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Fears that the US Fed may begin to taper its third round of quantitative easing (QE) have led to a sell-off in emerging market assets over the past few weeks. The MENA region has escaped relatively unscathed so far, but in this Watch , we look at what the …
13th June 2013
Financial markets have reacted positively to the news that MSCI has upgraded Qatar and the UAE to Emerging Market status. But we fear that the eventual benefit may be lower than some seem to expect. … MSCI reclassifications likely to have limited …
12th June 2013
Subsidies are becoming increasingly unaffordable across the poorer parts of the MENA region. But the threat of higher inflation and social unrest is likely to frustrate efforts at subsidy reform. … Fears of inflation and unrest to frustrate subsidy …
11th June 2013
Two and a half years on from the Arab Spring uprisings, youth unemployment in the Middle East, which was a key trigger for the unrest, remains high. In fact, we suspect it may have risen over the past couple of years. … Youth unemployment likely to have …
6th June 2013
Ongoing political uncertainty has led to a sharp deterioration in the Egyptian government’s finances. The measures required to put them on a more sustainable footing are politically sensitive. But without them, the public finances could spiral out of …
5th June 2013
Although Egypt’s headline PMI rose sharply in May to reach its highest level in six months, we would caution against reading this as a sign that the economy has turned the corner. Meanwhile, PMIs for the Gulf suggest that activity there remains strong, …
3rd June 2013
Political unrest, a fragile banking sector and a weak fiscal position are all likely to weigh on Bahrain’s economy over the next few years. As a result, we expect it to be one of the worst performers in the Gulf. … Bahrain's political upheaval to …
30th May 2013
The Tunisian dinar has been one of the worst performing EM currencies over the past couple of months. Meanwhile, equity markets in the Gulf have continued to rally. … Tunisian dinar falls on back of IMF …
29th May 2013
Optimism has returned to Dubai’s economy, but its debt problems aren’t fully resolved. Ultimately, we think oil-rich Abu Dhabi will step in to provide emergency financing if needed. But even so, the sheer scale of the liabilities accumulated in the boom …
Growth in the Gulf economies has held up well over the first few months of this year. Admittedly, the weakness of the global economy is weighing on demand for the region’s hydrocarbon exports. But domestic demand, buoyed by fiscal stimulus and rapid …
22nd May 2013
A fresh bout of tensions between Kuwait’s parliament and the government reinforces our concerns that the country’s fractious politics is undermining the economy’s growth prospects. All told, we think Kuwait will be one of the worst performers in the Gulf …
21st May 2013
The ongoing recession in the euro-zone, domestic political instability and the deepening conflict in Syria will weigh on tourism in Egypt, Jordan, Lebanon and Tunisia. This, in turn, will be a drag on GDP and employment growth and will further weaken the …
16th May 2013
We are upbeat on the longer-term growth prospects for the resource-poor MENA economies compared with their oil-rich Gulf neighbours. But even though the region’s two largest economies, Egypt (resource-poor) and Saudi Arabia (resource-rich), appear to have …
15th May 2013
Egypt has muddled through without an IMF deal for over two years, as bilateral aid has staved off a full-blown balance of payments crisis. But this cannot go on forever. The longer Egypt goes without securing a deal with the Fund, the closer it will be to …
13th May 2013
The Egyptian central bank’s decision to hold interest rates today came as a surprise, but with the country still on the brink of a full-blown balance-of-payments crisis we would not be surprised if rates were hiked again sooner rather than later. … …
9th May 2013
The reshuffle of Egypt’s cabinet, including a complete overhaul of the government’s economic team, doesn’t change the bigger picture that achieving support from across the political spectrum for much needed economic reform will be extremely difficult. … …
7th May 2013
April’s PMI data paint a familiar picture of continued economic weakness in Egypt and continued rapid growth in the Gulf. … PMIs suggest growth divisions …
We expect oil production in the Gulf to remain lower this year than in 2012, which will be a drag on annual GDP growth. But even so, we don’t think it will lead to a collapse in overall economic activity or challenge the Gulf’s fiscal sustainability. … …
2nd May 2013
Egyptian banks have been remarkably stable throughout the political upheaval of the past few years. If we’re right in thinking that Egypt’s economy will continue to muddle through without falling into a balance of payments crisis, then the banking sector …
30th April 2013
Stock markets across the MENA region have outperformed other emerging markets since the start of the year. By far the strongest performers have been equity markets in the UAE. … UAE equities continue to …
29th April 2013
Political deadlock in Egypt has placed another obstacle in the way of negotiations with the IMF. A team from the Fund left Cairo earlier this month without an agreement in place, apparently as a result of the lack of political consensus for reforms. With …
25th April 2013
Tunisia’s IMF deal is a crucial step to helping the economy out of its post-revolution slump. But the agreement also underlines the need for political consensus in the Arab Spring countries in order for tough economic decisions to be made. For this reason …
22nd April 2013
The recent fall in oil prices is unlikely to unduly trouble the Gulf States. Prices need to drop much further and stay there before they run fiscal deficits, and even then large savings and low debt levels mean that governments shouldn’t have to tighten …
18th April 2013
Concerns that Saudi Arabia’s dollar peg is no longer suitable in light of the country’s growing trade ties with Asia look wide of the mark. There are a myriad of other tools that Saudi policymakers can (and do) use to either support the economy or to …
17th April 2013
The Gulf economies are on course to grow at a decent pace this year, but the boost to their resource-poor neighbours is likely to be limited. Trade and investment links are surprisingly small. Instead, the one channel through which the resource-poor …
15th April 2013
The Saudi economy slowed sharply in Q4, but the breakdown of the GDP data shows that the non-oil private sector remains robust. Looking ahead, fiscal stimulus and rapid credit growth should support the non-oil sector and we expect the economy to expand at …
11th April 2013
Egyptian inflation edged down in March, but it has still risen sharply since the end of last year and we think it will reach double digits over the coming months. The irony is that the recent spike in inflation has been caused in part by the imposition of …
10th April 2013
The Gulf economies are on course to outperform the rest of the region over the next year or so. Admittedly, weak oil production will act as a drag on growth in 2013. But increased government spending should help to offset this. We have pencilled in growth …
4th April 2013
March’s PMI data suggest that the Gulf economies’ private sectors continue to grow at a robust pace. Meanwhile, there are signs that the downturn in Egypt has deepened as FX restrictions weigh on activity. … Gulf economies …
3rd April 2013
Continued delays to Egypt’s prospective IMF deal have raised the possibility of a default on its FX debt. A team from the Fund is due in Cairo tomorrow to discuss a financing package, but even if a deal isn’t agreed in the very near-term, further …
2nd April 2013
Yields on Egyptian dollar-denominated bonds have spiked as an IMF deal looks increasingly distant and concerns over the government’s fiscal position mount. … Bond yields spike in Egypt as IMF deal looks further …
27th March 2013
The deterioration in the French, Italian and Spanish economies in recent months has caused the growth outlook for North Africa to worsen. Coming on top of continued domestic political instability, growth looks set to disappoint again this year – we expect …
25th March 2013
The Egyptian central bank’s move to raise interest rates in spite of the weak economy shows that policymakers have run out of options. Capital controls and FX intervention haven’t been sufficient to ease strains in the balance of payments. And with an IMF …
21st March 2013
Food inflation in the resource-poor Arab countries should peak in the coming months, albeit at high rates, before falling back in early 2014. But in the near-term, the risk that high inflation translates into fresh civil unrest could make policymakers …
20th March 2013
Saudi Arabia’s growing trade ties with Asia bode well for the economy’s growth prospects over the coming years. While we expect advanced economies to remain sluggish, Emerging Asia should grow at around 6% per year. However, resilient oil exports mean …
18th March 2013
A combination of rising government spending, rapid and accelerating credit growth, and a rise in headline inflation has led some commentators to warn that the Saudi economy is overheating. Looking ahead, we think this is certainly a risk. However, for now …
14th March 2013
Continued political turmoil and the ongoing recession in the euro-zone will weigh on growth in Tunisia this year. Over the longer-term, however, if the political situation calms down and structural reforms are implemented, we believe the economy has the …
12th March 2013
The IMF’s reservations over Egypt’s economic programme have dealt a blow to hopes that a financing package will be agreed in the short-term. This doesn’t necessarily mean that Egypt is now destined for a balance of payments crisis. But it does underline …
11th March 2013
The Egyptian pound has stabilised since the beginning of February. But this doesn’t reflect an improvement in Egypt’s economic fundamentals. Rather it is the result of tighter capital controls. … Egypt: the pound's stabilisation comes at a …
7th March 2013
February’s PMIs suggest that the Egyptian economy remains in the doldrums against a backdrop of continued civil unrest. By contrast, the Gulf economies appear on course to grow at a healthy pace. … Egypt's economy still in the …
5th March 2013
The French economy is set to fall further behind others in the euro-zone as labour market rigidity holds back competitiveness and household spending is hit by fiscal austerity. This might cause France to push harder for more supportive policies for the …
4th March 2013
Political unrest is increasing balance of payments strains across the region’s resource-poor economies. Egypt has grabbed the headlines, but there are also external financing concerns in Jordan and Tunisia. … External fragilities remain high in the …
27th February 2013
Equities in the UAE have rallied over the past few months on hopes that the economic recovery is gathering pace. Elsewhere in the region, the Egyptian pound has stabilised recently following the CBE’s introduction of tighter capital controls, but this is …
26th February 2013
The Gulf economies cut back oil production towards the end of last year against the backdrop of the weakening global economy. But while the hydrocarbon sector may be a drag on growth in 2013, it looks like this is being offset by the strength of domestic …
21st February 2013
Morocco is set to be the best performer among the resource-poor Arab economies this year, supported by a comparatively stable political and macroeconomic environment and a rebound in the agricultural sector. That said, the recession in the euro-zone and …
20th February 2013
Recently announced plans in the Gulf countries to ease fiscal policy to counter the global downturn could lead to renewed fears of overheating in the region. Our core inflation measures suggest that there is little to worry about for now. Indeed, core …
18th February 2013
The depreciation of the Egyptian pound has slowed in recent weeks, but only because of a tightening of capital controls. If these remain in place for any length of time, they could present another headwind to the growth outlook. … Egypt's capital …
14th February 2013
All eyes have focused on the fall of the Egyptian pound since the end of last year. But at the same time, the economy has taken a sharp turn for the worse. This suggests that job creation probably slowed and the squeeze on households’ incomes intensified. …
13th February 2013
Continued unrest has led to a worsening of Egypt’s fiscal position over the past year or so and we estimate that fiscal tightening of 3% of GDP is needed just to stabilise the debt ratio. However, measures to put the public finances onto a more …
11th February 2013
