Egyptian fuel prices and rate cuts, US sanctions Lebanon

Fuel price hikes announced in Egypt last weekend mean that the central bank probably won’t respond to June’s sharp fall in inflation by cutting interest rates later today. But the easing cycle looks set to be resumed sooner rather than later. Meanwhile, sanctions imposed by the US on two Lebanese parliamentarians will have a limited direct economic impact, although the indirect effects raise the risk of a disorderly devaluation and default.
Jason Tuvey Senior Emerging Markets Economist
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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

Middle East Economics Update

What to expect in MENA in 2022

We think that GDP growth in the Gulf will be stronger than most expect this year on the back of rising oil output. Elsewhere, we expect a larger depreciation of the Egyptian pound than most anticipate and, if anything, there is a growing risk of an even sharper adjustment. Meanwhile, Tunisia will continue along the path towards a sovereign default. And bad loans look set to rise in banking sectors in Qatar and the UAE, causing credit conditions to tighten.

12 January 2022

More from Jason Tuvey

Emerging Europe Economics Weekly

Lira touches new low, CEE bond yield divergence

It's been a rocky week for the Turkish lira amid more changes at the central bank and political upheaval regarding a possible link between politicians and organised crime. This, coming alongside high inflation, has reduced the chances of an interest rate cut at the next meeting in June. Meanwhile, local currency bond yields have diverged in Central Europe recently, but we don't think this will continue and see scope for further rises in yields over the coming years, particularly in Czechia.

28 May 2021

Africa Economics Update

Nigeria’s recovery to remain stuck in first gear

The pick-up in Nigeria’s GDP growth in Q1 was driven in large part by the oil sector and rising oil output will support a further acceleration in growth over the coming quarters. But FX restrictions, limited fiscal support and a very slow vaccine rollout mean that the recovery is likely to remain stuck in the slow lane.

24 May 2021

Africa Data Response

South Africa Consumer Prices (Apr.)

The jump in South Africa’s headline inflation in April, to 4.4% y/y, was driven by energy price effects but there were signs that broader price pressures are starting to build. But even so, we think that the Reserve Bank will keep rates on hold for longer than investors currently expect in order to support the economy.

19 May 2021
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