Regional slowdown approaching a trough

The slowdown in the Middle East and North Africa should bottom out in the second half of this year and growth is likely to strengthen in 2018-19. In the Gulf, the hit to headline GDP growth from OPEC-agreed oil output cuts will start to fade next year as policymakers resist calls for deeper cuts. Economic spillovers from the diplomatic spat between Qatar and regional powers should be limited, but ongoing austerity and higher interest rates will weigh on non-oil sectors. Outside of the Gulf, Egypt’s economy should gradually strengthen as the recent inflation shock unwinds, monetary policy is loosened and fiscal consolidation slows. For the region as a whole, we expect growth to average around 2.5% in 2018-19, which is weaker than the consensus.