The recovery in the Middle East and North Africa should continue over the coming months but growth is likely to be weaker than most anticipate. The rebound is being led by the Gulf as the drag from last year’s oil output cuts fades and fiscal austerity takes a breather. But if oil prices drop back as we expect, fiscal consolidation will probably resume next year. Rising local interest rates, a result of dollar pegs, will present an additional headwind. We are more optimistic on the prospects for Egypt, where a cyclical upturn will be bolstered by falling inflation and looser monetary policy. Overall, we have pencilled in regional GDP growth of 2.8% this year, up from 1.4% in 2017. But the recovery is unlikely to gather pace in 2019-20 and our forecasts lie towards the bottom of the consensus. Balance sheets are strong, or at least improving, in the region’s larger economies but there are a growing concerns in some of the smaller countries such as Bahrain, Lebanon and Tunisia – currencies may come under pressure and fiscal policy will have to be tightened. Lower oil prices and lingering geopolitical tensions will weigh on the region’s financial markets.
Become a client to read more
This is premium content that requires an active Capital Economics subscription to view.
Already have an account?
You may already have access to this premium content as part of a paid subscription.
Sign in to read the content in full or get details of how you can access it
Register for free
Sign up for a free account to gain:
- Unlock additional content
- Register for Capital Economics events
- Receive email updates and economist-curated newsletters
- Request a free trial of our services