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Pressure is growing on Lebanon’s dollar peg and, in the event of a devaluation, the pound could fall by as much as 50% against the dollar. A messy sovereign default and a deep recession would follow. But over a longer horizon, a more competitive currency …
19th November 2019
Inflation to return to positive territory at start of 2020 Consumer prices in Saudi Arabia declined at their slowest pace so far this year in October and the headline rate is likely to return to positive territory soon. The prospect of fresh fiscal …
The 100bp interest rate cut delivered by Egypt’s central bank today is likely to be followed by further easing in the coming months. While we expect inflation to edge up in the near term, it will remain below the central bank’s target. As such, we …
14th November 2019
Lebanon: bailout wouldn’t be a silver bullet The situation in Lebanon is going from bad to worse and the chances of a combined debt, currency and banking crisis are rising. President Aoun seems to be seeking a bailout package but this would only pave the …
The boom in credit in Qatar since the turn of the year has caused a renewed build-up of vulnerabilities in the banking sector. Severe balance sheets strains should be avoided, but the recent pace of credit growth won’t be sustained, which will add to the …
13th November 2019
The decline in Egyptian inflation to a 14-year low of 3.1% y/y in October raises the risk that the central bank lowers interest rates by more than the 100bp that we have pencilled in for Thursday’s meeting. Inflation is likely to rise from here, but we …
11th November 2019
Many of the non-oil producing countries in the region have tended to support their dollar pegs by maintaining a level of FX reserves sufficient to cover the monetary base. In Egypt and Jordan, reserves are more than enough to cover the monetary base. But, …
7th November 2019
More details emerge on Aramco IPO The Saudi government launched preparations for the Aramco IPO earlier this week and a few more details have trickled out in the last few days. We looked in detail at the economic implications of the Aramco IPO in an …
Saudi non-oil sector keeps up momentum, but UAE’s slump continues October’s whole economy PMIs suggest that the upturn in fortunes for Saudi Arabia’s non-oil sector continued at the start of Q4. In contrast, the recent slump in the UAE appears to be more …
5th November 2019
The upcoming sale of a stake in Saudi Aramco would probably make the government less inclined to implement fresh austerity. The long-term impact on the Saudi economy will depend on whether this leads to renewed impetus behind reform, although we are …
4th November 2019
Lebanon inching closer to the precipice The situation has remained chaotic in Lebanon this week, with protests continuing and PM Saad Hariri submitting the resignation of his government. There are some suggestions that Mr. Hariri may be asked to form a …
31st October 2019
The focus on political risk and Lebanon’s growing debt problem have meant that the sharp slowdown in growth across large parts of the region has gone unnoticed. The latest figures suggest that the economies of Saudi Arabia, Qatar and Lebanon were all …
29th October 2019
Our Tracker suggests that the impact of oil production cuts caused the Saudi economy to contract in Q3. And output probably fell at a steeper pace in Q4. Saudi Arabia’s quarterly GDP data are published with a significant delay – figures for Q3 won’t be …
28th October 2019
More talk of deeper OPEC+ oil production cuts Rumours that OPEC+ oil producers are contemplating deeper production cuts underlines the desire of policymakers in Saudi Arabia to push up oil prices. But this would come at the expense of weaker GDP growth as …
24th October 2019
Overview – The region is set to record its second-lowest growth rate this decade in 2019 and, while a recovery is likely to take hold in 2020, it will be slow going. The drag on the Gulf economies from this year’s oil production cuts will fade, but this …
The recent protests in Lebanon highlight that it is politically impossible to push through the fiscal austerity needed to stabilise the government’s debt-to-GDP ratio. A debt restructuring is inevitable. There are lots of ways that this could play out. …
23rd October 2019
The protests in Lebanon (and policymakers’ response) underline that pushing through the austerity needed to stabilise the public finances is politically impossible. With large debt repayments due over the next year, a crunch point is approaching fast. A …
21st October 2019
Deflation continues to ease Saudi consumer prices fell at their slowest pace so far this year in September and we expect the headline rate to return to positive territory at the start of 2020. Data just released showed that the headline inflation rate …
Egypt: IMF help won’t remove risk of fiscal splurge Reports that Egypt and the IMF are in negotiations over some kind of future cooperation suggests that the authorities are trying to soothe investor fears of fiscal loosening. To recall, in July, Egypt …
17th October 2019
Economic growth in Kuwait is likely to remain sluggish in the coming years due to the impact of oil production cuts as well as ongoing tensions between the government and parliament, which will prevent fiscal loosening. Our GDP growth forecasts lie well …
15th October 2019
Tunisia’s new president will face the immediate challenge of a fractured parliament and, amid what are set to be arduous coalition talks, policy paralysis is likely to set in. The country’s large imbalances will be left unchecked, raising the risk of a …
14th October 2019
Tunisian elections risk policy paralysis The second round run-off of Tunisia’s presidential election will take place on Sunday and will face the immediate challenge of trying to work with a highly fragmented parliament. A period of policy paralysis would …
10th October 2019
Inflation drops to seven-year low, more rate cuts on the way The further drop in Egyptian inflation in September to a seven-year low of just 4.8% y/y means that the central bank will press ahead with its easing cycle over the coming months. We now expect …
Our GDP Tracker suggests that the intensifying drag from oil production cuts caused the Saudi economy to slow even further at the start of Q3. Things are likely to get even worse in the coming months and our GDP forecast for 2019 as a whole of 0.3% lies …
9th October 2019
Gulf slowdown has further to run National accounts figures released this week showed that Saudi Arabia’s economy officially entered recession in Q2 and Qatar’s economy shrunk too, all of which supports our below-consensus 2019 GDP growth forecasts for the …
3rd October 2019
Saudi non-oil sector holding up well, but UAE’s slump continues September’s batch of whole economy PMIs provided further evidence of a divergence between non-oil sectors in Saudi Arabia and the UAE. But we don’t think this will continue for much longer as …
Dubai’s economy slowed in 2018 and the activity data for this year suggest that growth has stayed weak. The 2020 World Expo will provide a fillip to the economy, but a number of other factors mean that GDP will grow at rates of 1-2% over 2019-21, well …
2nd October 2019
Oil output cuts drag growth down GDP growth in Saudi Arabia slowed further to 0.5% y/y in Q2 and, in quarter-on-quarter terms, the economy officially entered recession. The slowdown reflected a greater drag from oil output cuts, which more than offset …
30th September 2019
Events this month have highlighted the risks posed by politics to the region’s two largest economies. While Saudi Arabia initially suspended around half of its daily oil output following attacks on its oil facilities, it looks like there won’t be any …
The Central Bank of Egypt shrugged off the market volatility following recent protests across the country and lowered interest rates by another 100bp, to 13.25%, at today’s meeting. So long as the protests don’t escalate, weak inflation pressures mean …
26th September 2019
Talk of OPEC deal extension to be revived The latest reports suggest that Saudi Arabia has managed to get the bulk of its oil output back online following the Abqaiq attacks but, with oil prices drifting back towards $60pb, the debate may quickly shift to …
Signs that price pressures are building Saudi Arabian consumer price figures showed that deflation eased to -1.1% y/y in August and we expect it to return to positive territory in annual terms at the start of next year. Saudi Arabian inflation rose from …
24th September 2019
Protests in Egypt over the past few days have ignited concerns that the country is on the cusp of another period of political upheaval. Past experience suggests that this would be disruptive for the economy and government efforts to quell unrest, such as …
23rd September 2019
War with the US would cause a collapse in Iran’s economy that would directly knock around 0.3%-pts off global GDP – equal to the damage from the US-China trade war so far. More important to the rest of the world, though, would be the resulting surge in …
20th September 2019
Saudi oil output set to return quickly Saudi Arabia appears to have avoided the worst fears of prolonged disruption to its oil production following the Abqaiq attacks on Saturday. But the attacks appear to have dented the authorities’ appetite to rush …
19th September 2019
There is still a lot of uncertainty surrounding the attacks on Saudi Arabia’s Abqaiq oil facility but, so long as the worst of the disruption to oil supplies lasts no more than a few days, the hit to global energy markets and the Saudi economy should be …
16th September 2019
Saudi: rising chance of deeper oil output cuts With one eye on the upcoming Aramco IPO and the fiscal position under strain, the odds of the Saudi government pushing for deeper oil production cuts are shortening. This poses a downside risk to our already …
12th September 2019
The slowdown in Qatar’s economy over the past decade should come to an end in the coming quarters as the start of production at the Barzan gas project boosts growth in the hydrocarbon sector. But tight fiscal policy and a slowdown in credit growth are …
11th September 2019
Further decline in inflation opens door for more rate cuts The decline in Egyptian inflation in August to a six-year low of 7.5% y/y makes it is almost certain that the central bank will follow up last month’s 150bp interest rate cut with further easing. …
10th September 2019
The change at the helm of the Saudi energy ministry raises the chances that the current OPEC+ output deal is extended beyond its current expiry date of March next year, which would probably require the Kingdom to keep its oil output below its quota. The …
9th September 2019
Change in Aramco chief won’t affect oil policy Developments over the past week add to the signs that the Saudi government is ramping up preparations for the listing of state-owned oil company Aramco, but the latest moves are unlikely to result in a shift …
5th September 2019
The recent sharp rise in Saudi banks’ wholesale borrowing isn’t yet a major cause for concern, but it does mean that credit growth is more vulnerable to a shock that causes external financing conditions to tighten. Saudi bank’s foreign liabilities have …
3rd September 2019
Plunge in UAE PMI raises concerns over outlook August’s whole economy PMIs from the Gulf suggest that the pick-up in growth in non-oil sectors seen in the first half of the year has topped out. If oil prices stay low and fiscal policy becomes less …
Saudi equity market struggles The fall in the Saudi Tadawul equity index this week, despite the second phase of its inclusion in the MSCI EM index, reinforces our view that the stock market will struggle this year. Saudi Arabia’s stock market has been …
29th August 2019
Deflation eases further Saudi consumer prices continued to fall in July, by -1.3% y/y, but a closer look at the data suggests that underlying price pressures are starting to build. The headline rate is likely to return to positive territory by early next …
28th August 2019
Our GDP Tracker suggests that Saudi Arabia’s economy slowed further in Q2, to just 1.0% y/y, as the drag from the oil sector intensified. We think that GDP growth will be even softer in the coming months and we’re comfortable with our below-consensus …
27th August 2019
The Egyptian central bank cut its overnight deposit rate by a larger-than-expected 150bp last night (to 14.25%) and with inflation likely to fall further in the coming months, much more easing lies in store. We have revised down our year-end forecast to …
23rd August 2019
Lebanon’s debt back in the spotlight The dire finances of the Lebanese government have come back under the spotlight and we continue to think that some form of debt restructuring is more likely than not. Argentina’s experience in the past couple of weeks …
22nd August 2019
The sharp rise in Egyptian external debt in the last few years has triggered alarm in some quarters. But it has been accompanied by a large increase in FX reserves, suggesting that risks are currently manageable. Egypt’s external debt has increased …
20th August 2019
The latest data suggest that GDP growth in the Gulf economies slowed in Q2, which is partly a result of cuts in oil production but also softer activity in non-oil sectors. The early data for July, such as the whole economy PMIs, point to even weaker …
15th August 2019
