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The big fiscal squeeze that the Egyptian government has signed up for as part of its IMF deal will, if fully implemented, bring the debt ratio down. However, the authorities are likely to struggle to meet the targets set by the Fund and we suspect that …
26th January 2017
The recent pull-back in US Treasury yields has prompted several MENA sovereigns to push ahead with their plans to issue dollar debt. With the Fed likely to hike interest rates more aggressively in 2017-18, these governments may be sensing a final …
23rd January 2017
Saudi inflation fell further at the end of last year as the decline in food prices steepened. Inflation is likely to ease a little further in the first few months of 2017, but fresh subsidy cuts will start to push it up again by the middle of the year. … …
Our GDP Tracker suggests that the Saudi economy was on an improving trends towards the end of last year. But we expect growth to be slower this year compared with 2016 as weakness in the oil sector more than offsets a recovery in the non-oil economy. … …
19th January 2017
The conditions attached to Egypt’s IMF loan, details of which were released earlier today, suggest that a significant fiscal squeeze is in the pipeline this year, while monetary policy will remain tight. This supports our view that the economy will slow …
18th January 2017
The latest data show that Saudi Arabia’s balance of payments position improved markedly towards the end of 2016 and, with oil prices likely to grind higher this year, this trend looks set to continue. Accordingly, any remaining fears that policymakers …
The appreciation of the US dollar since the end of last year has prompted renewed concerns over the sustainability of currency pegs in the Gulf, but we think these fears are overdone. Oil prices are the key determinant of the devaluation threat and we …
13th January 2017
Yesterday’s inflation data from Egypt made for grim reading and we think the headline rate is likely to peak at around 27% in the coming months, prompting further interest rate hikes. Price pressures should start to ease around the middle of the year as …
11th January 2017
The 50% drop in the pound against the US dollar and fresh subsidy cuts pushed Egyptian inflation up further last month to its second-highest rate in a quarter of a century. With inflation likely to rise even further in the coming months, we think the …
10th January 2017
Saudi Arabia’s economy is likely to grow at its slowest pace since the global financial crisis this year. However, this will largely reflect weakness in the oil sector. In contrast, with austerity taking a breather, the non-oil sector should embark on a …
9th January 2017
Saudi Arabia’s recent budget suggested that fiscal consolidation will take a breather this year and, while the “Fiscal Balance Program” points to austerity resuming from 2018, it is likely to be less harsh than in the past couple of years. Perhaps more …
5th January 2017
December’s batch of PMI data suggest that the Gulf economies ended 2016 on a brighter note, supported by a boost sentiment from higher oil prices and signs that the worst of the drag from fiscal austerity may be over. … Whole Economy PMIs …
4th January 2017
Saudi Arabia’s budget suggests that, following a significant improvement in the public finances over the past couple of years, the fiscal stance will be broadly neutral in 2017. This supports our view that the economy should embark on a gradual recovery …
22nd December 2016
Saudi Arabia’s Finance Minister, Mohammed al-Jadaan, will deliver his maiden budget later this month, which is likely to reinforce the government’s commitment to tighter fiscal policy in order to adjust to low oil prices. That said, we think there’s scope …
19th December 2016
Saudi inflation fell to 2.3% y/y in November, its lowest rate this year. We expect inflation to settle at 2.0-2.5% in 2017, compared with an average of around 3.5% this year, which should support a modest recovery in consumer spending. … Saudi Arabia …
The rise in oil prices following the recent OPEC deal to cut output has supported financial markets across the Gulf over the past month. Stock markets have perked up and spreads of dollar bonds over US Treasuries have narrowed, limiting the overall rise …
15th December 2016
The recent agreement reached by OPEC and other oil producers to cut output has prompted speculation of a major shift in Saudi Arabia’s oil policy, but we remain cautious. After all, the Kingdom has agreed to a cut in production that is not drastically out …
14th December 2016
The Middle East & North Africa region will struggle again next year, recording its weakest economic growth since the global financial crisis in 2009. Fiscal policy will have to be tightened in most places in order to rein in twin budget and current …
12th December 2016
Egyptian inflation surged to 19.4% y/y in November following the float and subsequent 50% drop in the pound against the US dollar, as well as fresh subsidy cuts. Inflation looks set to rise even further in the coming months which is likely to prompt …
8th December 2016
Our GDP Tracker suggests that Saudi Arabia’s economy stabilised in Q3 and was on an improving trend towards the end of the quarter, supported by stronger growth in the oil sector. … Saudi economy holds steady in …
7th December 2016
The small drop in Egypt’s PMI last month suggests that the economy hasn’t deteriorated significantly following the pound’s float and subsequent 50% fall against the US dollar. But with inflation set to rise sharply and monetary and fiscal policy …
5th December 2016
Interbank interest rates in Saudi Arabia have edged down over the past month as investor sentiment towards the Kingdom has improved and policy moves have helped to ease liquidity constraints at banks. Nonetheless, with the US Federal Reserve set to hike …
29th November 2016
The 50% fall in the Egyptian pound against the US dollar since the central bank floated the currency at the start of November will cause economic growth to slow sharply in the coming quarters. Interest rates have already been hiked by 300bp and we think …
28th November 2016
Two weeks on from Donald Trump’s victory in the US Presidential election and we’re starting to get a sense of the likely shape and priorities of his administration. The inherent contradictions in Mr. Trump’s foreign policy make it difficult to decipher …
23rd November 2016
The oil cartel, OPEC, is likely to reach some sort of face-saving deal to cut oil output at its meeting next week, but we think claims that Saudi Arabia has abandoned its strategy of protecting its share of the oil market are wide of the mark. As we argue …
22nd November 2016
Saudi inflation eased for a fourth consecutive month in October, recording its lowest rate this year as food prices fell at a steeper pace and the effect of administered price hikes continued to fade. … Saudi Arabia Consumer Prices …
21st November 2016
Today’s decision by Egypt’s central bank to keep its key interest unchanged at 14.75% is probably a pause in the tightening cycle. We think the fall in the pound since it was floated will push inflation above 20% y/y in the coming months, prompting an …
17th November 2016
The latest figures from our Saudi GDP Tracker suggest that the Kingdom’s economy stabilised in Q3, supported by stronger growth in the oil sector. Some more timely indicators have raised fresh concerns over the health of the economy but, with the pace of …
16th November 2016
The sharp fall in the Egyptian pound since it was floated earlier this month should help to narrow the country’s current account deficit and support a pick-up in private capital inflows. If backed up by further economic reforms, this should eventually …
15th November 2016
Egyptian inflation dipped for a second consecutive month in October. But the 45% fall in the pound against the US dollar over the past week, as well as additional fuel subsidy cuts, means inflation is likely to climb above 20% in the coming months. … …
10th November 2016
The 45% fall in the Egyptian pound against the US dollar over the past week has probably taken it beyond its “fair value”, so we wouldn’t be surprised to see a small rebound in the coming days and weeks. … Where next for the Egyptian …
The Central Bank of Egypt’s decision to float the pound last week, coming alongside a raft of subsidy cuts, means inflation is likely to climb to more than 20% in the coming months. The impact is likely to be temporary and inflation should start to ease …
7th November 2016
The decision this morning by the Central Bank of Egypt (CBE) to finally adopt a floating exchange rate regime is a positive step and moves the government closer to securing a US$12bn financing package from the IMF. There will inevitably be fresh pain for …
3rd November 2016
The decision to replace Saudi Arabia’s finance minister is unlikely to mark a shift in the Kingdom’s approach to dealing with the fallout from lower oil prices. While the outgoing finance minister had become increasingly unpopular due to the austerity …
1st November 2016
The past month has been dominated by Saudi Arabia’s inaugural international bond sale and, in the first few days of trading, yields on the bonds have edged down in line with those in the rest of the Gulf. Meanwhile, the Egyptian pound has fallen further …
27th October 2016
The Egyptian government has inched closer to an IMF financing package over the past month after securing a US$2bn deposit from Saudi Arabia. This makes up a third of the bilateral financing that the Fund has demanded as a prerequisite of the deal. The …
26th October 2016
Saudi inflation dropped to its lowest rate this year in September as food prices fell at a steeper pace and the effect of administered price hikes earlier this year continued to fade. We expect inflation to ease further over the next 12-18 months. … Saudi …
24th October 2016
Banks in Saudi Arabia have coped well so far with the fallout from lower oil prices and we think the sector is in a strong position to confront the ongoing economic headwinds over the coming years. … Saudi banks should continue to weather economic …
Saudi Arabia’s record-breaking US$17.5bn sale of international bonds will finance around a third of next year’s budget deficit and almost all of the current account shortfall, so the Kingdom’s foreign exchange reserves are unlikely to fall much beyond …
19th October 2016
Saudi Arabia’s upcoming international bond issuance and the recent OPEC agreement have put the spotlight back on to the country’s adjustment to low oil prices. One point that is often overlooked is that the government has made significant progress on …
18th October 2016
Clinton’s housing proposals will not give homeownership much of a boost. The focus on down payments ignores the fact that it is the need for a high credit score which is preventing many Americans from buying. And even if the proposals do help more people …
12th October 2016
Saudi Arabia’s economy didn’t perform as badly as we had feared in Q2 and our GDP Tracker suggests that things have stabilised at the start of Q3. That said, more timely data and recent policy announcements have raised concerns that the economy may …
10th October 2016
Egyptian inflation dipped to 14.1% y/y in September, but this is unlikely to mark the start of a downward trend. Policymakers are edging to closer to an IMF deal, so a fresh devaluation of the pound and further subsidy cuts are looking increasingly …
Some analysts have argued that Egypt won’t devalue the pound until the country has a sustainable source of capital inflows, but we think this misses the point. The country is unlikely to experience a substantial pick-up in foreign investment until the …
6th October 2016
The drop in PMIs from the Gulf last month will raise concerns that the worst of the economic slowdown may not yet have passed. Meanwhile, the PMIs brought further evidence that Egypt’s economy is struggling and that price pressures continue to build. … …
5th October 2016
The 1.4% y/y Q2 GDP growth in Saudi Arabia reported by the local statistics authority was significantly stronger than we had expected. But we find this difficult to square with the weaker low-profile data as well as anecdotal reports. Accordingly, while …
30th September 2016
Last night’s OPEC deal to cut output is short on details, although our sense is that it’s unlikely to be a game-changer for Saudi Arabia, even if it shoulders most of the burden of the fall in production. The deal does show that the Saudi authorities have …
29th September 2016
Yields on Egyptian dollar bonds have edged down over the past month as the government has moved closer to securing an IMF deal. One of the likely lending conditions, however, is that the authorities adopt a more flexible exchange rate. We think this is …
27th September 2016
The sharp fall in Saudi inflation in August was driven by a drop in food inflation, although there were signs that the weakness of the economy is curtailing underlying price pressures. We expect inflation to ease further over the next 12-18 months. … …
26th September 2016
The decision by Egypt’s central bank to keep its key interest unchanged at 11.75% today, despite the recent sharp rise in inflation, suggests that large rate hikes are only likely once an IMF deal is in place and the pound has been devalued. We think …
22nd September 2016
