Regional growth slows further

The raft of GDP data released over the past month showed that growth across the Middle East & North Africa continued to slow in Q2. Our weighted-average measure of regional GDP expanded by 1.4% y/y in Q2, down from 2.0% y/y in Q1 and its slowest pace since the 2009 global financial crisis. The weakness was concentrated in the Gulf economies – the region’s largest, Saudi Arabia, economy contracted by 1.0% y/y. OPEC-agreed oil production cuts caused oil sectors to exert a bigger drag on growth than in Q1, while fiscal austerity continued to weigh on non-oil sectors. Qatar’s economy suffered as the blockade imposed by its neighbours led to disruptions to activity. And Tunisia’s recovery faltered. The one bright spot was Morocco, where growth was supported by a rebound in the agriculture sector from last year’s drought-related slump. We expect regional GDP growth to weaken a bit further over the remainder of this year as the drag from oil output cuts in the Gulf intensifies. A recovery should get underway in 2018, but it is likely to be weaker than most anticipate.