How credible are the region’s dollar pegs?

Many of the non-oil producing countries in the region have tended to support their dollar pegs by maintaining a level of FX reserves sufficient to cover the monetary base. In Egypt and Jordan, reserves are more than enough to cover the monetary base. But, in Lebanon, growth of the monetary base has outpaced that of FX reserves since 2011. The result is that the country’s dollar peg looks extremely vulnerable in the event of a bout of capital flight.
James Swanston Middle East and North Africa Economist
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Middle East Economics Weekly

Omicron, tourism and the oil market

Low vaccine coverage and large tourism sectors mean that the non-Gulf economies are particularly vulnerable to the emergence of the Omicron variant. Meanwhile, the drop in oil prices and the likelihood that OPEC+ raises oil output more slowly than previously envisaged has increased the downside risks to our GDP growth forecasts for the Gulf.

2 December 2021

Middle East Economics Update

Saudi economy set for a strong end to the year

The economic recovery in Saudi Arabia has picked up pace and should end the year on a strong note. The emergence of the Omicron variant has clouded the outlook, but for now we expect economic growth in the Kingdom to strengthen in 2022 on the back of rising oil output.

2 December 2021

Middle East Chart Book

MENA and the Omicron risks

The Middle East and North African economies are potentially among the most vulnerable to the fallout from the Omicron strain of COVID-19. The North African economies as well as Lebanon and Jordan have low vaccination rates and large tourism sectors, leaving them exposed to the risk of tighter restrictions and curbs on international travel. In the Gulf, vaccination rates are much higher and, Dubai aside, tourism sectors are relatively small. But the fall in energy prices could prompt governments to hold off loosening fiscal policy. And producers may raise oil output more slowly, which would weigh on economic growth.

30 November 2021

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Middle East Data Response

Saudi Arabia Consumer Prices (May)

The rise in Saudi inflation to 5.7% y/y in May is likely to be followed by another increase in June, but the headline rate will fall sharply in July to around 1.0-1.5% y/y as the effects of last year’s VAT hike fade. Inflation will probably remain subdued over the rest of this year and through 2022-23.

15 June 2021

Middle East Economics Weekly

Egypt vaccine, MENA tourism, Iran nuclear talks

Egypt’s domestic vaccine production has got underway, but the country has a very long way to go before it can lift virus-related restrictions on a sustained basis. Egypt and Bahrain were added to the UK’s travel red list, adding to our view that recoveries in tourism sectors in the region will be sluggish. Finally, recent comments from US Secretary of State Antony Blinken have reduced hopes that Iran’s nuclear deal can be revived soon.

10 June 2021

Middle East Data Response

Egypt Consumer Prices (May)

Egypt’s headline inflation rate rose to 4.8% y/y in May, the fastest pace recorded so far this year. But it remained below the lower bound of the central bank’s (CBE’s) target range, supporting our view that policymakers are likely to cut interest rates later this year.

10 June 2021
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