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Iran tensions, Egyptian inflation jumps

The immediate threat of direct conflict between the US and Iran has diminished over the past day or so, supporting a rally in local and global financial markets. But the threat has not disappeared and Iran may instead turn its attention to stoking trouble elsewhere in the region, such as Iraq and Lebanon. Meanwhile, inflation in Egypt rose sharply in December, but we still think that the door is ajar for the central bank to continue its loosening cycle next week.
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 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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