Gulf leads the way as Ukraine war drives divergence

The Gulf economies will be major beneficiaries from higher energy prices and our growth forecasts sit far above the consensus. Outside the Gulf, higher inflation and tighter fiscal policy will weigh on growth, while balance sheet problems are likely to build. In Egypt, despite the recent devaluation, we think the currency will need to weaken further in order to stabilise the external position. One consequence is that interest rates will be raised – and by more than most expect. Elsewhere, we think that Tunisia’s government will ultimately turn to default.