expectations for France and Japan were 0.7 percent each, and Italy came in last place with 0.6 percent.