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Gulf to drive a pick-up in regional growth in 2022

The recovery across the Middle East and North Africa is likely to gather pace this year, due in large part to the Gulf where rising oil output will cause GDP growth to pick up to rates well above current consensus expectations. Recoveries elsewhere are likely to lag behind amid a slow return of tourists and fiscal austerity. In Tunisia, though, fiscal consolidation is unlikely to be enough to avoid a sovereign default. Elsewhere, we think that concerns about Dubai’s corporate debt could resurface this year too.
James Swanston Middle East and North Africa Economist
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Middle East Economics Weekly

Tunisia rate hike, Saudi budget data, Egypt privatisations

Tunisia’s central bank hiked interest rates this week with policymakers almost certainly having one eye on the country’s fragile external position. But we do not think that this will prevent sharp falls in the dinar and, in turn, a sovereign default. Elsewhere, Saudi Arabia posted its largest budget surplus since 2013 in Q1 on the back of high oil prices and continued tight fiscal policy. If oil prices remain high, though, the proverbial purse strings are likely to be loosened, supporting activity in the non-oil sector. Finally, more details emerged of Egypt’s forthcoming privatisation drive with the government planning to remove itself from a whole swathe of sectors.

19 May 2022

Middle East Economics Update

Saudi set for bumper GDP growth this year

Saudi Arabia’s economy grew at its fastest pace in a decade in Q1 and we think this strength will carry on over the rest of this year. The combination of rising oil output and the increasing likelihood of looser fiscal policy underpin our above-consensus forecast for the Kingdom’s economy to grow by 10% in 2022.

18 May 2022

Middle East Economics Update

Saudi inflation to stay in check, risks lie to downside

Headline inflation in Saudi Arabia rose to 2.3% y/y in April and we think that it will continue to accelerate over the coming months. Unlike in other parts of the emerging world, however, inflation will not surge to multi-year highs and, if anything, the risks to our inflation forecast lie to the downside.

18 May 2022

More from James Swanston

Middle East Economics Weekly

Oil prices, UAE drone attack, Gulf monetary tightening

The recent upwards revision to our oil price forecast means that the window for looser fiscal policy in the Gulf will remain open for a little longer than we anticipated. One of the factors driving oil higher this week was the Houthi drone strike in the UAE, which highlighted the risks to the Emirates’ recovery – particularly the tourism sector. Finally, central banks in the Gulf will have to follow the Fed in tightening monetary policy – which now seems likely to start in March. That will add a headwind to non-oil sectors.

20 January 2022

Middle East Economics Weekly

Oil and Gulf fiscal policy, Egypt joins GBI-EM, Tunisia

We think that the recent rally in oil prices is likely to be short lived and, as prices fall back, the window for governments in the Gulf to loosen fiscal policy will shut. Elsewhere, Egypt’s inclusion in JP Morgan’s GBI-EM bond index at the end of the month could boost capital inflows, but also cause external imbalances to increase. Finally, despite some support from Saudi Arabia this week, the Tunisian government will still need to pass much-needed fiscal consolidation to repair its balance sheets. Otherwise, it will continue to edge closer to a sovereign default.

13 January 2022

Middle East Data Response

Saudi Arabia Consumer Prices (Dec.)

Saudi inflation edged up to 1.2% y/y in December and we think that the headline rate will drift a little higher over the first half of this year before stabilising at around 1.0-1.5% over the rest of 2022 and 2023. Drop-In: Neil Shearing will host an online panel of our senior economists to answer your questions and update on macro and markets this Thursday, 13th January (11:00 ET/16:00 GMT). Register for the latest on everything from Omicron to the Fed to our key calls for 2022. Registration here.

13 January 2022
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