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Recent calls for the Gulf countries to ditch their dollar pegs and allow their currencies to float are likely to fall on deaf ears. While there are some arguments in favour of shifting to more flexible currency regimes, we think that the dollar pegs are …
18th March 2015
Our GDP Tracker suggests that growth in Saudi Arabia’s economy slowed to under 2% y/y at the start of this year. Consumer spending may receive a boost over the coming months following King Salman’s decision to grant public sector workers an additional …
16th March 2015
The Egyptian government has organised this week’s Economic and Development Conference as a milestone in its strategy to raise much-needed investment. The spotlight will be on the unveiling of large public sector-led projects but we think it’s just as …
12th March 2015
Saudi Arabia’s inflation rate eased further in February to 2.1% y/y, driven in large part by another drop in food inflation. Against the backdrop of slower growth and weak commodity prices, we expect inflation to remain low for the rest of this year. … …
Egyptian inflation edged up to 10.6% y/y in February and is likely to stay close to 10% for the next few months. Further interest rate cuts are unlikely until the impact of last year’s energy price hikes falls out of the annual price comparison in Q3. … …
10th March 2015
The Gulf countries should be able to stomach low prices for the next few years at least, but further down the line some form of adjustment is likely to be needed and we think that fiscal policy will do most of the work. While there are a number of …
5th March 2015
We think fears that the plunge in oil prices since the middle of last year will force Saudi Arabia to ditch its dollar peg and devalue the riyal are overdone. The Kingdom has plenty of resources to sustain domestic spending and defend the peg. And even if …
4th March 2015
The latest whole economy PMIs from the MENA region provide further evidence that the fall in oil prices hasn’t caused activity in the Gulf economies to collapse, as some had feared. Indeed, activity remains relatively strong. Meanwhile, we doubt that the …
3rd March 2015
After a surprise rate cut last month, the Egyptian central bank left interest rates unchanged today. Looking ahead, we think that policymakers will hold off from lowering rates again until the direct impact of last year’s energy price hikes falls out of …
26th February 2015
The past month has brought further evidence that inflation is slowing across the MENA region. In Saudi Arabia, inflation now stands at its lowest rate in more than eight years, while price pressures have also eased in most of the other Gulf economies, as …
A pick-up in oil prices has supported a small rebound in Gulf stock markets over the past month but, further out, hopes of a sharp rally are likely to be disappointed. Meanwhile, having allowed the pound to depreciate last month, the Egyptian authorities …
24th February 2015
The latest data from Saudi Arabia suggest that economic activity was steady, but unspectacular, at the end of last year and we expect growth to remain relatively sluggish at 1.5-2.0% in 2015-16. … Weaker growth the new norm for Saudi …
20th February 2015
The plunge in oil prices means that current account positions in parts of the Gulf have slipped from surplus into deficit. In these countries, FX reserves are now being drawn upon to finance external shortfalls and sustain domestic spending but, so far at …
19th February 2015
The fall in oil prices has led to a sharp reversal of fortunes in the Middle East and North Africa. Fears of steep falls in output in the Gulf are overdone, but growth will weaken in the coming years. In contrast, the outlook for the North African …
12th February 2015
Inflation in Saudi Arabia continued to ease at the start of this year and, against the backdrop of slower economic growth and weak commodity prices, we expect it to remain low over the next twelve months. … Saudi Arabia Consumer Prices …
Egyptian inflation fell back in January and looks set to ease further over the coming months. Further interest rate cuts are likely this year, but we suspect that the CBE will wait until the effects of last year’s energy price hikes fall out of the annual …
10th February 2015
Oman is one of the few Gulf States that isn’t well placed to weather a period of low oil prices and, as a result, a fiscal squeeze will be needed. The authorities may be able to muddle through over the next couple of years by drawing down savings, but …
5th February 2015
January’s whole economy PMI data suggest that, in spite of the drop in oil prices at the end of last year, activity in the Gulf economies has continued to hold up well. Meanwhile, the dip in Egypt’s PMI was disappointing but the bigger picture is that the …
3rd February 2015
The Egyptian stock market has rallied in the past month, buoyed by the economy’s brightening prospects and hopes that the central bank’s decision to loosen its grip on the pound marks a shift towards more orthodox policymaking. … Egyptian equities hit …
29th January 2015
We think the depreciation of the Egyptian pound over the past week has further to go and the currency might plausibly weaken to around 8.25/US$ by the end of this year, a 10% fall against the dollar from its current rate. But given the central bank’s …
28th January 2015
After a prolonged period of exchange rate stability, the Central Bank of Egypt (CBE) loosened its grip on the pound this month, and the currency has since fallen by 3.5% against the US dollar. The CBE has been characteristically opaque about its …
26th January 2015
The passing away of Saudi Arabia’s King Abdullah has raised concerns about the issue of succession and whether this might lead to disruptions to policymaking in the Kingdom. The key point, though, is that the royal succession has been planned for many …
23rd January 2015
Concerns that the plunge in oil prices will push the Saudi economy into a deep recession this year look overdone. We expect growth to slow this year and next, but a collapse in output looks unlikely. … Saudi economy won’t collapse but growth will soften …
21st January 2015
The slowdown in Saudi GDP growth in Q4, to just 2.0% y/y, provides the first evidence that the plunge in oil prices has caused growth to soften. But so far, there are no signs of a collapse in output. … Saudi Arabia GDP …
20th January 2015
The small fall in the Egyptian pound in the past couple of days is significant given that the central bank had kept a tight grip on the currency since last summer and we think that the pound’s depreciation has further to run. No official explanation has …
19th January 2015
In a surprise decision today, Egypt’s central bank (CBE) became the latest in the emerging world to cut interest rates. Although the slide in oil prices is unlikely to have much direct impact on domestic inflation, it has helped to ease strains in the …
15th January 2015
Saudi Arabia’s inflation rate fell to an eight-year low of 2.4% y/y in December. But we suspect that the big fall in inflation is now behind us and the headline rate may even edge up over the coming years. … Saudi Arabia Consumer Prices …
Our GDP Tracker suggests that growth in the Saudi economy eased towards the end of last year, but there aren’t any signs that the plunge in oil prices has caused activity to collapse. Looking ahead, we expect growth to soften further as fiscal policy …
14th January 2015
We’ve written extensively in recent months about the losses the Gulf economies face in light of the plunge in oil prices. But in this Watch we explain why the North African economies of Egypt, Morocco and Tunisia stand to benefit from a period of lower …
13th January 2015
We’ve argued for some time that the Gulf economies are set to run a current account deficit this year for the first time in over a decade, and the latest plunge in oil prices means this deficit could come in at almost 10% of GDP – something not seen since …
8th January 2015
The rise in Egyptian inflation last month, which took it back into double-digits, rules out any possibility of an interest rate cut by the Central Bank of Egypt at next week’s meeting. … Egypt Consumer Prices …
The rise in December’s whole economy PMIs suggests that, in spite of the plunge in oil prices at the end of last year, economic activity in the Gulf has held up reasonably well. Meanwhile, Egypt’s economy appears to have ended last year on a slightly …
6th January 2015
Saudi Arabia’s 2015 budget statement doesn’t provide a clear steer about the path for actual government spending. Reading between the lines, it looks like the authorities will keep spending restrained this year, but there’s no sign that they will tighten …
5th January 2015
The recent plunge in Dubai’s stock market, coming alongside a drop in oil prices, has rekindled fears that the Emirate could face renewed problems with its large corporate debts. For our part, we think Dubai’s debt problems are far from resolved. But for …
17th December 2014
In spite of small rises today, equity markets in the Gulf have tumbled over the past month and all of the gains made earlier this year have now been wiped out. While we suspect that the big falls have probably now taken place, with lower oil prices here …
15th December 2014
The slump in oil prices has caused the Gulf’s equity markets to tumble, but the region’s governments still seem to be unfazed. Oman aside, no country has announced cuts in public spending. And Saudi Arabia’s Oil Minister has once again shrugged off calls …
11th December 2014
The fall in Saudi Arabia’s inflation rate in November to a two-and-a-half year low probably marks the trough and we expect it to rise gradually to 3.0-3.5% over the coming year. … Saudi Arabia Consumer Prices …
The slump in oil prices has caused concerns to emerge about the exposure of financial institutions to energy companies, but for banks in the Gulf this risk seems small. They are more vulnerable to a period of low oil prices if it results in weaker income …
10th December 2014
Egyptian inflation fell sharply last month on the back of easing food price pressures. If inflation remains in single digits over the coming months, it could prompt the Central Bank of Egypt to cut interest rates in the first half of next year. … Egypt …
Our GDP Tracker suggests that the Saudi economy started Q4 on a slightly weaker note. We don’t think that the latest fall in oil prices will cause growth to collapse but with fiscal policy set to become less supportive, we do think growth will soften …
9th December 2014
Last month’s drop in the whole economy PMIs for the Gulf economies appears to have been driven by weaker domestic demand. One explanation for this is that the continued slide in oil prices has weighed on sentiment. Meanwhile, the further fall in Egypt’s …
4th December 2014
The recent fall in oil prices, if sustained, will effectively wipe out the Gulf’s current account surplus. This shouldn’t pose too many problems for these economies. Even if oil prices fall further, large FX reserves could finance current account …
2nd December 2014
The Central Bank of Egypt left its benchmark interest rate unchanged at 9.25% today and, with growth picking up and inflation still high, it looks unlikely that July’s rate hike will be reversed any time soon. Equally, however, policymakers don’t appear …
27th November 2014
Comments ahead of today’s OPEC meeting, playing down calls for a cut in the cartel’s output target, suggest that the Gulf States aren’t too alarmed by the recent slide in oil prices. Indeed, Saudi Arabia’s Oil Minister, Ali al- Naimi , has explicitly said …
Low oil prices have continued to take their toll on equity markets in the Gulf. Meanwhile, pressure on the Egyptian pound has intensified over the past month and we think the authorities will need to loosen their grip on the currency sooner rather than …
25th November 2014
Egypt’s tourism sector has turned the corner in recent months and, if this improvement can be sustained, we estimate that it might result in additional revenues of as much as $3.3bn (1.2% of GDP) over the next twelve months. However, lingering security …
20th November 2014
Our GDP Tracker suggests that growth in Saudi Arabia’s economy stabilised in Q3. The oil sector was a drag on the economy, but this was offset by stronger growth in the non-oil sector. Going forward, we think that economic growth is likely to soften. A …
19th November 2014
Saudi Arabia is likely to resist pressure from other OPEC members to cut oil output in an effort to arrest the recent slide in prices. After all, the Saudi economy is in a stronger position to withstand a period of lower oil prices than many other members …
17th November 2014
The sharp fall in oil prices in recent months has led some to call into question the sustainability of the Gulf’s dollar pegs. However, we think the risk of currency devaluation is relatively small. … Gulf dollar pegs under little threat from lower oil …
13th November 2014
The fall in Saudi Arabia’s inflation rate in October suggests that, for now at least, price pressures in the economy are limited. … Saudi Arabia Consumer Prices …
