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Middle East

Saudi Arabia

Saudi set for bumper GDP growth this year

Saudi Arabia’s economy grew at its fastest pace in a decade in Q1 and we think this strength will carry on over the rest of this year. The combination of rising oil output and the increasing likelihood of looser fiscal policy underpin our above-consensus forecast for the Kingdom’s economy to grow by 10% in 2022.

18 May 2022

Saudi inflation to stay in check, risks lie to downside

Headline inflation in Saudi Arabia rose to 2.3% y/y in April and we think that it will continue to accelerate over the coming months. Unlike in other parts of the emerging world, however, inflation will not surge to multi-year highs and, if anything, the risks to our inflation forecast lie to the downside.

18 May 2022

S&P Global PMIs (Apr.)

April’s batch of whole economy PMIs showed a loss of momentum at the start of Q2 but continued to highlight the growing divergence between the Gulf and non-Gulf economies as a result of the spillovers from the war in Ukraine. China Drop-In (12th May, 09:00 BST/16:00 SGT): Join our China and Markets economists for a 20-minute discussion about near to long-term economic challenges, from zero-COVID disruptions to US-China decoupling. Register now.

9 May 2022
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Saudi Arabia GDP (Q1, Flash Estimate)

Saudi Arabia’s economy expanded by a robust 2.2% q/q in the first quarter of the year, which translated into year-on-year growth of 9.6% – the fastest pace recorded since 2011. With oil production to increase further and the strong likelihood of looser fiscal policy, we think that the Kingdom’s economy will experience grow by around 10% this year, which is well above consensus expectations. EM Drop-In (5th May, 10:00 EDT/15:00 BST): Join Shilan Shah for our latest monthly session on the big macro and markets stories in EMs. This month, Shilan and the team will be talking Russian gas, FX weakness and surging food prices. Register now

Pockets of public debt vulnerability

Tighter global monetary conditions and spillovers from the war in Ukraine have caused public debt problems to worsen in several emerging markets, and the MENA region is not immune to this. Within the region, Tunisia’s public debt position is most fragile and the government now faces a ballooning subsidy bill. We think that a debt restructuring will ultimately needed. Elsewhere, the devaluation of the Egyptian pound has coincided with concerns about the growing share of public debt that is denominated in FX. Of course, in the Gulf, high energy prices will provide a significant boost to public finances this year. We’re more concerned about private sector debts, particularly in Dubai. With the Dubai World Expo now over, there’s a growing risk of overcapacity in key sectors that could make debt servicing more difficult.

Gulf leads the way as Ukraine war drives divergence

The Gulf economies will be major beneficiaries from higher energy prices and our growth forecasts sit far above the consensus. Outside the Gulf, higher inflation and tighter fiscal policy will weigh on growth, while balance sheet problems are likely to build. In Egypt, despite the recent devaluation, we think the currency will need to weaken further in order to stabilise the external position. One consequence is that interest rates will be raised – and by more than most expect. Elsewhere, we think that Tunisia’s government will ultimately turn to default.

Saudi economy on the up

Saudi Arabia’s economic recovery has strengthened in recent months and, with oil output set to be raised further, the economy will record its fastest rate of growth in over a decade in 2022.

Saudi Arabia Consumer Prices (Mar.)

Saudi inflation rose to 2.0% y/y in March on the back of stronger food and transport prices, and we think it will continue to strengthen over the coming months and peak at around 2.5% y/y in Q3.

14 April 2022
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