Middle East

Middle East Chart Book

Middle East Chart Book

Inflation edges higher

Headline inflation rates have increased in almost all countries in the region since the turn of the year reflecting a combination of price pressures as economies re-open, higher food inflation and tax changes, as well as unfavourable base effects created by last year’s slump in global energy prices. The largest increases have been recorded in Qatar, due to stronger energy and services prices, and Oman, due to the recent introduction of VAT. Inflation in Lebanon remains in triple digits and may rise further if subsidies are scrapped and the pound continues to come under pressure on the black market.

27 May 2021

Middle East Chart Book

Vaccination roll outs pick up pace

The Gulf economies, as well as Morocco, lead the way when it comes to COVID-19 vaccination programmes in the region. The UAE, Bahrain, and Qatar have provided at least one dose to more than half of their population, while Morocco, Saudi Arabia and Kuwait have administered jabs to around 25 per 100. What’s more, the pace of vaccinations in the Gulf has accelerated over the past month which, if sustained, should mean the most vulnerable are vaccinated by the end of Q2. While this should support a lower incidence of hospitalisations and deaths, the recent rise in COVID-19 cases in most countries may make policymakers hesitant to lift restrictions quickly. As a result, with the exception of the UAE, social distancing measures are likely to remain in place in much of the region this quarter, meaning growth will be weak. However, as restrictions are eased in the second half of the year, the outlook will improve.

28 April 2021

Middle East Chart Book

Tourism sectors likely to remain a laggard

The recent rise in COVID-19 cases in the region adds to reasons to think that a recovery in tourism is some way off. Governments across the world seem, in any case, appear increasingly reluctant to open up to international travel amid fears of importing virus variants. Within MENA, Saudi Arabia has stated that those attending the Hajj this year (in July) must be vaccinated. Strong vaccine rollouts in the UAE and Morocco mean that they could stand to benefit if they are able to establish travel corridors with other countries. But, in general, international tourism is likely to remain well-below normal levels for much of this year, holding back economic recoveries.

25 March 2021
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Middle East Chart Book

Gulf to continue leaning on debt markets

Dollar bond issuance in the Gulf has got off to a quick start this year with Saudi Arabia, Oman, and Bahrain selling a total of $10.25bn of bonds in the past month. If oil prices continue to rise, as we expect, budget deficits will narrow and reduce governments’ financing needs. But we think that policymakers will continue to lean on international bond issuance to plug remaining shortfalls. For one thing, the dollar receipts can be used to plug both budget and current account deficits, helping to defend of dollar pegs without needing to reduce FX reserves. And it allows governments to avoid leaning on local banks to absorb sovereign debt, reducing the risk of crowding out lending to the private sector. Public debt-to-GDP ratios will rise but, aside from Bahrain and Oman, this is not a major cause for concern.

23 February 2021

Middle East Chart Book

Gulf leading the vaccine race

Governments across the region have begun the roll out of COVID-19 vaccines with parts of the Gulf making a strong start. The UAE and Bahrain are among the world leaders in administering vaccines. In the rest of the Gulf, programmes have been slower to get going, though there is hope this can be ramped up soon. This should mean recoveries get underway faster than the rest of the region. Indeed, the roll out of vaccines has been even more sluggish outside of the Gulf. Egypt, Jordan, and Morocco have only just begun their programmes and it will be some time before herd immunity is reached.

26 January 2021

Middle East Chart Book

Easing oil output quotas to provide boost to Gulf

The OPEC+ agreement earlier this month to increase oil supply will mean that downturns in hydrocarbon sectors across the Gulf will start to ease. And, of course, the Gulf countries will also benefit from higher prices – Brent crude broke through $50pb this month and we expect it to reach $60pb by the end of next year. This will help to rein in large budget and current account deficits and, in turn, ease any lingering strains on dollar pegs. Fiscal policy is likely to remain tight across much of the Gulf, but further aggressive austerity measures are unlikely. A key risk is that the growing acrimony among OPEC+ members escalates and the agreement falls apart, triggering another oil price war similar to that witnessed earlier this year.

18 December 2020

Middle East Chart Book

Vaccine developments brighten the economic outlook

The positive news on COVID-19 vaccines in recent weeks has helped to lift the near-term outlook for the Middle East and North Africa. For the Gulf countries, oil prices have picked up with Brent crude reaching its highest level since March and we think the rebound has further to run. This will boost oil exports , narrow current account deficits and should alleviate any lingering concerns that dollar pegs will be abandoned. While the recent rise in oil prices is unlikely to prevent OPEC+ extending its current output quotas beyond the end of next year, there will at least be less pressure on policymakers to implement further aggressive fiscal austerity. Meanwhile, the growing likelihood of a resumption of international tourism next year will come as a huge relief for the likes of Dubai as well as the North African economies.

24 November 2020

Middle East Chart Book

OPEC+ cut extension would drag on GDP

The latest OPEC oil production figures continue to show that several countries are overproducing, which is making Saudi Arabia – which has borne the brunt of production cuts – increasingly frustrated. For now, at least, countries are making compensatory cuts (although it’s not clear if some of the serial non-compliers like Nigeria and Angola will continue to do so). In the near term, we doubt that Saudi would revert to its previous policy of raising oil output to regain market share. Indeed, rumours suggest that the deal to cut output could even be extended beyond January (when quotas are set to ease). While that might support prices, it would prolong the drag exerted by oil sectors on overall GDP growth.

26 October 2020
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