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Qatar’s banking risks re-emerging

The boom in credit in Qatar since the turn of the year has caused a renewed build-up of vulnerabilities in the banking sector. Severe balance sheets strains should be avoided, but the recent pace of credit growth won’t be sustained, which will add to the headwinds facing the economy.
James Swanston Middle East and North Africa Economist
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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

More from James Swanston

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

Middle East Economics Weekly

Oil price rally continues, tourism re-opening

Oil prices hit their highest level in more than two years this week and, combined with higher oil output over the rest of this year, will help to rein in large twin budget and current account deficits in the Gulf. This opens the door for policymakers to loosen fiscal policy but if, as we expect, prices drop back by next year, there’s only a short space of time to do so. Meanwhile, several governments in the region have relaxed travel restrictions to try to spur a recovery in tourism sectors, but these steps will have little effect if other countries do not reciprocate (which seems unlikely).

3 June 2021
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