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This week ended with a bang as Egypt finally shifted to a more flexible exchange rate and secured an IMF deal. Some short-term economic pain is on the cards, but the move will help to restore macro stability and brighten long-term prospects. Early this …
27th October 2022
The Egyptian government announced steps to tackle its economic crisis, including a shift to a more flexible exchange rate regime and accompanying interest rate hikes -- but will it be enough? Our Emerging Markets team held a briefing on whether the …
Egypt’s central bank has just announced that it is shifting to a more flexible exchange rate regime, which we think will result in the pound falling 18% to 24/$ by end-2023 if not sooner. The move will result in some short-term economic pain but it will …
OPEC+ cut its oil production quotas by 2mn bpd in November and strong compliance with the agreement will hit GDP growth in the Gulf economies harder than other members of the group. The result is that the region is now set to endure a sharper economic …
26th October 2022
Download the full report here . Overview – The Gulf states will continue to lead the pack, but growth is set to slow next year by more than we had previously expected due to oil output cuts. In North Africa, balance of payments strains should ease, and …
21st October 2022
Tunisia still has work to do for IMF deal approval The IMF stated last weekend that Tunisia reached a staff-level agreement for a new deal, which (if approved) will reduce concerns that Tunisia might follow in Sri Lanka ’s footsteps towards a messy …
20th October 2022
The news that Tunisia has reached a staff-level agreement with the IMF over a $1.9bn financing package provides hope that the economy will avoid a messy balance of payments crisis. But there are still hurdles to overcome to seal the deal. And even with …
17th October 2022
US-Saudi relationship dials back Developments since last week’s OPEC+ decision provide further evidence that the relationship between Saudi Arabia and the US has soured. (See our immediate take on it here .) Chair of the US Senate Foreign Relations …
13th October 2022
Spillovers from the war in Ukraine and tighter external financing conditions have exacerbated strains in Egypt’s balance of payments and we think the pound needs to fall a lot further. This will add to inflation pressures, prompting further interest rate …
Inflation now at (or near) a peak Saudi inflation edged up to 3.1% y/y in September largely due to stronger food and housing inflation, but we think that the headline rate has now peaked and will drop back over the coming months and into early 2023. If …
Central banks have the tools to deal with liquidity crises arising from rising interest rates and falling asset prices. Instead, the bigger threat is that higher interest rates produce large and simultaneous falls in asset prices that threaten the …
11th October 2022
Inflation rises to four-year high, adding fuel to calls for rate hikes Egypt’s headline inflation rate rose to 15.0% y/y in September, its fastest pace in nearly four years as the impact of the falls in the pound fed through. Inflation will accelerate …
10th October 2022
OPEC+ cut to hit Gulf GDP growth; irks US The decision by OPEC+ to cut its oil output quotas by 2mn bpd on Wednesday poses a clear downside risk to our Gulf GDP growth forecasts, and it has also raised tensions between Saudi Arabia and the US. The oil …
6th October 2022
Yesterday’s decision by OPEC+ to cut oil production quotas by 2mn bpd adds to signs that, in a world economy that is fracturing, Saudi Arabia is tilting away from the US and leaning towards a China-led camp. That would threaten to undermine the push by …
Having prepped the market well beforehand, OPEC+ announced a 2mn bpd cut to its production quota from November. Of course, given that the group has been producing significantly below its quota, the decline in physical supply will be much less, though …
5th October 2022
Saudi Arabia continues to lead the way as Egypt struggles The batch of PMIs for September continued to paint a picture of economic divergence between the Gulf economies and the rest of the Middle East and North Africa. With fiscal policy set to be …
4th October 2022
OPEC+ weighing up a further output cut The latest reports suggest OPEC+ is seeking to follow up last month’s surprise 100,000bpd cut to oil output quotas with another reduction next week, increasing the downside risks to our Gulf GDP growth forecasts. …
29th September 2022
The Egyptian pound has continued to weaken as the central bank (CBE) has taken tentative steps towards a more flexible exchange rate, and we think that the currency needs to weaken further to address the country’s external imbalances. Measures to tackle …
The appointment of Saudi Arabia’s Crown Prince Mohammed bin Salman (MbS) as prime minister yesterday evening cements his role as the head of the government. The crown prince already held significant sway over economic policy so, in the near term, that …
28th September 2022
The Gulf countries have benefitted enormously from higher energy prices and will run large current account surpluses. But external positions have deteriorated in other parts of the region. That, alongside tighter external financing conditions, has led to …
27th September 2022
UAE seeking to accelerate oil ramp up Reports that the UAE is aiming to increase oil production capacity faster as peak oil demand draws closer could create tensions within OPEC+ over the group’s cautious approach to output quotas The Abu Dhabi National …
22nd September 2022
Mortgage lending in Saudi Arabia has ramped up in recent years as the government has tried to push up homeownership among Saudi nationals. Banks are well positioned in the event of future property price falls but the increased exposure to the sector is a …
20th September 2022
Rate hikes on the way across MENA A raft of central banks across the region look set to raise interest rates next week as those with dollar pegs follow the US Fed and we also hold a non-consensus view that the Central Bank of Egypt will resume its …
15th September 2022
Inflation strongest in over a year, but probably at its peak Saudi inflation rose to 3.0% y/y in August largely on the back of stronger non-food inflation, but we think that the headline rate is close to its peak and will slow over the rest of this year …
Saudi Arabia’s economy enjoyed a strong Q2, growing by a rapid 12.2% y/y, and timely data point to a robust third quarter as well. However, the recent cautious approach taken by OPEC+ towards oil production does pose a small downside risk to our GDP …
13th September 2022
OPEC+ oil output cut affirms cautious approach The decision by OPEC+ to follow through with suggestions of a 100,000bpd cut to its oil production quotas on Monday shows the group has grown wary of the weakening global economic backdrop. This is likely …
8th September 2022
Weaker pound pushing up inflation; CBE waits in wings to hike rates Egypt’s headline inflation rate jumped to a near-four-year high of 14.6% y/y in August as the impact of the weaker pound continued to filtered through. Inflation is likely to rise a …
Concerns over Egypt’s external position have grown due to the country’s wide current account deficit, rising short-term external debt and declining FX reserves. While some of the risks are mitigated by low rollover risks associated with Gulf deposits at …
6th September 2022
Egypt is facing growing external strains and downward pressure on the pound, with policymaking coming under increased scrutiny in recent weeks following the sudden resignation of central bank governor Tarek Amer. In this Update , we answer five questions …
5th September 2022
Gulf economies continue to lead the way August’s batch of PMIs showed that activity in the Gulf economies pulled further ahead of their non-Gulf counterparts even as external demand has weakened on the back of softer global growth. Meanwhile, there were …
Egypt to let the pound fall more quickly Comments from officials suggest that the Central Bank of Egypt (CBE) is pressing forward with its shift to a more orthodox exchange rate policy that, coupled with the increased likelihood of an IMF deal , should …
1st September 2022
A revived Iran nuclear deal would quickly bring an additional 1mn bpd of crude oil production online, which would directly weigh on global oil prices. But the bigger impact would be to make it less likely that supply cuts from OPEC+ would be used to …
31st August 2022
Headline inflation has risen further across the region in recent months. This has been most pronounced in the non-Gulf economies which have been particularly exposed to spillovers from the war in Ukraine due to their positions as large net commodity …
30th August 2022
What does Egypt need to do to get an IMF deal? Egypt’s Prime Minister Mostafa Madbouly said earlier this week that talks with the IMF over a new deal were in their “final stages” and the hurdles to securing a deal are not particularly high. We have …
25th August 2022
We think that the Egyptian pound needs to fall a lot further which, in the near-term, will push up inflation and harm the sovereign debt position. But it will be key to boosting Egypt’s external competitiveness and attracting foreign investment, thereby …
Abdalla begins with a hold as pressures mount on pound The Central Bank of Egypt (CBE) kept interest rates on hold, at 11.25%, in the first meeting under new caretaker governor Hassan Abdalla but, with pressure mounting on the pound, we still think …
18th August 2022
Amer departs… The resignation of Central Bank of Egypt (CBE) Governor Tarek Amer yesterday has further increased scrutiny of the country’s exchange rate policy. A weaker pound is clearly needed, preferably under an IMF deal, but there is a clear risk that …
The resignation of Central Bank of Egypt (CBE) Governor Tarek Amer points to a growing tension within policymaking circles on the best way to address the country’s external imbalances. We think the next governor will ultimately need to let the pound …
17th August 2022
The 2022 Football World Cup that kicks off in November will provide a significant boost to Qatar’s economy in Q4, but we doubt that the economic legacy of the tournament will live up to officials’ expectations. That raises the risk of overcapacity in key …
15th August 2022
Inflation rises, but will soon drop back Saudi inflation picked up to 2.7% y/y in July due to strengthening underlying price pressures, but we think that it is now at or close to a peak and will gradually fall back over the rest of this year and next. If …
PIF stumping up the cash for Egypt Saudi Arabia’s Public Investment Fund (PIF) established an arm in Egypt this week and has moved quickly to purchase stakes in several firms, which will help to ease external financing concerns. But a weaker pound is …
11th August 2022
Weaker pound to push inflation higher; further rate hikes on the cards Egypt’s headline inflation rate picked up to a three-year high of 13.6% y/y in July and we think it will remain above the Central Bank of Egypt’s (CBE’s) target range until early 2024. …
10th August 2022
With Russia tightening its squeeze on supply of gas to Europe, governments are turning their attention to other major gas exporters such as Qatar to try to fill the gap. But Qatar’s gas sector is already operating close to capacity and, while the North …
9th August 2022
Does Egypt really want an IMF deal? Egypt’s Finance Minister Mohamed Maait argued this week that any financing agreement with the IMF would be much smaller than some analysts’ estimates. If anything, Egypt could be hinting that it does not want IMF …
4th August 2022
Gulf economies continue to lead the way July’s batch of PMIs were a mixed bag, but the readings reinforce our view that activity in non-oil sectors in the Gulf remains strong. Meanwhile, there were further signs that price pressures are easing. In Saudi …
3rd August 2022
Spillovers from the war in Ukraine have caused Egypt’s large current account deficit to widen this year and, with the country struggling to attract stable forms of external financing, officials will need to stick to their shift to a flexible exchange rate …
1st August 2022
The rapid headline 11.8% y/y GDP growth recorded in Saudi Arabia in Q2 masked underlying weakness in non-oil sectors of the economy. Even so, Saudi Arabia is a relative bright spot in the global economy and the data cement our long-held view that the …
Gulf would benefit from possible OPEC+ policy shift Next week’s OPEC+ meeting may provide the first hints of the group’s production policy beyond September and if, as we expect, they opt to remove quotas, the Gulf stands to benefit most. On its current …
28th July 2022
The recently-released activity data from Saudi Arabia, the UAE, Qatar, and Bahrain confirmed that strong hydrocarbon production supported rapid economic growth at the start of this year. And strong growth is likely to be sustained over the coming …
27th July 2022
Referendum a key step in president's power grab Tunisians will vote on proposed constitutional amendments on Monday, which could cement President Saied’s one-man rule. This may further deter foreign investment, compounding the country's economic problems. …
21st July 2022
