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The high cost of oil reflects hopes of a strong recovery in demand at least as much as tensions in the Middle East. However, the price of a barrel of Brent probably still includes a premium of $10-15 for the possibility of more significant disruption to …
7th February 2013
The fall in Egypt’s FX reserves last month underlines the limited firepower that the authorities have to stem depreciation pressures on the pound. We think the pound could fall a further 10% or so over the coming months to 7.50/US$. … Egypt's FX …
5th February 2013
January’s PMI data suggest that civil unrest and political uncertainty continue to weigh heavily on activity in Egypt. By contrast, the Gulf economies are growing at a robust pace. … Egypt's economy continues to suffer amid civil …
Growing strains in the balance of payments continue to prevent any loosening of monetary policy to support Egypt’s struggling economy. We don’t think there will be any scope to ease policy until the authorities secure an IMF deal and political tensions …
31st January 2013
The Egyptian pound has fallen sharply over the past month after the Central Bank of Egypt loosened its grip on the currency. We think the pound could fall by a further 10-15% to around 7.5/US$, although much hinges on the progress of talks with the IMF. …
29th January 2013
Although Egypt’s constitutional crisis has eased, the currency is now presenting a fresh cause for concern. Our central view remains that Egypt will secure an IMF deal which, combined with a return of private capital inflows and official aid, should …
24th January 2013
Our Saudi Activity Proxy shows that the economy picked up modestly towards the end of last year. And looking ahead, government stimulus should keep the economy growing at a healthy clip. … Saudi stimulus to keep economy …
22nd January 2013
Two years have passed since the start of the ‘Arab Spring’ and the economic progress that many hoped for at the time still hasn’t materialised. But while the transition process is likely to remain bumpy in the short-term, over the longer-term we think …
21st January 2013
With all eyes on Egypt’s currency crisis, it’s easy to forget the fiscal crisis hitting the resource-poor Arab countries at the same time. Gaping budget deficits are squeezing out investment and damaging the region’s productive capacity. Fiscal …
16th January 2013
Fears that the recent fall in the Egyptian pound will lead to a sharp rise in inflation are overplayed. Instead, tax hikes and subsidy cuts are likely to have a much greater impact on headline inflation over the coming year. … Egyptian inflation to rise …
15th January 2013
The rise in government spending announced in the Saudi budget for this year reinforces our view that supportive fiscal policy should enable the economy to continue to perform well despite a weak global environment. But at the same time, strong near-term …
14th January 2013
The latest PMI data suggest that Egypt’s constitutional crisis took a heavy toll on the economy at the end of last year. By contrast, activity in the Gulf economies is holding up well, buoyed by fiscal stimulus. … Constitutional crisis weighs on …
9th January 2013
With the Central Bank of Egypt (CBE) loosening its grip on the pound, the key question is whether the authorities will succeed in overseeing an “orderly” devaluation of the currency. If an IMF deal can be secured we think they stand a good chance, …
8th January 2013
The Egyptian central bank appears to have shifted from keeping the pound pegged to the dollar to allowing a relatively gradual devaluation. We think this process has further to run and the pound could fall by a further 10-15% vs. the dollar over the …
2nd January 2013
Egypt’s constitutional crisis continues to cast a dark shadow over the economy. Admittedly, the vote on the new draft constitution passed off more smoothly than might have been expected. But the political situation has become much more polarised and …
19th December 2012
The Middle East remains a region of two halves. On the one hand, the Gulf economies are in good shape and look well placed to weather what is likely to be a challenging year ahead for the world economy. We expect the GCC economies to grow by over 3% next …
17th December 2012
The pick-up in Saudi Arabia’s GDP growth in Q3 supports our view that it is on track to be one of the best performers in the MENA region next year. However, the breakdown shows that growth was driven largely by a sharp rise in government spending. … …
11th December 2012
This week’s OPEC meeting will be dominated by the tricky choice of a new Secretary-General, while the decision on output should be relatively simple. We agree with the consensus that the notional ceiling will be kept at 30mn barrels per day, at least for …
10th December 2012
Egypt’s deepening political crisis has put paid to any hopes of policy easing, in the very near-term at least. Indeed, if things stay as they are, we wouldn’t be surprised if the central bank is forced into hiking rates to support the pound. … Political …
6th December 2012
The latest batch of PMI data from the Middle East and North Africa (MENA) suggest that while the oil-rich Gulf economies have lost some steam they are still comfortably outperforming their resource-poor neighbours. We expect this “twin speed” pattern of …
5th December 2012
The massive fiscal stimulus packages unveiled by Gulf economies in the wake of the Arab Spring raised fears at the time that they would lead to economic overheating and rising inflation. Fortunately, these fears have not materialised. And with the …
4th December 2012
Egyptian financial markets have been battered this month amid a deepening constitutional crisis. … Middle East Markets Monitor (Nov.) …
29th November 2012
President Morsi’s decision to grant himself sweeping powers has thrown Egypt into a constitutional crisis, the outcome of which is highly uncertain and will frame the near-term outlook for the economy and the markets. But taking a step back, it looks like …
It’s been a mixed month for Egypt’s post-revolution economy. The good news is that a $4.8bn programme with the IMF has been agreed at a staff level, paving the way for formal approval by the Fund’s board by the end of the year. However, the good news …
26th November 2012
News that Egypt’s government has reached a “staff-level” agreement with the IMF on a $4.8bn programme has greatly reduced the risk of a balance of payments crisis in the country. Radical policy reforms are unlikely in the very near-term, but the …
20th November 2012
Our Saudi Activity Proxy shows that the economic slowdown continued at the end of the last quarter. Overall, it looks like GDP growth slowed to around 2.5% y/y in Q3 from 5.5% y/y in Q2. … Saudi slowdown …
The Gulf looks comparatively well placed to weather the further deterioration in the global economy that we expect in 2013. Government spending has increased significantly in recent years, but there is room for further stimulus if needed, even if oil …
15th November 2012
The latest data from Egypt paint a disappointing picture of weakening growth and rising inflation. And with subsidy cuts and tax hikes expected as conditions to any agreement with the IMF, headline inflation is likely to be pushed higher over coming …
12th November 2012
Media reports suggesting that the Egyptian government could reach a deal with the IMF within the next few months is clearly good news. However, we have been here before and we suspect the issue of currency devaluation remains a major stumbling block to …
8th November 2012
Talks between Egypt and the IMF this month have focused attention back onto the external financing requirements of the region’s resource-poor economies. But so long as their oil-rich neighbours continue to drip-feed aid, we think they should be able to …
6th November 2012
October’s PMI data suggest that Saudi Arabia’s non-oil private sector continues to grow at a robust pace, but our own activity proxy – based on actual hard data – indicates that the economy has already slowed fairly sharply. … Saudi PMI continues to point …
5th November 2012
The arrival of an IMF delegation in Egypt and hopes that a deal will soon be concluded have supported the local equity and bond markets over the past few months. Yet, this isn’t the first time that a deal has appeared imminent and the near-term outlook …
31st October 2012
Recent activity data provide further evidence that the Gulf economies are slowing. The good news is that inflationary pressures are easing at the same time. This will boost households’ real incomes which, alongside last year’s enormous fiscal stimulus …
25th October 2012
Saudi Arabia’s headline inflation rate fell for the seventh consecutive month in September, hitting a three-year low. This will help to ease fears that the economy is overheating, which, in turn, could prompt the Saudi Arabian Monetary Agency (SAMA) to …
19th October 2012
Egypt’s central bank kept interest rates on hold today as concerns over the fragile external funding position continue to outweigh the need to stimulate an ailing economy. … Currency concerns keep Egyptian rates on …
18th October 2012
Our activity proxy for Saudi Arabia shows that the economy continues to slow, as growth in both the oil and non-oil sectors starts to ease. Overall GDP growth looks like it slowed to around 4% y/y in Q3, down from 5.5% y/y in the second quarter. … Saudi …
17th October 2012
Morocco’s current account deficit has been pushed up to a 27-year high by a combination of weaker export demand from the euro-zone and the higher cost of commodity imports. Nonetheless, an IMF funding line will help to prevent a balance of payments crisis …
16th October 2012
On the face of it, the appointment of a widely respected economist as Jordan’s new Prime Minister should help to kick-start much-needed economic and fiscal reforms in the country. But in practice we suspect the reform process will continue to be held back …
10th October 2012
September’s data show that inflationary pressures eased further in Egypt, with core inflation falling to a six-year low. But an interest rate cut is unlikely next week. … Egypt Consumer Prices (Sep. …
Today’s data from the Central Bank of Egypt (CBE) showing that foreign currency reserves fell in September highlight the importance of an IMF backstop when talks take place at the end of this month. … IMF deal needed to stop the rot in …
8th October 2012
Egypt’s talks with the IMF over a financing package are set to get underway this month. There are a number of major stumbling blocks, the most contentious of which is whether Egypt is forced to devalue its currency. Nonetheless, we don’t think that this …
5th October 2012
Today’s cut in Kuwait’s benchmark interest rate will do little to boost output growth. Instead, the economy is in desperate need of political stability and progress on the government’s development plan. … Kuwait rate cut unlikely to boost economic …
4th October 2012
September’s PMI data suggest that the UAE’s non-oil sector is growing at a healthy pace on the back of both strong domestic demand and stable external conditions. … UAE HSBC/Markit PMI (Sep. …
3rd October 2012
September’s PMI data suggest that growth in Saudi Arabia’s non-oil private sector continues to accelerate. But this contradicts other activity data, including our own proxy for the non-oil economy. … Saudi PMI continues to buck the global …
The combination of an improvement in political conditions and rising hopes of an IMF deal has boosted bond and equity markets in Egypt. But at the same time, the return of foreign investors will increase the exposure of the country’s markets to …
28th September 2012
New rules limiting the exposure of the UAE’s banks to government entities are unlikely to boost lending to the private sector in the immediate term. But in time, the change in regulations could improve credit conditions, which would help to speed up the …
27th September 2012
Political conditions in Egypt have continued to improve in recent months, but the real economy is still struggling. Industrial production has stagnated and strains in the balance of payments persist. Fortunately, the new government is making progress on …
26th September 2012
After two years of turmoil, there is light at the end of the tunnel for some of the resource-poor Arab economies. But a recovery is unlikely to start until 2014 at the earliest. Next year, most of these countries are set to be battered as political …
20th September 2012
Saudi Arabia’s recent commitment to maintain oil output at record levels means that our forecast for GDP growth this year is looking too pessimistic. We now expect the economy to expand by around 4.5% in 2012, but output will slow to 3.3% next year. … …
19th September 2012
