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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
The Central Bank of Egypt (CBE) kept interest rates on hold for a fourth consecutive meeting on Thursday as policymakers remained cautious about delivering more monetary stimulus. That said, with the CBE accepting that inflation will undershoot its …
14th August 2020
The normalising of relations between Israel and the UAE may pave the way for similar agreements with the other Gulf countries, notably Saudi Arabia. The move might help to foster economic relations between the two countries, although the experience from …
13th August 2020
Lebanon’s investors should ready for larger losses The resignation of Lebanon’s government is unlikely to result in the political change that protestors are demanding and, with debt restructuring negotiations on hold, bondholders will probably have to …
Saudi Arabia’s budget deficit will narrow over the coming years as oil prices recover and the government ploughs ahead with austerity. But debt will rise further, reaching close to 40% of GDP by end-2022, having been less than 2% of GDP in 2014. And …
Inflation drops to eight-month low, easing cycle to resume on Thursday The fall in Egyptian inflation to an eight-month low of 4.2% y/y in July, alongside easing pressure on the pound, means that we think an interest rate cut at Thursday’s MPC meeting is …
10th August 2020
Beirut blasts to deepen Lebanon’s crises The catastrophic blast in port of Beirut on Tuesday has led to widespread destruction in the city and a significant loss of life. The disaster will, sadly, only deepen Lebanon’s economic, humanitarian, and …
6th August 2020
The major blast in Beirut yesterday has severe humanitarian consequences, and the incident threatens to deepen the country’s economic and political crises. Yesterday, a huge blast rocked Lebanon’s capital city, Beirut, that emanated from the local port. …
5th August 2020
Bumpy recovery continues July’s batch of whole economy PMIs from across the Middle East and North Africa all rose compared with surveys from June but, against the backdrop of prolonged weakness in tourism and hospitality sectors and fiscal austerity, the …
The Gulf economies have been the epicentre of the coronavirus outbreak in the region but almost all countries have managed to put new daily cases on a downwards trend thanks to strict containment measures and aggressive testing. In contrast, new cases are …
31st July 2020
The Saudi economy has embarked on a recovery in the past couple of months, but fiscal austerity and oil production cuts, as well as the ongoing suspension of pilgrimages, mean that it is likely to be slow going. The latest activity data suggest that Saudi …
30th July 2020
Pressure mounting on Dubai’s GREs The past week has highlighted the strains that the coronavirus crisis has inflicted on some of Dubai’s government-related entities (GREs) and reinforced our concerns over their ability to service large debts. Reports this …
Overview – Oil production cuts, fiscal austerity, the continued spread of the virus, and weakness in key tourism sectors will hold back economic recoveries across the Middle East and North Africa. It will be one of the worst performing EM regions over the …
28th July 2020
Health fears bring leadership changes onto agenda The health of the leaders of Saudi Arabia and Kuwait has come into the spotlight this week and, while we think that a leadership transition wouldn’t alter the economic outlook for Kuwait, it would heighten …
23rd July 2020
Saudi Arabia has grown increasingly frustrated with other oil producers’ failure to comply with the OPEC+ oil output cuts and, while we think that the current deal will remain intact for now, the risk of another price war will grow as demand improves. …
Policy paralysis returns to Tunisia Tunisian Prime Minister Elyes Fakhfakh resigned on Wednesday after a week of political turmoil, which will hold up efforts to secure a new IMF deal and increases the threat of a sovereign debt crisis. Mr. Fakhfakh’s …
16th July 2020
Inflation eases, but VAT hike will cause it to jump this month Saudi inflation eased to its lowest level this year in June as weak demand dampened underlying price pressures and fuel inflation dropped further. But this is likely to mark the low-point and …
15th July 2020
Reasons to be cautious about Diriyah Gate Construction started on a new tourist development in Saudi Arabia in recent weeks but the plan risks repeating past mistakes with other megaprojects and diverting resources away from other key areas Diriyah Gate …
9th July 2020
Inflation rise unlikely to prevent CBE resuming easing cycle later this year Egypt’s headline inflation rate picked up to 5.6% y/y in June and will probably rise a bit further over the coming months. Crucially, though, we expect inflation to remain below …
Tunisia’s public finances have deteriorated sharply over the past decade and the government’s debt burden appears to be on an unsustainable path. This would be exacerbated if external financing conditions tighten and the dinar weakens sharply. A sovereign …
8th July 2020
Region set for a bumpy recovery June’s batch of whole economy PMIs from across the Middle East and North Africa were mixed but the big picture is that, even as lockdown measures are eased, the region’s economic recovery is set to be extremely sluggish. …
6th July 2020
Dubai’s recovery to be sluggish Figures released this week showed that Dubai’s economy shrunk by 3.5% y/y in Q1 due to the start of the coronavirus crisis. Of course, Q1 figures are old news and only covered the first month of lockdown (in March). More …
2nd July 2020
The Saudi economy contracted by 1% y/y in Q1 and the figures from Q2 point to an even sharper downturn in Q2 due to the coronavirus crisis. The lifting of the lockdown this month is helping to support a recovery but a fresh bout of fiscal austerity means …
30th June 2020
It is by no means inevitable that the coronavirus crisis puts a big permanent hole in the supply capacity of economies (i.e. their ability to produce goods and services). With the right government policies, many economies should be able more or less to …
29th June 2020
Banking sector risks rising in the UAE The UAE’s banking sector is continuing to show signs of vulnerability and reports over the past week have echoed our concerns. (See here .) Moody’s downgraded eight of the UAE’s largest banks, including Emirates NBD, …
25th June 2020
Governments across MENA have taken steps to re-open economies over the past month and, after a sharp downturn in April and May, daily indicators suggest that economic activity has started to recover. That said, activity remains well below pre-virus …
24th June 2020
Inflation eases, but will jump in July on back of VAT hike Saudi inflation edged down to 1.1% y/y last month as a further jump in food inflation was more than offset by weaker price pressures in other major categories. But the hike in the VAT rate means …
Lebanon’s “disasterclass” Comments from Hezbollah leader, Hassan Nasrallah, have raised concerns that the Lebanese authorities may back away from IMF talks, further increasing the risk that Lebanon’s crisis deepens. The Lebanese authorities had hoped for …
18th June 2020
Banking sectors across the Middle East and North Africa are generally well placed to weather the current economic downturn but there are pockets of vulnerability, particularly in Qatar and parts of North Africa. And there is a growing risk of a wave of …
17th June 2020
Lebanon’s government has made little progress with its economic rescue plan and there’s a growing likelihood that the sovereign debt and currency crises already underway will ultimately lead to series of bank failures. We already expected the economy to …
15th June 2020
Egypt: IMF deal strengthens case for rate cuts News over the past week that Egypt has secured an IMF deal and that headline inflation remains subdued should give the central bank room to resume its easing cycle later this month. Egypt’s new one-year …
11th June 2020
The tripling of the VAT rate from July will cause inflation in Saudi Arabia to jump, but the impact may be relatively less severe than it was when VAT was first introduced at the start of 2018. That said, the hit to households’ finances reinforces our …
10th June 2020
Door swings open for easing cycle to resume The fall in Egyptian inflation to 4.7% y/y in May leaves the headline rate well below the lower bound of the central bank’s target range and, with policymakers’ focus shifting away from supporting the pound to …
Saudi, FX reserves, PIF and Newcastle United The sharp decline in Saudi Arabia’s foreign exchange reserves in recent months is more benign than it appears. But with the sovereign wealth fund holding an increasing share of the Kingdom’s FX savings, it will …
4th June 2020
The measures to contain the coronavirus outbreak have shut down economies across the world, leading to job losses and falls in income. Migrant workers appear to have felt the brunt of this and the resulting drop in remittances will hit the economies in …
3rd June 2020
Activity recovery, but still very weak Whole economy PMIs from across the Middle East and North Africa rose compared with last month’s ultra-low levels as lockdown measures began to be eased, but activity remained very weak. And against the backdrop of …
Our GDP Tracker suggests that the Saudi economy held up relatively well in Q1, but more timely low-profile data point to a collapse in activity in Q2. And, as lockdown measures are eased, the onset of fiscal austerity will hold back the economic recovery. …
1st June 2020
The rapid spread of the coronavirus in the region means that plans to lift lockdowns have come later than in many other EMs and the damaging economic effects of social distancing have persisted. The Gulf economies have also suffered from the effects of …
28th May 2020
Easing lockdowns will lead to only slow recoveries As Eid al-Fitr celebrations across the Middle East and North Africa draw to a close, a number of countries have started to outline their paths out of stringent coronavirus lockdowns. Dubai, where some …
Dubai’s economic hit brings bailout on to agenda The past week has provided clear signs of the toll that the coronavirus crisis is taking on Dubai’s economy and negotiations are apparently underway for Abu Dhabi to ride to the rescue. As we’ve noted …
21st May 2020
Saudi Arabia’s foreign exchange reserves are being depleted rapidly to protect the dollar peg, but we think that they would need to fall by more than $380bn to less than $100bn before the monetary authority could no longer commit to full convertibility …
20th May 2020
