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Lebanon’s new government appears to be warming to the idea of going to the IMF, which would reduce the risk of a disorderly debt default that causes severe strains in the local banking sector. But even if the authorities go to the Fund, any deal is still …
13th February 2020
Inflation rises, but central bank to restart easing cycle The modest rise in Egyptian inflation in January leaves it below the mid-point of the central bank’s target range and, after pausing for breath at the last MPC meeting, we think that policymakers …
10th February 2020
Lebanon: hopes rise for March Eurobond payment Lebanon’s Eurobond that matures in March has rallied over the past week amid rising hopes that the authorities will make the payment, but this will simply delay the inevitable debt restructuring. The price of …
6th February 2020
Overview – Fears about the coronavirus outbreak have weighed on oil prices and clouded the near-term outlook for the Gulf countries. Lower oil prices and a possible deepening of oil production cuts will act as a headwind to growth in early 2020. But even …
5th February 2020
Morocco’s economy has slowed over the past few years, but we think that a recovery will take hold in 2020. Further out, we expect that the country will record growth in excess of 5% a year by 2030. After peaking at 4.0% in 2017, GDP growth in Morocco has …
Gulf non-oil sectors start the year on soft note, Egypt price pressures rise January’s batch of whole economy PMIs suggested that activity in non-oil sectors in the Gulf slowed at the start of the year. Meanwhile, underlying price pressures seem to be …
4th February 2020
Oil prices drop raises of deeper OPEC+ output cuts Oil prices have dropped back in recent weeks due to fears about the coronavirus outbreak in China and, while lower prices don’t pose a significant threat to the Gulf economies, it has increased the …
30th January 2020
Fiscal plans announced across the Gulf over the past month suggest that governments will keep policy tight, a key reason why we think that economic growth will disappoint this year. The Saudi 2020 budget outlined that expenditure would be cut by nearly …
29th January 2020
Our GDP Tracker suggests that the downturn in Saudi Arabia’s economy deepened at the end of last year as the drag from oil production cuts intensified. A recovery is likely to take hold this year, but it is likely to be weaker than most currently …
27th January 2020
The Egyptian pound has strengthened further at the start of this year but it is now making exports uncompetitive and, with support from high real interest rates likely to fade, the currency will probably give up some of its gains over the rest of this …
23rd January 2020
Lebanon: new government faces unenviable task Lebanon’s prime minister finally managed to form a new government this week and policymakers are quickly facing up to reality of the economy’s woes. An approach to the IMF for a financing package seems to be …
Kingdom pulls out of deflation Saudi Arabia emerged from deflation in December, recording a positive inflation reading for the first time in a year. We expect underlying price pressures to stay weak over the course of this year, but higher local fuel …
21st January 2020
In a surprise move, the Central Bank of Egypt (CBE) left interest rates on hold yesterday even though policymakers don’t seem to be worried by the recent rise in inflation. We think that the easing cycle will be resumed in the coming months and forecast …
17th January 2020
Lebanon: debt swap proposal fails to take off The unravelling this week of a proposed debt swap by the Lebanese authorities suggests that, even once a government is formed, debt restructuring will be a drawn-out process. On Sunday, Lebanon’s central bank …
16th January 2020
The swift appointment of Haitham bin Tariq as the Sultan of Oman, following the death of Sultan Qaboos, has eased fears that the country would enter a prolonged period of political uncertainty. But the new leader faces a difficult task of securing …
13th January 2020
As threat of war recedes, Iran shift its focus The immediate threat of direct conflict between the US and Iran has diminished over the past day or so, supporting a rally in local and global financial markets. But the threat has not disappeared and Iran …
9th January 2020
Central bank to look though inflation jump and cut rates The jump in Egyptian inflation last month to 7.1% y/y was largely due to the unwinding of favourable base effects but it means that next week’s interest rate decision will be a much closer call than …
Fears of a direct conflict between the US and Iran have eased over the past day or so, but the risk has not disappeared and the rest of the MENA region is vulnerable to any retaliation by Tehran. Attacks on oil facilities or an attempt to close the Strait …
7th January 2020
The Gulf states are likely to have recorded their second weakest pace of aggregate growth since the global financial crisis in 2019 due to oil output cuts and poor performances from non-oil sectors. While we think there will be a recovery in 2020-21, it …
Gulf non-oil sectors soften, Egyptian price pressures remain subdued Whole economy PMIs for December suggested that activity in Saudi Arabia’s non-oil sector slowed at the end of last year, a sign that fresh fiscal austerity is already starting to take …
6th January 2020
The assassination of Qassem Soleimani, a major figure in the Iranian regime, in a US airstrike last night has significantly raised the chances of an outright conflict between the US and Iran. We’ve previously estimated that a US-Iran war could shave …
3rd January 2020
Saudi recovery to disappoint Saudi Arabia’s economy contracted in Q3 of last year and the latest evidence suggests that Q4 was even worse. While a recovery will probably take hold this year, we think that it will be weaker than most currently anticipate. …
2nd January 2020
Higher oil prices won’t loosen the purse strings We think that the recent rise in oil prices has further to run but this is unlikely to result in a shift towards looser fiscal policy across the Gulf. Our commodities team now expects that the price of oil …
19th December 2019
Political developments across Algeria, Tunisia and Lebanon threaten to exacerbate already-poor balance of payments positions. Presidential elections that took place in Algeria last week don’t appear to have appeased protestors, who are no doubt …
17th December 2019
Deflation eases, energy subsidy cuts seem to be on the agenda Deflation in Saudi Arabia continued to ease in November and we think that the headline rate will return to positive territory in the New Year. Reports that the government is reviewing energy …
Aramco’s (long-awaited) IPO Shares of Saudi Aramco jumped by 10% when they debuted on the local Tadawul stock exchange on Wednesday. And today the valuation of the company briefly touched the $2tn that Crown Prince Mohammed bin Salman (MbS) has long …
12th December 2019
Inflation picks up, but rate cuts still lie in store The rise in Egyptian inflation last month to 3.6% y/y still leaves the headline rate well below the central bank’s target paving the way for further interest rate cuts over the next twelve months or. We …
10th December 2019
Saudi Arabia’s 2020 budget makes clear that the authorities are preparing for a prolonged period of low oil prices by introducing fresh fiscal austerity. This, combined with the deeper oil production cuts agreed with OPEC+ last week, has prompted us to …
9th December 2019
The OPEC+ oil quota cuts announced today are unlikely to have a significant economic impact on most Gulf economies, but they will on Saudi Arabia. The direct impact of the output cuts means GDP growth in Q1 there might be some 0.6%-pts weaker than we …
6th December 2019
Lebanon: Next stop the IMF? News that Lebanese banks will make some interest payments on FX deposits in local currency underscores that strains in the balance of payments are worsening. The risk of a debt restructuring and devaluation is rising by the …
5th December 2019
The political situation in Lebanon shows little sign of improving and the risk of a disorderly devaluation, sovereign default and banking crisis are rising by the day. Our sense is that the authorities will eventually turn to the IMF, probably before …
4th December 2019
Saudi non-oil sector picks up, Egyptian price pressures continue to ease November’s whole economy PMIs suggested that activity in Saudi Arabia’s non-oil sector has continued to strengthen, but with fiscal policy set to be tightened, this strength is …
3rd December 2019
New term for CBE governor, orthodoxy to stay The appointment of Egypt’s central bank governor, Tarek Amer, for a second four-year term will welcomed by investors as a sign that the government remains committed to orthodox policymaking and supports our …
28th November 2019
Our GDP Tracker suggests that Saudi Arabia’s economy contracted by around 0.5% y/y in Q3 as a greater drag from oil production cuts (as well as the temporary disruption from the attacks on oil facilities in September) more than offset stronger growth in …
27th November 2019
Preparations for the public listing of Saudi state oil company, Aramco, have stepped up a gear this month but the signs are that it is unlikely to be the blockbuster sale that the Kingdom once hoped for. When plans for the listing were first mooted in …
25th November 2019
Lebanon triple crisis fears escalate The Lebanese government will probably meet a FX debt repayment due next week, but this will act as a further drain on the country’s FX reserves, piling the pressure on the dollar peg. The chances of a messy …
21st November 2019
Pressure is growing on Lebanon’s dollar peg and, in the event of a devaluation, the pound could fall by as much as 50% against the dollar. A messy sovereign default and a deep recession would follow. But over a longer horizon, a more competitive currency …
19th November 2019
Inflation to return to positive territory at start of 2020 Consumer prices in Saudi Arabia declined at their slowest pace so far this year in October and the headline rate is likely to return to positive territory soon. The prospect of fresh fiscal …
The 100bp interest rate cut delivered by Egypt’s central bank today is likely to be followed by further easing in the coming months. While we expect inflation to edge up in the near term, it will remain below the central bank’s target. As such, we …
14th November 2019
Lebanon: bailout wouldn’t be a silver bullet The situation in Lebanon is going from bad to worse and the chances of a combined debt, currency and banking crisis are rising. President Aoun seems to be seeking a bailout package but this would only pave the …
The boom in credit in Qatar since the turn of the year has caused a renewed build-up of vulnerabilities in the banking sector. Severe balance sheets strains should be avoided, but the recent pace of credit growth won’t be sustained, which will add to the …
13th November 2019
The decline in Egyptian inflation to a 14-year low of 3.1% y/y in October raises the risk that the central bank lowers interest rates by more than the 100bp that we have pencilled in for Thursday’s meeting. Inflation is likely to rise from here, but we …
11th November 2019
Many of the non-oil producing countries in the region have tended to support their dollar pegs by maintaining a level of FX reserves sufficient to cover the monetary base. In Egypt and Jordan, reserves are more than enough to cover the monetary base. But, …
7th November 2019
More details emerge on Aramco IPO The Saudi government launched preparations for the Aramco IPO earlier this week and a few more details have trickled out in the last few days. We looked in detail at the economic implications of the Aramco IPO in an …
Saudi non-oil sector keeps up momentum, but UAE’s slump continues October’s whole economy PMIs suggest that the upturn in fortunes for Saudi Arabia’s non-oil sector continued at the start of Q4. In contrast, the recent slump in the UAE appears to be more …
5th November 2019
The upcoming sale of a stake in Saudi Aramco would probably make the government less inclined to implement fresh austerity. The long-term impact on the Saudi economy will depend on whether this leads to renewed impetus behind reform, although we are …
4th November 2019
Lebanon inching closer to the precipice The situation has remained chaotic in Lebanon this week, with protests continuing and PM Saad Hariri submitting the resignation of his government. There are some suggestions that Mr. Hariri may be asked to form a …
31st October 2019
The focus on political risk and Lebanon’s growing debt problem have meant that the sharp slowdown in growth across large parts of the region has gone unnoticed. The latest figures suggest that the economies of Saudi Arabia, Qatar and Lebanon were all …
29th October 2019
Our Tracker suggests that the impact of oil production cuts caused the Saudi economy to contract in Q3. And output probably fell at a steeper pace in Q4. Saudi Arabia’s quarterly GDP data are published with a significant delay – figures for Q3 won’t be …
28th October 2019
More talk of deeper OPEC+ oil production cuts Rumours that OPEC+ oil producers are contemplating deeper production cuts underlines the desire of policymakers in Saudi Arabia to push up oil prices. But this would come at the expense of weaker GDP growth as …
24th October 2019
