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Gulf a bright spot

We think that rising oil production and high global energy prices will result in rapid GDP growth this year and next across the Gulf economies. Growth is likely to be well above consensus expectations.
James Swanston Middle East and North Africa Economist
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Middle East Economics Update

The economic impact of the Qatar FIFA World Cup

The 2022 Football World Cup that kicks off in November will provide a significant boost to Qatar’s economy in Q4, but we doubt that the economic legacy of the tournament will live up to officials’ expectations. That raises the risk of overcapacity in key sectors and strains in the banking sector.

15 August 2022

Middle East Data Response

Saudi Arabia Consumer Prices (Jul.)

Saudi inflation picked up to 2.7% y/y in July due to strengthening underlying price pressures, but we think that it is now at or close to a peak and will gradually fall back over the rest of this year and next. If anything, the risks are skewed to the downside given the growing likelihood of a cut to the VAT rate.  

15 August 2022

Middle East Economics Weekly

Egypt: PIF steps up investment; CBE rate hike on the cards

Saudi Arabia’s Public Investment Fund has stepped up investments into Egypt this week that will help to ease external financing concerns. At the same time, electricity rationing will begin next week to free up more natural gas (which Egypt relies on for power) for export in an effort to narrow the large current account deficit. However, these measures will only provide a short-term reprieve and a weaker pound and steps to attract more direct investment will be key to putting the external position on a more sustainable footing. Meanwhile, rising inflation is likely to prompt the Central Bank of Egypt to resume its tightening cycle with a 50bp hike, to 11.75%, next Thursday.

11 August 2022

More from James Swanston

Middle East Chart Book

Region’s financial markets routed

Risk-off sentiment and the sell-off in EM financial markets have hit the Middle East and North Africa hard. Having been the top regional performer earlier in the year, the MSCI Arabian Markets Index has fallen by nearly 20% since mid-April. Sovereign dollar bond spreads have widened across the board, particularly in Egypt and in Tunisia – the latter appears to be hurtling toward a default. With developed market central banks set to deliver more hikes over the rest of this year and next, we suspect that equities in the Middle East and North Africa (and EMs more generally) will continue to struggle. Meanwhile, sovereign dollar bond spreads could widen further, and currencies in North Africa are likely to come under greater pressure.

24 June 2022

Middle East Economics Weekly

OPEC+ policy, Egypt’s orthodox shift and FY22/23 budget

Next Thursday's OPEC+ meeting may drop some hints about the future for the group's oil output beyond September and we think that quotas are likely to be lifted. If that’s the case, the Gulf economies would be major beneficiaries. Elsewhere, comments from Egypt’s finance minister suggest that officials are becoming more receptive to a weaker pound, adding to hopes that the move to a more flexible exchange rate is the real deal. A weak currency is a concern given the growing sovereign FX debt burden, but the country’s FY2022/23 budget passed this week does at least highlight a commitment to fiscal austerity.

23 June 2022

Middle East Economics Update

Egypt public finance risks contained… for now

Egypt’s public debt dynamics look increasingly fragile due to a combination of the extremely short average maturity of its debt, rapidly rising yields, and a growing share of debt denominated in foreign currency. That said, for now, there are reasons to think that the sovereign should be able to muddle through. World with Higher Rates - Drop-In (21st June, 10:00 ET/15:00 BST): Does monetary policy tightening automatically mean recession? Are EMs vulnerable? How will financial market returns be affected? Join our special 20-minute briefing to find out what higher rates mean for macro and markets. Register now

20 June 2022
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