Further signs of a slowdown in the Gulf

The latest data suggest that GDP growth in the Gulf economies slowed in Q2, which is partly a result of cuts in oil production but also softer activity in non-oil sectors. The early data for July, such as the whole economy PMIs, point to even weaker growth at the start of Q3. And with oil prices having fallen, renewed fiscal austerity is on the cards, particularly in Saudi Arabia. Gulf central banks will follow the Fed and lower rates further (due to their dollar pegs), providing some support to credit growth. But even so, the net result is that growth across the region is likely to weaken over the rest of the year.