Saudi-UAE oil deal, Saudi fuel cap, Moroccan reforms

Reports suggest that Saudi Arabia and the UAE have seemingly reached an agreement over oil output quotas and the resulting rise in production will boost economic recoveries across the Gulf over the coming quarters. Meanwhile, the Saudi government announced it would freeze local fuel prices this month, which may raise concerns about officials’ commitment to the fiscal reforms implemented in recent years. Elsewhere, Morocco turned back to fiscal consolidation and outlined plans to loosen the grip on the dirham, all of which is positive for the long-term outlook but may weigh on the near-term recovery.
James Swanston Middle East and North Africa Economist
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Middle East Economics Weekly

Egypt and UAE inflation, OPEC+, austerity in Algeria

Inflation figures for Egypt showed the headline rate jumped to a 20-month high in September and we think that this will delay a turn towards interest rate cuts. Elsewhere, the UAE emerged from deflation in August amid signs that the property sector has turned a corner. But disappointing news on the number of visitors to the World Expo reinforce our bearish view on the sector. Meanwhile, the rally in oil prices has ratcheted up the pressure on the OPEC+ to raise output quotas, which would most likely involve higher quotas for the Gulf. Finally, Algeria’s turn to fiscal austerity is unlikely to be enough to prevent a sharp devaluation in the coming years.

14 October 2021

Middle East Data Response

Saudi Arabia Consumer Prices (Sep.)

Saudi inflation rose to 0.6% y/y in September and is likely to drift a little higher over the rest of this year. However, we do not envisage a significant pick up in the headline rate and inflation is likely to remain around 1.0-1.5% y/y in 2022-23.

14 October 2021

Middle East Economics Weekly

OPEC+ fallout, Oman’s upgrade, TUI cancellations

The OPEC+ meeting this week triggered a rise in oil prices and, while we expect prices to fall by next year, rising production means that overall oil export revenues for the Gulf economies should increase in 2022. In turn, that will open the window for some governments to loosen fiscal policy. The exceptions to this are Oman and Bahrain. Although Oman had its outlook upgraded by S&P this week, both governments will still need to tighten fiscal policy further. Finally, the decision by travel company TUI to cancelled flights to Tunisia and Egypt until later this month highlights that recoveries in the tourism-dependent economies will be bumpy.

7 October 2021

More from James Swanston

Middle East Data Response

Saudi Arabia Consumer Prices (Jun.)

Saudi inflation rose to 6.2% y/y in June but it will fall sharply in July to around 1.0 y/y as the effects of last year’s VAT hike fall out of the annual price comparison. Inflation is likely to hover around 1.0-1.5% y/y over the rest of this year and in 2022-23, although the possibility of VAT cut presents a downside risk.

15 July 2021

Middle East Economics Weekly

OPEC+ fallout, Oman and the IMF, vaccines in Egypt

The failure of OPEC+ to reach an agreement over new output quotas has raised the likelihood that the deal collapses and the Gulf states ramp up production. Elsewhere, Oman has asked for IMF assistance with its fiscal plans but it will still probably have to continue relying on financial support from the rest of the Gulf. And finally, while Egypt’s vaccination programme got a boost this week, it will still be sometime before restrictions are lifted, which will dash hopes of a revival in the tourism sector this summer.

8 July 2021

Middle East Data Response

Egypt Consumer Prices (Jun.)

Egypt’s headline inflation rate edged up to 4.9% y/y in June and is likely to increase further over the coming months. Against this backdrop, we think the Central Bank of Egypt (CBE) will keep interest rates on hold until later in the year.

8 July 2021
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