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The Egyptian central bank has found itself in the spotlight this month, as attention has (re-)focussed on the country’s fragile external position. The appointment of Tarek Amer as governor had already sparked speculation that policymakers were gearing …
22nd December 2015
The Gulf economies have weathered the storm created by the fall in oil prices well so far, but 2016 is likely to be the year in which low energy prices begin to weigh on growth. We don’t expect currencies to be devalued, but governments are paving the way …
21st December 2015
Equity markets in the Gulf have fallen further over the past month, dragged down by the renewed slump in oil prices. Elsewhere, Egypt’s central bank has maintained a tight grip on the pound but policymakers seem to be gearing up for a devaluation sooner …
17th December 2015
Our GDP Tracker suggests that the Saudi Arabian economy weakened a little in October and, with fiscal policy set to tighten, we expect much slower growth in 2016. … Saudi growth eases, further slowdown likely in …
15th December 2015
The further rise in Egyptian inflation to 11.1% y/y in November, alongside fresh fears over the fragile external position, is likely to add to policymaker’s concerns. For now, we expect the central bank to leave interest rates on hold at next week’s MPC …
10th December 2015
The slight fall in Saudi inflation in November, to 2.3% y/y, reinforces our view that the backdrop of weak global commodity prices and slowing growth should keep price pressures subdued over the coming years. … Saudi Arabia Consumer Prices …
9th December 2015
Last week’s OPEC meeting ended with little change to the cartel’s policy, but rumours suggest that Saudi Arabia is softening its stance on production cuts. While we’re probably at the point where the Kingdom would like to see oil prices rising again soon, …
7th December 2015
Egypt’s fragile external position has come under the spotlight once again, but the latest signs are that policymakers are trying to ease foreign currency restrictions. The upshot is that a devaluation of the pound now looks more likely than ever and, …
3rd December 2015
Saudi Arabia’s upcoming budget statement will be scrutinised even more than usual and we suspect (and hope) that it will provide more realistic forecasts as well as a clear agenda for fiscal consolidation. Failure to do so would reinforce fears that the …
2nd December 2015
Renewed concerns over Egypt’s external position, coupled with fresh security fears in light of the Russian plane crash in the Sinai, have caused the country’s equity market to slump and dollar bond yields to rise in the past month. Stocks in the Gulf have …
26th November 2015
The past month has bought mounting speculation about currency devaluation in the region’s two largest economies, Egypt and Saudi Arabia. In the case of Saudi Arabia, we think this is extremely unlikely. The adjustment to cheap oil is most probably going …
24th November 2015
Speculation over a devaluation of the Saudi riyal has mounted in the past few days but we think such a move is likely to be used as a last resort. Instead, we think cuts to capital spending are likely to bear the brunt of the adjustment to cheap oil over …
23rd November 2015
The Gulf countries are in a strong position to cope with low oil prices, but some form of adjustment will be needed over the coming years. We expect tighter fiscal policy to do most of the work and we suspect that the bulk of this will come via lower …
19th November 2015
There is growing talk that Egypt is in the midst of a currency crisis and, while we think some of this may be a bit overdone, developments over the past month or so suggest that a shift towards a more flexible exchange rate regime (and a weaker pound) may …
17th November 2015
Our GDP Tracker suggests that Saudi Arabia’s economy slowed sharply in September. With a fiscal squeeze expected to get underway soon, this is likely to be a sign of things to come over the next twelve to eighteen months. … Saudi Arabia’s economy shifts …
16th November 2015
The Saudi government appears to be moving towards privatising a number of state-owned companies which, although not a game changer when it comes to financing the budget deficit, adds to the reasons to expect the fiscal adjustment to cheap oil to be …
12th November 2015
Saudi inflation edged up for the second consecutive month in October, to 2.4% y/y, a fresh high for this year. Even so, low global commodity prices and slower economic growth should keep price pressures in check for the foreseeable future. … Saudi Arabia …
11th November 2015
Reports that Saudi Arabia will launch an international bond provides some clarity on how the budget deficit will be financed over the next year – as things stand, we think around 65% will come from domestic bond issues, 10% from international bond issues …
10th November 2015
The further rise in Egyptian inflation to 9.7% y/y in October was driven almost entirely by an increase in the food component, which is highly volatile. Stripping out food prices, inflation actually eased back last month. … Egypt Consumer Prices …
Mounting evidence that the Russian plane crash in Egypt’s Sinai Peninsula was caused by a bomb planted by an affiliate of Islamic State is almost inevitably going to deal a hammer blow to Egypt’s tourism sector. The resulting loss in foreign currency …
9th November 2015
Substantial foreign exchange reserves mean that most of the Gulf economies can afford to adjust gradually to a prolonged period of cheap oil. Kuwait and the UAE are in the strongest position, but Bahrain and Oman will probably need to undertake a sharp …
5th November 2015
Despite recent media reports espousing the resilience of Saudi consumers in the face of lower oil prices, a number of indicators suggest that household spending in the Kingdom has softened in recent months. With a fiscal squeeze in the pipeline, we expect …
4th November 2015
October’s ‘whole economy’ PMIs for the MENA region suggest that economic activity slowed in the Gulf at the start of Q4. As the policy adjustment to cheap oil gets underway, we expect growth to weaken further, and by more than the consensus expects. …
3rd November 2015
The decision by Standard & Poor’s to downgrade Saudi Arabia’s sovereign credit rating on Friday night is hardly surprising in light of the deterioration in the fiscal position this year and lack of a clear agenda to rein in the budget deficit. However, …
2nd November 2015
A renewed focus on Egypt’s external position appears to have been the main reason why the central bank kept the benchmark overnight deposit rate unchanged at 8.75% today, rather than lower rates. The impending change in central bank governor has clouded …
29th October 2015
The past month has brought the clearest signs yet that a fiscal squeeze in Saudi Arabia is looming. According to leaked memos, the Ministry of Finance has ordered government entities to halt new projects, freeze hiring and postpone purchases of new cars …
The Egyptian pound was devalued, albeit modestly, over the past few weeks and, while the central bank has brought this process to a halt, we think a further fall in the currency is likely over the coming months. Meanwhile, the region’s equities have fared …
26th October 2015
Saudi Arabia’s peg to the US dollar is coming under increasing scrutiny but we think fears that the authorities will devalue the riyal are overdone. The Kingdom’s substantial foreign exchange reserves provide a substantial buffer and, if history is any …
21st October 2015
Several Gulf countries have turned to their foreign exchange reserves in an effort to finance budget and current account deficits caused by last year’s slump in oil prices, but there seems to be persistent confusion about the exact mechanics of reserve …
Our GDP Tracker suggests that Saudi Arabia’s economy slowed in August and, with a fiscal squeeze looking increasingly likely, growth looks set to weaken further over the coming quarters. We continue to think that the consensus is too optimistic on growth …
20th October 2015
For the third time this year the Central Bank of Egypt has loosened its grip on the pound and the currency is likely to fall further over the coming days. We expect it to reach 8.25/US$ by the end of this year and 8.50/US$ by end-2016, although past …
19th October 2015
Egyptians are scheduled to return to the polls this month to elect a new parliament, which is likely to emerge as a body that is largely aligned with President al-Sisi. As we explain in this Watch, in the short-term this may well be interpreted by …
15th October 2015
Saudi Arabian inflation rose to 2.3% y/y in September, its highest rate this year. But with the economy set to slow and global commodity prices likely to stay low, we expect inflation to remain relatively subdued for the foreseeable future. … Saudi …
14th October 2015
The conflict in Syria has taken a heavy toll on Lebanon’s economy over the past few years – the country is hosting more than a million refugees, the key tourism sector is suffering, and the political situation has taken a turn for the worse. With a …
12th October 2015
We think recent concerns that a withdrawal of government deposits from commercial banks will result in a liquidity crunch across the Gulf are overdone. Policymakers have plenty in their toolkit to avoid such a scenario. … Gulf likely to avoid bank …
8th October 2015
The jump in Egyptian inflation to 9.2% y/y in September was driven almost entirely by a rise in the volatile food component. While we do expect inflation to fall back again, last month’s data mean an interest rate cut at the next MPC meeting now looks …
September’s whole economy’ PMIs point to renewed weakness in the Gulf economies at the end of Q3. Elsewhere, there is further evidence that Egypt’s economy has stabilised following a weak first half of the year. … Whole Economy PMIs …
5th October 2015
Financial markets across the MENA region have been hit over the past few months, but there are at least signs that growth has stabilised in key economies. After a disappointing first half of the year, timely data indicate that both the UAE and Egypt have …
30th September 2015
Growth in the Gulf economies has held up well this year, but policymakers cannot delay the adjustment to low oil prices much longer. Tighter fiscal policy looms. Large savings and low debt levels mean that this is likely to be a gradual process, and …
29th September 2015
The fact that Saudi Arabia is drawing down its foreign exchange reserves should come as little surprise given that the Kingdom is running a current account deficit and also facing sizeable capital outflows. This is likely to be the state of play for some …
28th September 2015
In a mixed month for the MENA region’s equity markets, Egypt’s EGX30 proved to be the best performer despite the launch of a corruption investigation within the cabinet. In contrast, Saudi Arabia’s TADAWUL dropped back even though oil prices recovered …
24th September 2015
Algeria was ill-prepared to confront a period of low oil prices and, as we warned might happen, the authorities have reacted by letting the dinar weaken, while a sharp fiscal squeeze is now on the cards. These measures will help to rein in the county’s …
23rd September 2015
The decision by the Egyptian central bank (CBE) to keep its benchmark overnight deposit rate unchanged at 8.75% today was probably a close call and we suspect that policymakers were swayed from cutting rates as they, along with many other EM central …
17th September 2015
Our GDP Tracker suggests that Saudi Arabia’s economy continued to grow by over 5% y/y at the start of Q3. However, this is likely to be as good as it gets for some time – we expect growth to slow over the rest of this year and by more than the consensus …
16th September 2015
The Gulf’s commitment to dollar pegs mean that rate hikes by the US Federal Reserve will be imported to the region, adding to the headwinds facing economic growth. But this is a secondary concern compared with a prolonged period of low oil prices. … Fed …
15th September 2015
We have argued for some time that Egypt needs to devalue the pound and there are signs that policymakers are (belatedly) coming round to this view. We expect the currency to reach 8.25/US$ by the end of next year, from 7.83/US$ at present. … Devaluation …
10th September 2015
A further drop in Egyptian inflation in August to 7.9% y/y, its lowest rate in more than two years, means that an interest rate cut at this month’s MPC meeting is looking increasingly likely. Meanwhile, inflation in Saudi Arabia remained subdued. … Egypt …
The whopping increase in Egypt’s current account deficit in the last fiscal year is likely to grab the headlines. But there is more to this than meets the eye. It largelyreflects an accounting issue related to the way the Gulf States provided financial …
9th September 2015
The recent announcement by Italian energy group Eni that it has discovered a “super giant” gas field off the coast of Egypt has been billed as a game changer for the country. However, as we explain in this Watch, while the economic benefits are likely to …
8th September 2015
With oil prices still languishing at multi-year lows, Saudi Arabia’s budget position – which looks set to post a shortfall of close to 20% of GDP this year – has come under increasing scrutiny in recent months. However, there seems to be some confusion …
7th September 2015
