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Saudi inflation eased in February to 4.2% y/y, although it remained high due to the impact of recent administered price rises. But with economic growth slowing, we think underlying price pressures will weaken in the coming quarters. … Saudi Arabia …
21st March 2016
The Central Bank of Egypt’s larger-than-expected 150bp in its overnight deposit rate, to 10.75%, was a pre-emptive move to limit the inflationary impact from the recent devaluation of the pound. We think the pound is likely to weaken further over the …
17th March 2016
The decision this morning by the Central Bank of Egypt to devalue the pound and move to a more flexible exchange rate regime is a positive step and should help to improve the country’s balance of payments position. There will inevitably be some short-term …
14th March 2016
Low oil prices mean that budget deficits will persist for some time in the GCC and we think these countries will shift away from a reliance on savings towards issuing debt to plug the gap this year. We estimate that more than US$85bn of debt will be …
10th March 2016
The fall in Egyptian inflation to a six-month low of 9.1% y/y in February may make policymakers more confident to push ahead with a devaluation of the pound. … Egypt Consumer Prices …
Recent announcements by the Gulf countries that they will cut off financial support to Lebanon and slap a travel ban on the country are likely to have a larger political than economic impact. But if the Gulf followed up with further measures, it could be …
8th March 2016
The modest rise in ‘whole economy’ PMIs in the Gulf last month probably reflects a boost to sentiment on the back of the recovery in oil prices from their January lows. The big picture, however, is that activity is subdued and we expect growth to slow …
3rd March 2016
We think the latest moves by the Central Bank of Egypt suggest that a long-awaited devaluation of the pound may be just around the corner. This will inevitably involve some short-term pain, but over a longer horizon, it should help to lay the foundations …
2nd March 2016
Recent elections in Iran have provided a positive endorsement of President Rouhani’s reformist policies ahead of next year’s presidential vote and should ease fears that Tehran will renege on its nuclear agreement with major foreign powers (which could …
1st March 2016
Our GDP Tracker suggests that Saudi Arabia’s economy slowed sharply at the end of last year and, as the fiscal squeeze begins to bite, we expect growth to weaken to just 1.5% this year. … Saudi economy ended last year on a weak …
29th February 2016
Recent comments from Saudi Arabia’s veteran Oil Minister Ali al- Naimi have dashed hopes that had been growing in some quarters that the Kingdom was about to shift direction on its oil market policy and cut production. The decision earlier this month by …
25th February 2016
The gradual rise in oil prices from the lows reached in January has underpinned a rebound in equity markets in the Gulf this month and dampened speculation that these countries will be forced to abandon their dollar pegs. Meanwhile, fresh moves to ease FX …
22nd February 2016
The slump in oil prices has raised fears that banks in the Gulf could come under strain, as governments withdraw deposits, foreign exchange reserves are depleted and assets begin to sour. But, while we expect credit growth to slow over the coming years, …
17th February 2016
Egyptian inflation came in at 10.1% y/y in January and, with a looming devaluation of the pound and the government preparing the ground for a fresh round of subsidy cuts, it is likely to remain in (or close to) double digits for most of this year. … …
11th February 2016
A drought is likely to weigh heavily on Morocco’s agricultural sector this year and headline GDP growthlooks set to slow to around 2.5%, down from more than 4% in 2015. Nonetheless, with twin budget andcurrent account deficits narrowing sharply and the …
9th February 2016
A period of fiscal austerity means that we expect the Gulf economies to slow this year, a view that not too long ago was non-consensus but is now relatively mainstream . Both the consensus and the IMF anticipate that growth in this part of the region …
4th February 2016
We have argued for some time that the Gulf economies are in a strong position to weather a period of low oil prices and, despite speculation in markets, that dollar pegs won’t be abandoned. Bahrain and Oman are the two countries where the risk of …
3rd February 2016
The further drop in ‘whole economy’ PMIs in the Gulf in January adds to evidence that tightening fiscal policy is beginning to weigh on growth. Elsewhere, the surveys suggest that Egypt’s economy continued to struggle at the start of 2016. … Whole Economy …
The raft of budgets announced in the Gulf over the past month should help to ease concerns that these countries lack a clear agenda to adjust to cheap oil. The Saudi government has already cut energy subsidies and intends to reduce spending by around 14% …
29th January 2016
The Central Bank of Egypt kept its benchmark overnight deposit rate unchanged at 9.25% today as an influx of financial support has eased immediate concerns over the country’s external position and reduced the need to follow up on December’s rate hike. But …
28th January 2016
The start of 2016 has brought more of the same for financial markets in the Gulf – equity markets have fallen, bond yields have risen and speculation has continued to mount that currencies will be devalued. … Gulf financial markets battered by fresh …
26th January 2016
The latest drop in oil prices has intensified speculation that the Gulf economies might abandon their dollar pegs but there remain good reasons to think that this would achieve little in terms of narrowing current account deficits. It would also involve …
21st January 2016
Our GDP Tracker suggests that growth in Saudi Arabia’s economy was broadly stable between October and November but, with a fiscal squeeze underway, growth looks set to weaken this year. We remain comfortable with our long-held view that the economy will …
19th January 2016
Sanctions relief should support a revival of Iran’s economy and a short period in which it enjoys growth of as much as 6-8%. But there is unlikely to be much impact on the rest of the region, either via moves in oil prices or in trade with Iran. … Iran …
18th January 2016
A privatisation drive in Saudi Arabia looks increasingly likely and we estimate that the government might be able to raise between $75bn and $100bn (12-15% of GDP) from asset sales. This wouldn’t be enough to plug the Kingdom’s large twin budget and …
14th January 2016
Inflation in Saudi Arabia was unchanged at 2.3% y/y in December, but the recent wave of subsidy cuts means that it is likely to edge higher over the coming months. … Saudi Arabia Consumer Prices …
The latest Egyptian economic data, on the face of it, show that the economy held up well in 2015, but the underlying picture is actually pretty weak. With the tourism sector in the midst of a fresh downturn and a devaluation of the pound looking …
13th January 2016
In an interview with The Economist published earlier today, Saudi Arabia’s Deputy Crown Prince Mohammed bin Salman (or MbS, as he is known locally) outlined encouragingly ambitious fiscal and reform plans, including an admission that the government is …
7th January 2016
The fresh drop in oil prices has once again prompted speculation that Saudi Arabia will follow other major oil producers and devalue its currency. But we think this will only be used as a last resort. Indeed, the recently announced budget for this year …
The drop in ‘whole economy’ PMIs from the Gulf countries in December, in the case of Saudi Arabia to a fresh record low, provides further evidence that non-oil sectors are starting to feel the pinch from fiscal consolidation. This reinforces our long-held …
Saudi Arabia’s budget for 2016 released at the end of last year sets the Kingdom up for a period of fiscal consolidation. The plans outlined will help to rein in the country’s large twin budget and current account deficits and will be taken as a sign that …
5th January 2016
The slowdown in Saudi GDP growth in the third quarter of last year, to 3.6% y/y, is a sign of things to come. With the recent budget confirming that a period of fiscal consolidation is now underway, we expect growth to slow to just 1.5% this year. … Saudi …
The Egyptian central bank has found itself in the spotlight this month, as attention has (re-)focussed on the country’s fragile external position. The appointment of Tarek Amer as governor had already sparked speculation that policymakers were gearing …
22nd December 2015
The Gulf economies have weathered the storm created by the fall in oil prices well so far, but 2016 is likely to be the year in which low energy prices begin to weigh on growth. We don’t expect currencies to be devalued, but governments are paving the way …
21st December 2015
Equity markets in the Gulf have fallen further over the past month, dragged down by the renewed slump in oil prices. Elsewhere, Egypt’s central bank has maintained a tight grip on the pound but policymakers seem to be gearing up for a devaluation sooner …
17th December 2015
Our GDP Tracker suggests that the Saudi Arabian economy weakened a little in October and, with fiscal policy set to tighten, we expect much slower growth in 2016. … Saudi growth eases, further slowdown likely in …
15th December 2015
The further rise in Egyptian inflation to 11.1% y/y in November, alongside fresh fears over the fragile external position, is likely to add to policymaker’s concerns. For now, we expect the central bank to leave interest rates on hold at next week’s MPC …
10th December 2015
The slight fall in Saudi inflation in November, to 2.3% y/y, reinforces our view that the backdrop of weak global commodity prices and slowing growth should keep price pressures subdued over the coming years. … Saudi Arabia Consumer Prices …
9th December 2015
Last week’s OPEC meeting ended with little change to the cartel’s policy, but rumours suggest that Saudi Arabia is softening its stance on production cuts. While we’re probably at the point where the Kingdom would like to see oil prices rising again soon, …
7th December 2015
Egypt’s fragile external position has come under the spotlight once again, but the latest signs are that policymakers are trying to ease foreign currency restrictions. The upshot is that a devaluation of the pound now looks more likely than ever and, …
3rd December 2015
Saudi Arabia’s upcoming budget statement will be scrutinised even more than usual and we suspect (and hope) that it will provide more realistic forecasts as well as a clear agenda for fiscal consolidation. Failure to do so would reinforce fears that the …
2nd December 2015
Renewed concerns over Egypt’s external position, coupled with fresh security fears in light of the Russian plane crash in the Sinai, have caused the country’s equity market to slump and dollar bond yields to rise in the past month. Stocks in the Gulf have …
26th November 2015
The past month has bought mounting speculation about currency devaluation in the region’s two largest economies, Egypt and Saudi Arabia. In the case of Saudi Arabia, we think this is extremely unlikely. The adjustment to cheap oil is most probably going …
24th November 2015
Speculation over a devaluation of the Saudi riyal has mounted in the past few days but we think such a move is likely to be used as a last resort. Instead, we think cuts to capital spending are likely to bear the brunt of the adjustment to cheap oil over …
23rd November 2015
The Gulf countries are in a strong position to cope with low oil prices, but some form of adjustment will be needed over the coming years. We expect tighter fiscal policy to do most of the work and we suspect that the bulk of this will come via lower …
19th November 2015
There is growing talk that Egypt is in the midst of a currency crisis and, while we think some of this may be a bit overdone, developments over the past month or so suggest that a shift towards a more flexible exchange rate regime (and a weaker pound) may …
17th November 2015
Our GDP Tracker suggests that Saudi Arabia’s economy slowed sharply in September. With a fiscal squeeze expected to get underway soon, this is likely to be a sign of things to come over the next twelve to eighteen months. … Saudi Arabia’s economy shifts …
16th November 2015
The Saudi government appears to be moving towards privatising a number of state-owned companies which, although not a game changer when it comes to financing the budget deficit, adds to the reasons to expect the fiscal adjustment to cheap oil to be …
12th November 2015
Saudi inflation edged up for the second consecutive month in October, to 2.4% y/y, a fresh high for this year. Even so, low global commodity prices and slower economic growth should keep price pressures in check for the foreseeable future. … Saudi Arabia …
11th November 2015
Reports that Saudi Arabia will launch an international bond provides some clarity on how the budget deficit will be financed over the next year – as things stand, we think around 65% will come from domestic bond issues, 10% from international bond issues …
10th November 2015
