Middle East

Middle East Economics Focus

Middle East Economics Focus

Egyptian pound’s rally to go into reverse

The Egyptian pound has appreciated significantly since the devaluation in 2016 and there are signs that the strength of the currency is weighing on the country’s external competitiveness. We forecast a gradual depreciation from around 15.6/$ now to 17/$ by the end of next year, which is a larger fall than most expect. But there is a risk that policymakers have not learnt from their past mistakes and support an overvalued exchange rate for too long, leading to a sharper adjustment further down the line.

15 June 2021

Middle East Economics Focus

Tunisia heading for a debt restructuring

Tunisia’s public finances have deteriorated further during the COVID-19 crisis and, with the government unlikely to be able to push through much-needed fiscal austerity, a debt restructuring looks increasingly likely in the coming years.

18 March 2021

Middle East Economics Focus

The Arab Spring: 10 years on

Ten years on from the “Arab Spring” uprisings that afflicted large swathes of the Middle East and North Africa, hopes for a shift to democracy that would unleash reforms and transform the region’s economic prospects have failed to materialise. Even once the effects of the current crisis dissipate, productivity growth will remain weak and income convergence will be slow. This will continue to create fertile ground for social unrest, which will pose a key downside risk to the economic outlook.

17 December 2020
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Middle East Economics Focus

Lasting blow to supply capacity is not inevitable

It is by no means inevitable that the coronavirus crisis puts a big permanent hole in the supply capacity of economies (i.e. their ability to produce goods and services). With the right government policies, many economies should be able more or less to revert to the path of output they were on before the crisis. Nonetheless, with demand likely to be slow to recover fully, this could still take several years. And there will be several important exceptions to this generally optimistic picture.

Middle East Economics Focus

Is Dubai facing another debt crisis?

Efforts to contain the coronavirus will cause Dubai’s economy to contract sharply, exacerbating overcapacity in key sectors and making it more difficult for the Emirate’s government-related entities (GREs) to service their large debts. Our own database shows that these debts have risen to more than 80% of the Emirate’s GDP. We think that Abu Dhabi would, ultimately, step in with another bailout. But a risk of a repeat of the events of 2009, when support was slow to arrive, is high. That would make the financial market and economic fallout much worse.

20 April 2020

Middle East Economics Focus

Why Lebanon is heading for a debt restructuring

The recent protests in Lebanon highlight that it is politically impossible to push through the fiscal austerity needed to stabilise the government’s debt-to-GDP ratio. A debt restructuring is inevitable. There are lots of ways that this could play out. But one important point to make is that the combination of an overvalued currency and widespread holdings of government FX debt in the local financial sector means that there’s the risk of a messy default accompanied by currency and banking crises.

23 October 2019

Middle East Economics Focus

Assessing the potential impact of a US-Iran war

War with the US would cause a collapse in Iran’s economy that would directly knock around 0.3%-pts off global GDP – equal to the damage from the US-China trade war so far. More important to the rest of the world, though, would be the resulting surge in oil prices and increased uncertainty, which would add to the headwinds already facing the global economy.

20 September 2019

Middle East Economics Focus

Egypt: improved fiscal health to support faster growth

The recent improvement in Egypt’s budget position will be enough to keep the government’s debt ratio on a downward trend. Government bond yields are likely to fall and austerity looks set to come to an end. This underpins our view that GDP growth will be stronger than most expect in the next few years.

27 February 2019
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