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Tunisia fiscal policy, Egypt’s private sector, COVID-19

Tunisia’s government upwardly revised its 2021 budget deficit target this week which, coupled with growing signs of it making concessions to appease the UGTT labour union, adds to our view that the public finances will continue to deteriorate and a debt restructuring will be needed. Elsewhere, Egypt government announced plans to scale back its involvement in the economy. While encouraging, there are reasons to be sceptical. And finally, COVID-19 vaccine rollouts in parts of North Africa have picked up the pace and the news of the development of an antiviral pill will provide countries with a further tool to add to the arsenal.
James Swanston Middle East and North Africa 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 James Swanston

Middle East Economics Update

Pockets of vulnerability in MENA banking sectors

Most banking sectors in the region (with the notable exception of Lebanon) have, so far, come through the COVID-19 crisis in relatively good shape. But with support programmes now being withdrawn, there is a risk that vulnerabilities in Tunisia, Qatar, and the UAE crystalise.

18 November 2021

Middle East Economics Weekly

Tunisia unrest, Kuwaiti government, Oman fuel prices

Escalating social unrest in Tunisia and opposition to fiscal reforms from the powerful UGTT labour union will make it more difficult for President Saied to push through much-needed fiscal reforms and further cements our view that the government will be forced to restructure its debts. Elsewhere, Kuwait’s government resigned (again) but hopes that this will pave the way for passing the long-awaited debt law may be overdone. And finally, Oman’s Sultan Haitham announced a cap to local fuel prices until the end of 2022 to quell rising inflationary pressures, although this may increase concerns about the government’s commitment to fiscal consolidation.

11 November 2021

Middle East Data Response

Egypt Consumer Prices (Oct.)

Egypt’s headline inflation rate eased to 6.3% y/y in October and is likely to remain around 6.0-6.5% over the rest of this year and in early 2022. Against this backdrop, we think the Central Bank of Egypt (CBE) will keep interest rates on hold for the time being.

10 November 2021
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