Egypt Consumer Prices (Mar.)

The slight fall in Egyptian inflation in March to 5.1% y/y leaves the headline rate well below the central bank’s target range which, coupled with the economic hit from the draconian measures to contain the coronavirus, is likely to increase pressure for further monetary easing. But this is likely to be dependent on policymakers loosening their grip on the pound in the coming weeks.
James Swanston Middle East and North Africa Economist
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Middle East Economics Weekly

Unrest in Tunisia, Gulf restrictions, Egypt fuel hike

Tunisia’s President Kais Saied’s power grab on Sunday and moves over the course of this week will reinforce concerns about the future of democracy in the country and the likelihood of a sovereign debt restructuring has increased further. Elsewhere, the Gulf countries have taken a strong stance on the need for proof of COVID-19 vaccinations to access domestic services and travel internationally, although we doubt this will have a major impact on recoveries. Finally, the hike in Egyptian fuel prices this week which will push up inflation and delay the start of a monetary easing cycle

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OPEC+ agreement provides a boost to Gulf recoveries

The end of the impasse within OPEC+ this month will result in higher oil output and boost recoveries in the Gulf over the second half of this year and in 2022. Output quotas will rise by 400,000bpd each month after the UAE backed down in return for having its baseline production raised from next year. More supply on the market is likely to weigh on oil prices, but we think that the impact on Gulf oil export revenues will be more than offset by rising production volumes. As a result, budget and account positions in the Gulf will improve, providing policymakers with a small window to loosen fiscal policy and support recoveries in the region’s non-oil sectors.

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Middle East Economics Weekly

Egypt vaccine, MENA tourism, Iran nuclear talks

Egypt’s domestic vaccine production has got underway, but the country has a very long way to go before it can lift virus-related restrictions on a sustained basis. Egypt and Bahrain were added to the UK’s travel red list, adding to our view that recoveries in tourism sectors in the region will be sluggish. Finally, recent comments from US Secretary of State Antony Blinken have reduced hopes that Iran’s nuclear deal can be revived soon.

10 June 2021

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Egypt Consumer Prices (May)

Egypt’s headline inflation rate rose to 4.8% y/y in May, the fastest pace recorded so far this year. But it remained below the lower bound of the central bank’s (CBE’s) target range, supporting our view that policymakers are likely to cut interest rates later this year.

10 June 2021

Middle East Economics Weekly

Oil price rally continues, tourism re-opening

Oil prices hit their highest level in more than two years this week and, combined with higher oil output over the rest of this year, will help to rein in large twin budget and current account deficits in the Gulf. This opens the door for policymakers to loosen fiscal policy but if, as we expect, prices drop back by next year, there’s only a short space of time to do so. Meanwhile, several governments in the region have relaxed travel restrictions to try to spur a recovery in tourism sectors, but these steps will have little effect if other countries do not reciprocate (which seems unlikely).

3 June 2021
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