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Egypt: low inflation to elicit IMF call for rate cuts Egypt’s September inflation reading will be closely watched next week as there is a good chance that it will prompt the IMF to give the central bank the green light for further interest rate cuts. A …
8th October 2020
Fears over Dubai’s debts have re-emerged in recent weeks and, in this Update , we provide revised estimates of the Emirate’s debt pile. The short point is that the debts of Dubai’s government and of government-related entities remain large, and with the …
6th October 2020
PMIs rise, but recoveries to remain slow-going September’s whole economy PMIs from across the Middle East and North Africa all rose as a further easing of virus containment measures supported another pick-up in economic activity. But against the backdrop …
5th October 2020
Saudi budget plans suggest austerity is here to stay Saudi Arabia’s preliminary 2021 budget that was released this week reinforces our view that, with oil prices likely to stay low, policymakers are not intending to row back on recent fiscal austerity. …
1st October 2020
Economy slumps, recovery already stuttering Saudi Arabia’s economy contracted by 7.0% y/y in Q2 on the back of the virus containment measures and oil production cuts. And even though containment measures have started to be lifted, the imposition of harsh …
30th September 2020
The passing of Kuwaiti’s Emir Sheikh Sabah al-Ahmad al-Sabah has raised some concerns over political stability in the country, and, while the transition will probably prove to be smooth, the new Emir will accede to the throne facing several tough …
29th September 2020
The Central Bank of Egypt (CBE) cut interest rates by 50bps at Thursday’s MPC meeting after a six month pause to the loosening cycle. Policymakers are likely to remain cautious about future easing, but we think rates will be reduced gradually over the …
25th September 2020
Saudi: low oil prices limit scope for policy support Saudi policymakers are apparently “assessing all the options” in a bid to boost the Kingdom’s economic recovery but, with oil prices still low, the scope to row back on fiscal austerity plans is …
24th September 2020
Oil prices suffered a fresh bout of weakness this month amid growing concerns over rising global coronavirus cases, which reinforces our view that economic recoveries in the Gulf will be slow. At the recent OPEC ministerial meeting, the cartel emphasised …
23rd September 2020
OPEC meets as clouds gather over the oil market The OPEC ministerial meeting that takes place today is unlikely to result in any immediate policy changes, but the cartel will probably acknowledge the worsening demand outlook and may signal that it stands …
17th September 2020
Consumer spending in Saudi Arabia seems to have bounced back quickly in recent months, but the steep VAT hike and the suspension of the Cost of Living Allowance means that this is unlikely to be sustained. Keeping track of Saudi consumer spending is …
16th September 2020
Inflation edges up as effects of VAT hike dominate Saudi inflation edged up to 6.2% y/y in August as the effects of the VAT hike at the start of July continued to dominate. Inflation will remain elevated until the middle of next year and, combined with …
15th September 2020
Gulf financing sources widen amid low oil prices The fall in the price of Brent crude oil this week has put further pressure on fiscal positions across the Gulf, with most likely to run large budget deficits over the second half of the year. At the time …
10th September 2020
Inflation slows to nine-month low, but CBE likely to keep rates on hold The fall in Egyptian inflation to a nine-month low of 3.4% y/y in August increases the likelihood that the central bank will resume its easing cycle when it meets later this month. …
Egypt’s economic recovery, a fall in the pound and a small rise in global oil prices are likely to cause the headline rate of inflation to drift up over the coming months. But it is unlikely to reach the 9% mid-point of the central bank’s target range. …
9th September 2020
Saudi Arabia’s economic recovery has faltered in recent months and the backdrop of fiscal austerity, the partial suspension of pilgrimages and oil production cuts mean that it is likely to remain slow going. The latest signs are that the recovery in Saudi …
7th September 2020
Lebanon and Tunisia not out of the woods yet Developments in Tunisia and Lebanon this week have raised hopes that policymakers will soon tackle their respective economic problems, but there are still plenty of reasons to remain cautious. Tunisia’s new …
3rd September 2020
Recoveries already losing steam, deflation to persist in the Gulf August’s whole economy PMIs from across the Middle East and North Africa all fell adding to the signs that activity in the region has plateaued amid fiscal austerity and continued virus …
The coronavirus crisis has caused domestic demand across the Gulf to slump and deflation is likely to persist, with the key exception of Saudi Arabia. Most places are well placed to deal with the negative repercussions of deflation and, if anything, …
2nd September 2020
Lebanon in limbo as crisis deepens Nearly three weeks after the Lebanese government resigned following the Beirut blast there has still been no progress in forming a new one as the country falls further into the depths of its crisis. Former Prime Minister …
27th August 2020
Governments across the Gulf have managed to get on top of coronavirus outbreaks but Morocco, Tunisia, Jordan, and Lebanon have seen the virus spread rapidly in recent weeks. These economies are the most vulnerable in the region to a fresh tightening of …
26th August 2020
The recovery in oil prices from their nadir in April has not prompted policymakers in the Gulf to row back on their plans to push through fiscal austerity. Saudi Arabia suspended the Cost of Living Allowance in June and also delayed or cancelled capital …
Oman’s government reshuffle A government reshuffle in Oman this week saw Sultan Haitham relinquish some of his powers. Changes at the foreign ministry may help to improve relations with other Gulf countries and pave the way for Oman to secure bilateral …
20th August 2020
The worst of the strains in Egypt’s balance of payments is probably now over and the current account deficit should narrow over the coming quarters, but we still think that the pound will gradually weaken against the dollar. The current account position …
VAT hike triggers inflation jump Saudi inflation jumped to 6.1% y/y in July on the back of the tripling of the VAT rate from 5% to 15% and we expect it to hover around this level over the next twelve months. This, combined with the suspension of the Cost …
17th August 2020
The Central Bank of Egypt (CBE) kept interest rates on hold for a fourth consecutive meeting on Thursday as policymakers remained cautious about delivering more monetary stimulus. That said, with the CBE accepting that inflation will undershoot its …
14th August 2020
The normalising of relations between Israel and the UAE may pave the way for similar agreements with the other Gulf countries, notably Saudi Arabia. The move might help to foster economic relations between the two countries, although the experience from …
13th August 2020
Lebanon’s investors should ready for larger losses The resignation of Lebanon’s government is unlikely to result in the political change that protestors are demanding and, with debt restructuring negotiations on hold, bondholders will probably have to …
Saudi Arabia’s budget deficit will narrow over the coming years as oil prices recover and the government ploughs ahead with austerity. But debt will rise further, reaching close to 40% of GDP by end-2022, having been less than 2% of GDP in 2014. And …
Inflation drops to eight-month low, easing cycle to resume on Thursday The fall in Egyptian inflation to an eight-month low of 4.2% y/y in July, alongside easing pressure on the pound, means that we think an interest rate cut at Thursday’s MPC meeting is …
10th August 2020
Beirut blasts to deepen Lebanon’s crises The catastrophic blast in port of Beirut on Tuesday has led to widespread destruction in the city and a significant loss of life. The disaster will, sadly, only deepen Lebanon’s economic, humanitarian, and …
6th August 2020
The major blast in Beirut yesterday has severe humanitarian consequences, and the incident threatens to deepen the country’s economic and political crises. Yesterday, a huge blast rocked Lebanon’s capital city, Beirut, that emanated from the local port. …
5th August 2020
Bumpy recovery continues July’s batch of whole economy PMIs from across the Middle East and North Africa all rose compared with surveys from June but, against the backdrop of prolonged weakness in tourism and hospitality sectors and fiscal austerity, the …
The Gulf economies have been the epicentre of the coronavirus outbreak in the region but almost all countries have managed to put new daily cases on a downwards trend thanks to strict containment measures and aggressive testing. In contrast, new cases are …
31st July 2020
The Saudi economy has embarked on a recovery in the past couple of months, but fiscal austerity and oil production cuts, as well as the ongoing suspension of pilgrimages, mean that it is likely to be slow going. The latest activity data suggest that Saudi …
30th July 2020
Pressure mounting on Dubai’s GREs The past week has highlighted the strains that the coronavirus crisis has inflicted on some of Dubai’s government-related entities (GREs) and reinforced our concerns over their ability to service large debts. Reports this …
Overview – Oil production cuts, fiscal austerity, the continued spread of the virus, and weakness in key tourism sectors will hold back economic recoveries across the Middle East and North Africa. It will be one of the worst performing EM regions over the …
28th July 2020
Health fears bring leadership changes onto agenda The health of the leaders of Saudi Arabia and Kuwait has come into the spotlight this week and, while we think that a leadership transition wouldn’t alter the economic outlook for Kuwait, it would heighten …
23rd July 2020
Saudi Arabia has grown increasingly frustrated with other oil producers’ failure to comply with the OPEC+ oil output cuts and, while we think that the current deal will remain intact for now, the risk of another price war will grow as demand improves. …
Policy paralysis returns to Tunisia Tunisian Prime Minister Elyes Fakhfakh resigned on Wednesday after a week of political turmoil, which will hold up efforts to secure a new IMF deal and increases the threat of a sovereign debt crisis. Mr. Fakhfakh’s …
16th July 2020
Inflation eases, but VAT hike will cause it to jump this month Saudi inflation eased to its lowest level this year in June as weak demand dampened underlying price pressures and fuel inflation dropped further. But this is likely to mark the low-point and …
15th July 2020
Reasons to be cautious about Diriyah Gate Construction started on a new tourist development in Saudi Arabia in recent weeks but the plan risks repeating past mistakes with other megaprojects and diverting resources away from other key areas Diriyah Gate …
9th July 2020
Inflation rise unlikely to prevent CBE resuming easing cycle later this year Egypt’s headline inflation rate picked up to 5.6% y/y in June and will probably rise a bit further over the coming months. Crucially, though, we expect inflation to remain below …
Tunisia’s public finances have deteriorated sharply over the past decade and the government’s debt burden appears to be on an unsustainable path. This would be exacerbated if external financing conditions tighten and the dinar weakens sharply. A sovereign …
8th July 2020
Region set for a bumpy recovery June’s batch of whole economy PMIs from across the Middle East and North Africa were mixed but the big picture is that, even as lockdown measures are eased, the region’s economic recovery is set to be extremely sluggish. …
6th July 2020
Dubai’s recovery to be sluggish Figures released this week showed that Dubai’s economy shrunk by 3.5% y/y in Q1 due to the start of the coronavirus crisis. Of course, Q1 figures are old news and only covered the first month of lockdown (in March). More …
2nd July 2020
The Saudi economy contracted by 1% y/y in Q1 and the figures from Q2 point to an even sharper downturn in Q2 due to the coronavirus crisis. The lifting of the lockdown this month is helping to support a recovery but a fresh bout of fiscal austerity means …
30th June 2020
It is by no means inevitable that the coronavirus crisis puts a big permanent hole in the supply capacity of economies (i.e. their ability to produce goods and services). With the right government policies, many economies should be able more or less to …
29th June 2020
Banking sector risks rising in the UAE The UAE’s banking sector is continuing to show signs of vulnerability and reports over the past week have echoed our concerns. (See here .) Moody’s downgraded eight of the UAE’s largest banks, including Emirates NBD, …
25th June 2020
Governments across MENA have taken steps to re-open economies over the past month and, after a sharp downturn in April and May, daily indicators suggest that economic activity has started to recover. That said, activity remains well below pre-virus …
24th June 2020
