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The war in Ukraine and Saudi oil policy

Saudi Arabia has so far resisted pressure from the US to raise oil production in order to dampen prices but, with Russian oil production and exports set to be disrupted, we think that a move in this direction is now more likely than not. While the Kingdom will not want to be seen pandering to the US, raising oil output more quickly would align with its long-term strategy in the oil market of increasing market share. In view of the wider interest, we are also sending this Middle East & North Africa Economics Update to clients of our Energy Service.
Jason Tuvey Senior Emerging Markets Economist
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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

Middle East Data Response

Egypt Consumer Prices (Jul.)

Egypt’s headline inflation rate picked up to a three-year high of 13.6% y/y in July and we think it will remain above the Central Bank of Egypt’s target range until early 2024. Greater flexibility of the pound has taken some pressure off policymakers to hike interest rates aggressively, but we still think rates will rise a further 150bp, to 12.75%, by the end of this year.

10 August 2022

Middle East Economics Update

Qatar’s LNG boost still a few years away

With Russia tightening its squeeze on supply of gas to Europe, governments are turning their attention to other major gas exporters such as Qatar to try to fill the gap. But Qatar’s gas sector is already operating close to capacity and, while the North Field expansion that comes online from 2025 will boost the country’s LNG capacity by over 60%, this wouldn’t be a panacea for Europe’s gas shortages. In view of the wider interest, we are also sending this MENA Update to clients of our Energy and Emerging Europe Services.

9 August 2022

More from Jason Tuvey

Emerging Europe Data Response

Turkey Industrial Production & Retail Sales (Dec.)

Turkey’s latest activity figures confirm that the economy entered a downturn at the start of this year as the surge in inflation triggered a further drop in retail sales and weaker domestic demand started to weigh on industry. The spillovers from the war in Ukraine only add to the headwinds and the risks to our already below-consensus forecast GDP growth forecasts for this year lie firmly to the downside.

11 March 2022

Emerging Europe Data Response

Turkey Consumer Prices (Feb.)

Turkey’s headline inflation rate leapt again to reach 54.4% y/y in February due to the combination of the lira’s collapse in late-2021 as well as higher domestic energy prices and a large minimum wage hike at the start of this year. Inflation will stay close to these high levels until the very final months of this year, but the central bank and, crucially, President Erdogan seem to have no appetite for interest rate hikes. EM Drop-In (Thur. 3 March, 15:00 GMT) We’re discussing the impact of Russia-Ukraine on emerging markets in a special 20-minute briefing this Thursday. Registration details.

3 March 2022

Emerging Europe Economics Update

One chart to watch on Russia’s banking sector

The spread of Russian interbank interest rates over the central bank’s policy rate – which was hiked aggressively on Monday – has widened pointing to some stress in the banking sector. But for now it is far from the levels recorded during 2008/09 and 2014/15. A key risk is that the plunge in Russian asset prices, together with fears of counterparty risk, cause interbank lending to freeze and rates to spike. This has often been a precursor to banking crises and so the interbank rate will be a key indicator to watch. EM Drop-In (Thur. 3 March, 15:00 GMT): We’re discussing the impact of Russia-Ukraine on emerging markets in a special 20-minute briefing this Thursday. Registration details.

2 March 2022
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