Egypt: rate cuts still on the cards

The Central Bank of Egypt (CBE) kept its policy rate on hold on Thursday, and we continue to hold a non-consensus view that a fall in inflation later in the year will allow the CBE to resume its easing cycle in Q4.
James Swanston Middle East and North Africa Economist
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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

More from James Swanston

Middle East Economics Weekly

UAE vaccine rollout, Egypt and Oman subsidy reversals

The announcement that the price of state-subsidised bread in Egypt will be raised adds to our view that inflation will drift higher and that the central bank will hold off from cutting rates for now. Elsewhere, Oman’s government looks set to reverse its plans to remove electricity subsidies, which may add to concerns about the commitment to repair very weak public finances. Finally, the UAE is expanding its COVID-19 vaccine rollout as the authorities hope to support the non-oil economy and the tourism sector in particular.

5 August 2021

Middle East Data Response

Whole Economy PMIs (Jul.)

July’s whole economy PMIs painted a mixed picture with recoveries in Qatar and the UAE’s non-oil sectors picking up pace, while those in Egypt and Saudi Arabia softening. Strong vaccine rollouts and the relaxation of virus-related measures should pave the way for a strong recovery in the Gulf economies over the rest of this year whereas Egypt’s recovery is likely to lag behind.

3 August 2021

Middle East Economics Weekly

Unrest in Tunisia, Gulf restrictions, Egypt fuel hike

Tunisia’s President Kais Saied’s power grab on Sunday and moves over the course of this week will reinforce concerns about the future of democracy in the country and the likelihood of a sovereign debt restructuring has increased further. Elsewhere, the Gulf countries have taken a strong stance on the need for proof of COVID-19 vaccinations to access domestic services and travel internationally, although we doubt this will have a major impact on recoveries. Finally, the hike in Egyptian fuel prices this week which will push up inflation and delay the start of a monetary easing cycle

29 July 2021
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