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Overview – The region is set to record its second-lowest growth rate this decade in 2019 and, while a recovery is likely to take hold in 2020, it will be slow going. The drag on the Gulf economies from this year’s oil production cuts will fade, but this …
24th October 2019
The recent protests in Lebanon highlight that it is politically impossible to push through the fiscal austerity needed to stabilise the government’s debt-to-GDP ratio. A debt restructuring is inevitable. There are lots of ways that this could play out. …
23rd October 2019
The protests in Lebanon (and policymakers’ response) underline that pushing through the austerity needed to stabilise the public finances is politically impossible. With large debt repayments due over the next year, a crunch point is approaching fast. A …
21st October 2019
Deflation continues to ease Saudi consumer prices fell at their slowest pace so far this year in September and we expect the headline rate to return to positive territory at the start of 2020. Data just released showed that the headline inflation rate …
Egypt: IMF help won’t remove risk of fiscal splurge Reports that Egypt and the IMF are in negotiations over some kind of future cooperation suggests that the authorities are trying to soothe investor fears of fiscal loosening. To recall, in July, Egypt …
17th October 2019
Economic growth in Kuwait is likely to remain sluggish in the coming years due to the impact of oil production cuts as well as ongoing tensions between the government and parliament, which will prevent fiscal loosening. Our GDP growth forecasts lie well …
15th October 2019
Tunisia’s new president will face the immediate challenge of a fractured parliament and, amid what are set to be arduous coalition talks, policy paralysis is likely to set in. The country’s large imbalances will be left unchecked, raising the risk of a …
14th October 2019
Tunisian elections risk policy paralysis The second round run-off of Tunisia’s presidential election will take place on Sunday and will face the immediate challenge of trying to work with a highly fragmented parliament. A period of policy paralysis would …
10th October 2019
Inflation drops to seven-year low, more rate cuts on the way The further drop in Egyptian inflation in September to a seven-year low of just 4.8% y/y means that the central bank will press ahead with its easing cycle over the coming months. We now expect …
Our GDP Tracker suggests that the intensifying drag from oil production cuts caused the Saudi economy to slow even further at the start of Q3. Things are likely to get even worse in the coming months and our GDP forecast for 2019 as a whole of 0.3% lies …
9th October 2019
Gulf slowdown has further to run National accounts figures released this week showed that Saudi Arabia’s economy officially entered recession in Q2 and Qatar’s economy shrunk too, all of which supports our below-consensus 2019 GDP growth forecasts for the …
3rd October 2019
Saudi non-oil sector holding up well, but UAE’s slump continues September’s batch of whole economy PMIs provided further evidence of a divergence between non-oil sectors in Saudi Arabia and the UAE. But we don’t think this will continue for much longer as …
Dubai’s economy slowed in 2018 and the activity data for this year suggest that growth has stayed weak. The 2020 World Expo will provide a fillip to the economy, but a number of other factors mean that GDP will grow at rates of 1-2% over 2019-21, well …
2nd October 2019
Oil output cuts drag growth down GDP growth in Saudi Arabia slowed further to 0.5% y/y in Q2 and, in quarter-on-quarter terms, the economy officially entered recession. The slowdown reflected a greater drag from oil output cuts, which more than offset …
30th September 2019
Events this month have highlighted the risks posed by politics to the region’s two largest economies. While Saudi Arabia initially suspended around half of its daily oil output following attacks on its oil facilities, it looks like there won’t be any …
The Central Bank of Egypt shrugged off the market volatility following recent protests across the country and lowered interest rates by another 100bp, to 13.25%, at today’s meeting. So long as the protests don’t escalate, weak inflation pressures mean …
26th September 2019
Talk of OPEC deal extension to be revived The latest reports suggest that Saudi Arabia has managed to get the bulk of its oil output back online following the Abqaiq attacks but, with oil prices drifting back towards $60pb, the debate may quickly shift to …
Signs that price pressures are building Saudi Arabian consumer price figures showed that deflation eased to -1.1% y/y in August and we expect it to return to positive territory in annual terms at the start of next year. Saudi Arabian inflation rose from …
24th September 2019
Protests in Egypt over the past few days have ignited concerns that the country is on the cusp of another period of political upheaval. Past experience suggests that this would be disruptive for the economy and government efforts to quell unrest, such as …
23rd September 2019
War with the US would cause a collapse in Iran’s economy that would directly knock around 0.3%-pts off global GDP – equal to the damage from the US-China trade war so far. More important to the rest of the world, though, would be the resulting surge in …
20th September 2019
Saudi oil output set to return quickly Saudi Arabia appears to have avoided the worst fears of prolonged disruption to its oil production following the Abqaiq attacks on Saturday. But the attacks appear to have dented the authorities’ appetite to rush …
19th September 2019
There is still a lot of uncertainty surrounding the attacks on Saudi Arabia’s Abqaiq oil facility but, so long as the worst of the disruption to oil supplies lasts no more than a few days, the hit to global energy markets and the Saudi economy should be …
16th September 2019
Saudi: rising chance of deeper oil output cuts With one eye on the upcoming Aramco IPO and the fiscal position under strain, the odds of the Saudi government pushing for deeper oil production cuts are shortening. This poses a downside risk to our already …
12th September 2019
The slowdown in Qatar’s economy over the past decade should come to an end in the coming quarters as the start of production at the Barzan gas project boosts growth in the hydrocarbon sector. But tight fiscal policy and a slowdown in credit growth are …
11th September 2019
Further decline in inflation opens door for more rate cuts The decline in Egyptian inflation in August to a six-year low of 7.5% y/y makes it is almost certain that the central bank will follow up last month’s 150bp interest rate cut with further easing. …
10th September 2019
The change at the helm of the Saudi energy ministry raises the chances that the current OPEC+ output deal is extended beyond its current expiry date of March next year, which would probably require the Kingdom to keep its oil output below its quota. The …
9th September 2019
Change in Aramco chief won’t affect oil policy Developments over the past week add to the signs that the Saudi government is ramping up preparations for the listing of state-owned oil company Aramco, but the latest moves are unlikely to result in a shift …
5th September 2019
The recent sharp rise in Saudi banks’ wholesale borrowing isn’t yet a major cause for concern, but it does mean that credit growth is more vulnerable to a shock that causes external financing conditions to tighten. Saudi bank’s foreign liabilities have …
3rd September 2019
Plunge in UAE PMI raises concerns over outlook August’s whole economy PMIs from the Gulf suggest that the pick-up in growth in non-oil sectors seen in the first half of the year has topped out. If oil prices stay low and fiscal policy becomes less …
Saudi equity market struggles The fall in the Saudi Tadawul equity index this week, despite the second phase of its inclusion in the MSCI EM index, reinforces our view that the stock market will struggle this year. Saudi Arabia’s stock market has been …
29th August 2019
Deflation eases further Saudi consumer prices continued to fall in July, by -1.3% y/y, but a closer look at the data suggests that underlying price pressures are starting to build. The headline rate is likely to return to positive territory by early next …
28th August 2019
Our GDP Tracker suggests that Saudi Arabia’s economy slowed further in Q2, to just 1.0% y/y, as the drag from the oil sector intensified. We think that GDP growth will be even softer in the coming months and we’re comfortable with our below-consensus …
27th August 2019
The Egyptian central bank cut its overnight deposit rate by a larger-than-expected 150bp last night (to 14.25%) and with inflation likely to fall further in the coming months, much more easing lies in store. We have revised down our year-end forecast to …
23rd August 2019
Lebanon’s debt back in the spotlight The dire finances of the Lebanese government have come back under the spotlight and we continue to think that some form of debt restructuring is more likely than not. Argentina’s experience in the past couple of weeks …
22nd August 2019
The sharp rise in Egyptian external debt in the last few years has triggered alarm in some quarters. But it has been accompanied by a large increase in FX reserves, suggesting that risks are currently manageable. Egypt’s external debt has increased …
20th August 2019
The latest data suggest that GDP growth in the Gulf economies slowed in Q2, which is partly a result of cuts in oil production but also softer activity in non-oil sectors. The early data for July, such as the whole economy PMIs, point to even weaker …
15th August 2019
The planned IPO of Aramco – which reports suggest is back on – will probably make the government less inclined to impose fresh austerity measures in response to lower oil prices. The partial sale of the company itself won’t do much to improve the …
12th August 2019
Balance sheets resilient… The plunge in oil prices over the past week won’t result in balance sheet strains in the Gulf economies, but it does strengthen our view that governments in parts of the region, most notably Saudi Arabia, will resume fiscal …
8th August 2019
Drop in inflation bolsters case for rate cuts The drop in Egyptian inflation to a four year low of 8.7% y/y in July reinforces our view that the central bank will resume its easing cycle at its next meeting with a 100bp cut in the overnight deposit rate, …
Financial support from the Gulf means that Bahrain and Oman should avoid damaging devaluations and acute sovereign debt problems. Even if their governments fail to implement the fiscal tightening that the other Gulf countries demand (as seems increasingly …
7th August 2019
Pick-up in the Gulf’s non-oil sectors appears to have run its course The drop in PMIs across the Gulf in July suggests that the pick-up in growth in non-oil sectors in the first half of 2019 has started to go into reverse. If oil prices stay low and …
5th August 2019
Saudi fiscal loosening unlikely to last much longer Budget figures released this week in Saudi Arabia showed that the government loosened fiscal policy in Q2 but, if oil prices remain low (as we expect), the authorities will reverse course in the coming …
1st August 2019
Government debt-to-GDP ratios across the Gulf have risen significantly over the past five years but only in Bahrain and Oman do we hold serious concerns over the health of the public finances. Financial support from their neighbours should prevent …
31st July 2019
Our GDP Tracker suggests that the slowdown in Saudi Arabia’s economy at the start of this year extended into Q2 and it looks set to intensify over the rest of 2019. Our forecast for GDP growth of just 0.3% over this year as a whole lies well below …
30th July 2019
Rate cuts unlikely to boost Gulf credit growth Central banks in the Gulf will follow the US Federal Reserve in cutting interest rates next week, but past experience suggests that this is unlikely to provide a significant boost to the economy. Fed Chair …
25th July 2019
Saudi Arabia’s economy slowed at the start of this year and we think that further weakness lies in store. Figures released in the past month showed that economic growth slumped from 3.6% y/y in Q4 2018 to 1.7% y/y in Q1 2019. OPEC’s decision to extend its …
24th July 2019
Deflation continues to ease Deflation in Saudi Arabia continued to ease last month as the pick-up in activity in the non-oil sector fed through into stronger price pressures. If oil prices stay low, as we expect, the government is likely to push ahead …
23rd July 2019
Threat of harsh US sanctions on Saudi still limited A bill approved by the US House of Representatives this week that seeks to impose sanctions on Saudi Arabia has created headlines, but it is unlikely to result in aggressive action against the Kingdom. …
18th July 2019
Household consumption in Saudi Arabia expanded at its fastest pace in more than three years in Q1 but the prospect of fresh subsidy cuts and tax hikes means that this recent strength won’t last. The latest quarterly national accounts data, which now …
17th July 2019
Overview – The regional slowdown at the start of this year has further to run. This will continue to be led by the Gulf countries, where the drag from oil output cuts will intensify and low oil prices will prompt fresh fiscal austerity. Elsewhere, balance …
15th July 2019
