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Egypt: government keeps the belt tight Egypt’s budget deficit has narrowed this year despite the COVID-19 pandemic as the authorities maintained a tight grip on public spending. While this highlights the commitment to lowering the public debt ratio, it …
10th December 2020
Inflation rises, but still scope for further monetary loosening The jump in Egyptian inflation to 5.7% y/y in November still leaves it below the lower bound of the central bank’s target range, leaving the door open for interest rates to be lowered further …
A rebound in global economic activity triggered by COVID-19 vaccines will lift the oil market and, in turn, the Gulf economies over the coming quarters. But one legacy of the crisis is that these countries will have to contend with peak oil demand being …
7th December 2020
Deal or no deal? The past week has been dominated by the OPEC+ meeting and, while it has brought to the fore divisions within the cartel, it seems that the group is moving towards some sort of agreement. The OPEC Conference started on Monday but, having …
3rd December 2020
Recoveries still struggling to gather momentum November’s whole economy PMIs from across the Middle East and North Africa showed a mixed performance and, despite the global economic backdrop improving amid the rollout of COVID-19 vaccines, economic …
UAE: major oil discovery, OPEC quit rumours This week’s revelation by the UAE that it has discovered major new oil reserves boosts the economy’s long-term prospects but it may further raise questions over its commitment to OPEC. On Sunday, Abu Dhabi …
26th November 2020
The positive news on COVID-19 vaccines in recent weeks has helped to lift the near-term outlook for the Middle East and North Africa. For the Gulf countries, oil prices have picked up with Brent crude reaching its highest level since March and we think …
24th November 2020
Aramco’s bond issuance: a cause for concern? This week’s dollar bond sale by Saudi Aramco is a further sign that the government is squeezing every last drop out of the company in order to contain the size of this year’s budget deficit, but adds to …
19th November 2020
Policymakers across the region have drawn down foreign exchange reserves this year in order to prop up currency pegs and, in the Gulf countries at least, this can be sustained for some time to come. Even in Bahrain and Oman, financial support from their …
18th November 2020
The Central Bank of Egypt (CBE) unexpectedly moved to cut interest rates for a second consecutive meeting on Thursday evening and, with inflation set to remain weak, we think that the easing cycle has further to run over the next twelve months or so. The …
13th November 2020
What does a vaccine mean for MENA? The distribution of an effective COVID-19 vaccine would clearly improve the near-term outlook but scarring effects from the crisis mean that we still expect the region to recover more slowly than most other parts of the …
12th November 2020
Stronger inflation to temper CBE rate cuts The rise in Egyptian inflation to 4.5% y/y in October adds to the reasons why we think that policymakers will hold off on cutting interest rates when they meet on Thursday. Further out, we think that the easing …
10th November 2020
Slow recovery gets underway The first ever “flash estimate” of Saudi GDP released today showed that the easing of virus containment measures supported an economic recovery in Q3. But the rebound was weak and the latest monthly activity figures suggest …
Saudi Arabia’s economic recovery has lost momentum in recent months and persistent low oil prices reinforce our view that policymakers are unlikely to row back on fiscal austerity and there is rising probability that current oil production cuts are …
9th November 2020
The US election and implications for MENA This week’s US election has yet to reach a conclusive result but it looks increasingly likely that Joe Biden will secure the presidency. Even so, some of the potential downside risks facing the Middle East and …
5th November 2020
The deterioration in Gulf public finances this year has pushed governments across the region to finance a significant portion of their budget deficits through international debt markets, which we expect to continue in the coming years. While this doesn’t …
A mixed bag, but recoveries to remain sluggish October’s whole economy PMIs from across the Middle East and North Africa were a mixed bag but, against the backdrop of renewed lockdowns across the globe and low oil prices, recoveries are likely to remain …
3rd November 2020
The latest fall in the price of oil increases the chances that current OPEC+ production quotas are extended beyond the end of this year and reinforces our view that governments across the Gulf are unlikely to row back on recent austerity measures. …
2nd November 2020
Saudi budget data: austerity doing its job Data published this week showed that, even though it’s early days, fiscal austerity in Saudi Arabia is already having the desired effect of improving the underlying budget position. But this will come at the …
29th October 2020
The latest OPEC oil production figures continue to show that several countries are overproducing, which is making Saudi Arabia – which has borne the brunt of production cuts – increasingly frustrated. For now, at least, countries are making compensatory …
26th October 2020
Oman’s issuance to help unlock financing? Oman successfully returned to the international bond market this week, which will help finance the large twin deficits and support the rial’s dollar peg. Ultimately, though, we think Oman will have to rely on …
22nd October 2020
Overview – The economies of the Middle East and North Africa have continued to recover in recent months but, while the Gulf countries seem to have the virus under control, low oil prices mean that fiscal consolidation will continue to hold back growth. In …
21st October 2020
More Saudi bank mergers in the pipeline? The merger of two of Saudi Arabia’s largest banks may be a sign of things to come as firms in the sector look to boost profitability against the backdrop weak economic growth and low interest rates. National …
15th October 2020
Food and education drag inflation down Saudi inflation dropped back to 5.7% y/y in September as food inflation eased and schools slashed tuition fees ahead of the new academic year. While the effects of July’s VAT hike will keep inflation elevated until …
The weakness of Egypt’s inflation reading for September is likely to prompt another rate cut at the central bank’s (CBE’s) next meeting. With inflation persistently undershooting the CBE’s target (which expires this quarter), policymakers are likely to …
14th October 2020
Egypt: low inflation to elicit IMF call for rate cuts Egypt’s September inflation reading will be closely watched next week as there is a good chance that it will prompt the IMF to give the central bank the green light for further interest rate cuts. A …
8th October 2020
Fears over Dubai’s debts have re-emerged in recent weeks and, in this Update , we provide revised estimates of the Emirate’s debt pile. The short point is that the debts of Dubai’s government and of government-related entities remain large, and with the …
6th October 2020
PMIs rise, but recoveries to remain slow-going September’s whole economy PMIs from across the Middle East and North Africa all rose as a further easing of virus containment measures supported another pick-up in economic activity. But against the backdrop …
5th October 2020
Saudi budget plans suggest austerity is here to stay Saudi Arabia’s preliminary 2021 budget that was released this week reinforces our view that, with oil prices likely to stay low, policymakers are not intending to row back on recent fiscal austerity. …
1st October 2020
Economy slumps, recovery already stuttering Saudi Arabia’s economy contracted by 7.0% y/y in Q2 on the back of the virus containment measures and oil production cuts. And even though containment measures have started to be lifted, the imposition of harsh …
30th September 2020
The passing of Kuwaiti’s Emir Sheikh Sabah al-Ahmad al-Sabah has raised some concerns over political stability in the country, and, while the transition will probably prove to be smooth, the new Emir will accede to the throne facing several tough …
29th September 2020
The Central Bank of Egypt (CBE) cut interest rates by 50bps at Thursday’s MPC meeting after a six month pause to the loosening cycle. Policymakers are likely to remain cautious about future easing, but we think rates will be reduced gradually over the …
25th September 2020
Saudi: low oil prices limit scope for policy support Saudi policymakers are apparently “assessing all the options” in a bid to boost the Kingdom’s economic recovery but, with oil prices still low, the scope to row back on fiscal austerity plans is …
24th September 2020
Oil prices suffered a fresh bout of weakness this month amid growing concerns over rising global coronavirus cases, which reinforces our view that economic recoveries in the Gulf will be slow. At the recent OPEC ministerial meeting, the cartel emphasised …
23rd September 2020
OPEC meets as clouds gather over the oil market The OPEC ministerial meeting that takes place today is unlikely to result in any immediate policy changes, but the cartel will probably acknowledge the worsening demand outlook and may signal that it stands …
17th September 2020
Consumer spending in Saudi Arabia seems to have bounced back quickly in recent months, but the steep VAT hike and the suspension of the Cost of Living Allowance means that this is unlikely to be sustained. Keeping track of Saudi consumer spending is …
16th September 2020
Inflation edges up as effects of VAT hike dominate Saudi inflation edged up to 6.2% y/y in August as the effects of the VAT hike at the start of July continued to dominate. Inflation will remain elevated until the middle of next year and, combined with …
15th September 2020
Gulf financing sources widen amid low oil prices The fall in the price of Brent crude oil this week has put further pressure on fiscal positions across the Gulf, with most likely to run large budget deficits over the second half of the year. At the time …
10th September 2020
Inflation slows to nine-month low, but CBE likely to keep rates on hold The fall in Egyptian inflation to a nine-month low of 3.4% y/y in August increases the likelihood that the central bank will resume its easing cycle when it meets later this month. …
Egypt’s economic recovery, a fall in the pound and a small rise in global oil prices are likely to cause the headline rate of inflation to drift up over the coming months. But it is unlikely to reach the 9% mid-point of the central bank’s target range. …
9th September 2020
Saudi Arabia’s economic recovery has faltered in recent months and the backdrop of fiscal austerity, the partial suspension of pilgrimages and oil production cuts mean that it is likely to remain slow going. The latest signs are that the recovery in Saudi …
7th September 2020
Lebanon and Tunisia not out of the woods yet Developments in Tunisia and Lebanon this week have raised hopes that policymakers will soon tackle their respective economic problems, but there are still plenty of reasons to remain cautious. Tunisia’s new …
3rd September 2020
Recoveries already losing steam, deflation to persist in the Gulf August’s whole economy PMIs from across the Middle East and North Africa all fell adding to the signs that activity in the region has plateaued amid fiscal austerity and continued virus …
The coronavirus crisis has caused domestic demand across the Gulf to slump and deflation is likely to persist, with the key exception of Saudi Arabia. Most places are well placed to deal with the negative repercussions of deflation and, if anything, …
2nd September 2020
Lebanon in limbo as crisis deepens Nearly three weeks after the Lebanese government resigned following the Beirut blast there has still been no progress in forming a new one as the country falls further into the depths of its crisis. Former Prime Minister …
27th August 2020
Governments across the Gulf have managed to get on top of coronavirus outbreaks but Morocco, Tunisia, Jordan, and Lebanon have seen the virus spread rapidly in recent weeks. These economies are the most vulnerable in the region to a fresh tightening of …
26th August 2020
The recovery in oil prices from their nadir in April has not prompted policymakers in the Gulf to row back on their plans to push through fiscal austerity. Saudi Arabia suspended the Cost of Living Allowance in June and also delayed or cancelled capital …
Oman’s government reshuffle A government reshuffle in Oman this week saw Sultan Haitham relinquish some of his powers. Changes at the foreign ministry may help to improve relations with other Gulf countries and pave the way for Oman to secure bilateral …
20th August 2020
The worst of the strains in Egypt’s balance of payments is probably now over and the current account deficit should narrow over the coming quarters, but we still think that the pound will gradually weaken against the dollar. The current account position …
VAT hike triggers inflation jump Saudi inflation jumped to 6.1% y/y in July on the back of the tripling of the VAT rate from 5% to 15% and we expect it to hover around this level over the next twelve months. This, combined with the suspension of the Cost …
17th August 2020
