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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
The planned IPO of Aramco – which reports suggest is back on – will probably make the government less inclined to impose fresh austerity measures in response to lower oil prices. The partial sale of the company itself won’t do much to improve the …
12th August 2019
Balance sheets resilient… The plunge in oil prices over the past week won’t result in balance sheet strains in the Gulf economies, but it does strengthen our view that governments in parts of the region, most notably Saudi Arabia, will resume fiscal …
8th August 2019
Drop in inflation bolsters case for rate cuts The drop in Egyptian inflation to a four year low of 8.7% y/y in July reinforces our view that the central bank will resume its easing cycle at its next meeting with a 100bp cut in the overnight deposit rate, …
Financial support from the Gulf means that Bahrain and Oman should avoid damaging devaluations and acute sovereign debt problems. Even if their governments fail to implement the fiscal tightening that the other Gulf countries demand (as seems increasingly …
7th August 2019
Pick-up in the Gulf’s non-oil sectors appears to have run its course The drop in PMIs across the Gulf in July suggests that the pick-up in growth in non-oil sectors in the first half of 2019 has started to go into reverse. If oil prices stay low and …
5th August 2019
Saudi fiscal loosening unlikely to last much longer Budget figures released this week in Saudi Arabia showed that the government loosened fiscal policy in Q2 but, if oil prices remain low (as we expect), the authorities will reverse course in the coming …
1st August 2019
Government debt-to-GDP ratios across the Gulf have risen significantly over the past five years but only in Bahrain and Oman do we hold serious concerns over the health of the public finances. Financial support from their neighbours should prevent …
31st July 2019
Our GDP Tracker suggests that the slowdown in Saudi Arabia’s economy at the start of this year extended into Q2 and it looks set to intensify over the rest of 2019. Our forecast for GDP growth of just 0.3% over this year as a whole lies well below …
30th July 2019
Rate cuts unlikely to boost Gulf credit growth Central banks in the Gulf will follow the US Federal Reserve in cutting interest rates next week, but past experience suggests that this is unlikely to provide a significant boost to the economy. Fed Chair …
25th July 2019
Saudi Arabia’s economy slowed at the start of this year and we think that further weakness lies in store. Figures released in the past month showed that economic growth slumped from 3.6% y/y in Q4 2018 to 1.7% y/y in Q1 2019. OPEC’s decision to extend its …
24th July 2019
Deflation continues to ease Deflation in Saudi Arabia continued to ease last month as the pick-up in activity in the non-oil sector fed through into stronger price pressures. If oil prices stay low, as we expect, the government is likely to push ahead …
23rd July 2019
Threat of harsh US sanctions on Saudi still limited A bill approved by the US House of Representatives this week that seeks to impose sanctions on Saudi Arabia has created headlines, but it is unlikely to result in aggressive action against the Kingdom. …
18th July 2019
Household consumption in Saudi Arabia expanded at its fastest pace in more than three years in Q1 but the prospect of fresh subsidy cuts and tax hikes means that this recent strength won’t last. The latest quarterly national accounts data, which now …
17th July 2019
Overview – The regional slowdown at the start of this year has further to run. This will continue to be led by the Gulf countries, where the drag from oil output cuts will intensify and low oil prices will prompt fresh fiscal austerity. Elsewhere, balance …
15th July 2019
CBE to hold fire today, but rate cuts looming Fuel price hikes announced in Egypt last weekend mean that the central bank probably won’t respond to June’s sharp fall in inflation by cutting interest rates later today. But the easing cycle looks set to be …
11th July 2019
Inflation falls to three-year low, easing cycle to restart soon The sharp decline in Egyptian inflation last month, to a three-year low of 9.4% y/y, increases the chances that the central bank will soon resume its easing cycle. But policymakers will wait …
10th July 2019
Economic growth in the UAE will slow over the rest of this year due to the impact of oil production cuts. But preparations for the World Expo will help to drive a rebound in 2020 and we expect the economy to be the best performing in the Gulf. The latest …
4th July 2019
Saudi economic growth to weaken further GDP data released by Saudi Arabia this week showed that its economy slowed sharply in Q1 and, as the drag from oil output cuts intensifies and fiscal policy is tightened, growth will weaken further. The Saudi …
PMIs hold up in the Gulf, but momentum is unlikely to last June’s PMI figures were robust across the Gulf, but we expect that activity will slow as oil prices falter and fiscal policy becomes less supportive. Meanwhile, subdued price pressures in Egypt …
3rd July 2019
Saudi further opens up to foreign investors The announcement that Saudi Arabia will ease foreign ownership restrictions on publicly-listed companies should go some way to boosting foreign direct investment into the country. On Wednesday, Saudi Arabia’s …
27th June 2019
The past month has been dominated by the escalation of tensions between the US and Iran and the risk of an outright conflict is rising. Admittedly, President Trump decided to call off airstrikes on Iran in response to the downing of a US drone by Iranian …
26th June 2019
Our GDP Tracker suggests that Saudi Arabia’s economy slowed further at the start of Q2 as the drag from the oil sector intensified and the recent pick-up in the non-oil sector started to peter out. We expect growth to slip further over the rest of this …
25th June 2019
The widening of Lebanese dollar bond spreads over the past week suggests that investors are coming round to our view that the authorities will need to resort to a debt restructuring. Meanwhile, this morning’s downing of a US drone by Iranian forces adds …
20th June 2019
Reform of Lebanon’s state-owned electricity company, EdL, lies at the heart of the government’s efforts to tackle the dire public finances. But while this is needed, the approved measures are unlikely to make a sufficient dent in the country’s budget …
19th June 2019
Easing Saudi deflation in May suggests that the recent pick-up in growth in the non-oil sector is feeding through into price pressures. In addition, a fresh round of subsidy cuts is looking increasingly likely and this would push inflation back into …
Egypt’s IMF deal has proved successful in helping to repair the country’s balance sheets, but many of the structural constraints facing the economy remain in place and will be extremely difficult to overcome. The upshot is that, while Egypt’s near-term …
17th June 2019
Attacks this morning on two tankers in the Gulf of Oman provide the latest sign that geopolitical tensions in the region are mounting and there is a significant and increasing risk that events morph into outright conflict. This would do severe damage to …
13th June 2019
The rise in Egyptian inflation in May, combined with upcoming subsidy cuts, means that the central bank will almost certainly refrain from resuming its easing cycle in the coming months. Meanwhile, the latest whole economy PMIs painted another bright …
10th June 2019
The plunge in oil prices over the past week isn’t a major headache for the largest Gulf economies, but it will exacerbate balance sheet strains in Bahrain and Oman. It also reduces the chances that OPEC+ decides to raise output at its upcoming meeting. …
6th June 2019
Our GDP Tracker suggests that Saudi Arabia’s economy slowed in the first quarter as a pick-up in the non-oil economy was offset by weakness in the oil sector. We think that the slowdown has further to run over the rest of this year and our 2019 GDP growth …
5th June 2019
The Egyptian pound has been the best performing EM currency this year, but we think that it will give up all of its gains over the coming months. We forecast the pound to depreciate by around 7% to 18/$ by the end of this year. … Egyptian pound’s rally …
4th June 2019
The negative market reaction to Lebanon’s 2019 budget suggests that investors are coming round to our view that the government will need to pursue debt restructuring in the coming years. Fiscal woes in Bahrain have also rattled investors this week as …
30th May 2019
The Egyptian central bank’s decision today to keep interest rates on hold (rather than cut them) reflected policymakers’ concerns about the inflationary impact of upcoming subsidy cuts. But with inflation likely to drop back, we think that the easing …
23rd May 2019
Electricity price hikes announced in Egypt this week are actually less aggressive than last year’s, but this will shave only a small amount off headline inflation. And with fuel price increases still to be announced, we think that the central bank will …
The outlook for Lebanon’s economy is going from bad to worse. The most immediate threat is that the country could find itself caught in the crosshairs amid escalating tensions between the Gulf countries and Iran. One possible outcome is that Lebanon faces …
22nd May 2019
The further easing of deflation in Saudi Arabia in April suggests that stronger activity in the non-oil sector at the start of this year is (finally) feeding through to a pick-up in price pressures. … Saudi Consumer Prices …
21st May 2019
Credit growth in Saudi Arabia has started to pick up and, with monetary conditions set to be loosened in line with the US, it is likely to strengthen further over the next couple of years. That said, we doubt that private sector lending growth will return …
20th May 2019
Mounting friction between the US and Iran has dominated the news flow this week and weighed on financial markets across the MENA region. Investors seem to be most concerned that Lebanon will get caught in the crosshairs. Meanwhile, data released this week …
16th May 2019
Mounting friction between the US and Iran is likely to cause Iran’s economic downturn to deepen but, on its own, this doesn’t pose a major problem for the Gulf economies. The bigger threat is that tensions escalate and spill over via either a proxy war or …
14th May 2019
The health of balance sheets across the Middle East and North Africa have come under the spotlight in recent months. We are most concerned about some of the smaller economies, particularly Lebanon. … Balance sheets improving, but vulnerabilities …
9th May 2019
Developments in Bahrain over the past week suggest that the government is backtracking on its commitment to fiscal austerity. We doubt that the other Gulf countries will withdraw their support but, if Bahrain’s public finances continue to deteriorate, …
Egyptian inflation dropped back in April but given that it remained above target, the chance of an interest rate cut at the MPC meeting in two weeks’ time is touch and go. For now, though, we still think that the overnight deposit rate will be lowered by …
Saudi Arabia recorded a budget surplus in Q1 but, if oil prices drop back as we expect, the fiscal position is likely to deteriorate. This won’t cause significant balance sheet strains, although fiscal policy will probably be tightened, weighing on growth …
2nd May 2019
Saudi equities have continued to rally this week, but we think that they will erase all of their recent gains by the end of this year. Meanwhile, projections from Morocco’s agriculture ministry released this week point to weaker agricultural output this …
After reaching a three-year high in Q4 2018, GDP growth in Saudi Arabia has slowed at the start of this year as the drag from oil output cuts has more than offset a pick-up in activity in the non-oil sector. The possibility of oil output being raised in …
30th April 2019
GDP figures released over the past month showed that the largest Gulf economies recorded strong growth towards the end of last year, but a fresh slowdown has got underway at the start of 2019. This has primarily reflected the impact of the OPEC-agreed oil …
25th April 2019
US President Trump’s decision not to extend waivers on Iran’s oil exports means that Saudi Arabia is likely to raise oil production over the coming months. While this poses an upside risk to our GDP growth forecasts, the economy is still on course to …
Inflation in Saudi Arabia remained in negative territory last month and, barring a fresh round of administered price hikes, we expect this to remain the case for much of this year. … Saudi Consumer Prices …
23rd April 2019
