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We were in the Gulf last week visiting clients and this Update takes stock of the key talking points that emerged, from a sense of optimism surrounding the Gulf economies to despair and fear regarding Egypt and other parts of North Africa. One thing that …
11th May 2023
Flash GDP figures showed that Saudi Arabia’s economy contracted in Q1 on the back of OPEC+-agreed oil output cuts, but growth in the non-oil economy remained strong. The “voluntary” oil production reductions announced last month will continue to weigh on …
9th May 2023
The idea of a new BRICS currency to settle trade or hold in reserves instead of the dollar has been doing the rounds recently. This could be modelled on the IMF’s Special Drawing Rights. But getting India on board with China would be difficult. And if the …
4th May 2023
Note: We’re holding a special 20-minute online briefing all about EM debt risks this Thursday at 10:00 EDT/15:00 BST . Register now . Egypt’s balance of payments (BoP) position strengthened markedly late last year, but policymakers’ reluctance to live up …
2nd May 2023
Note: We’ll be discussing the OPEC+ decision and answering your questions in an online briefing at 10:00 EDT/15:00 BST today . Register here . The surprise announcement of a further 1.66mn bpd cut to oil output by OPEC+ will reduce GDP growth mechanically …
3rd April 2023
While the Credit Suisse rescue might draw a line under that particular institution’s problems, it is clear that confidence in the financial sector overall is still extremely fragile. So regardless of whether more financial institutions run into trouble, …
20th March 2023
A key channel through which emerging markets could be affected by the strains in the global banking sector is if lending by foreign banks falls sharply. On this front, EMs’ vulnerabilities have eased since the Global Financial Crisis. But there are still …
16th March 2023
At the time of writing, financial markets appear to be stabilising after the turmoil caused by the collapse of SVB. And it doesn’t look like EMs have suffered large capital outflows or strains in their banking sectors. If this relatively benign scenario …
14th March 2023
The restoration of diplomatic ties between Saudi Arabia and Iran adds to signs that geopolitical tensions in the Middle East are easing, which may help to reduce risk premia in financial assets in the region as well as the oil market. Tensions will not …
13th March 2023
Household spending in Saudi Arabia appeared to soften in the final months of 2022, but surveys suggest that consumers are optimistic about the outlook. The backdrop of loose fiscal policy, an improved labour market and falling inflation means that …
1st March 2023
Tunisia’s fragile balance of payments of position has deteriorated further over the past year and the dinar appears increasingly overvalued. We think that the currency needs to fall by at least 30% against the euro to restore competitiveness. The approval …
8th February 2023
The Central Bank of Egypt (CBE) surprisingly left interest rates unchanged at Thursday’s MPC meeting but, with inflation likely to rise even further above the central bank’s target, we still think that policy will be tightened further. We have pencilled …
3rd February 2023
Saudi Arabia’s economy enjoyed bumper growth in 2022, but there were signs that activity was slowing in the final months of the year and we expect this trend to continue into the early part of 2023. Saudi Arabia’s economy was one of the best performers in …
25th January 2023
The recent falls in the Egyptian pound pose a threat to Egypt’s fragile public debt dynamics but we think that the government will be able to muddle through. The key risk is that the government shifts fiscal policy in a looser direction, which could …
18th January 2023
The sharp fall in the Egyptian pound today means that, in real trade-weighted terms, it is at its lowest level since the 2016 devaluation. The experience from that period is that the boost to Egypt’s external competitiveness will lead to a sharp narrowing …
11th January 2023
The sharp fall in the Egyptian pound today, coming in the wake of last week’s move to ease FX restrictions, suggests that the authorities are starting to make good on their pledge to shift to a more flexible exchange rate regime. There are already signs …
4th January 2023
This is part of a series of reports outlining our key macro and market calls for 2023. Click here to view the full series. Our latest EM Outlook can be found here . EMs will experience one of the broadest slowdowns in GDP growth in 2023 since the 1990s. …
15th December 2022
Morocco has been hit hard by the spillovers from the war in Ukraine and, while its external strains aren’t anywhere near as sever as those in Egypt and Tunisia, we think the authorities will need to resume their shift to a more flexible exchange rate …
16th November 2022
The recent IMF deals reached by governments in Egypt and Tunisia are positive developments and will help ease balance of payments strains in both countries. Egypt has already made progress with meeting the IMF’s demands and restoring macro stability, …
9th November 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
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
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 …
6th October 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
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
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
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
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
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 …
The Saudi economy grew at its fastest pace in a decade in Q1 and we think this strength will carry through to the rest of 2022. Our GDP growth forecast of 10% for this year lies well above the consensus. After the final Q1 GDP figures confirmed the …
12th July 2022
Reports that the Saudi Central Bank (SAMA) has injected liquidity into the banking sector appears to be a consequence of a lack of FX intervention (despite high oil prices), tight fiscal policy and strong credit growth. SAMA appears keen to sustain robust …
30th June 2022
We think that rising oil production and high global energy prices will result in rapid GDP growth this year and next across the Gulf economies. Growth is likely to be well above consensus expectations . It goes without saying that hydrocarbon sectors are …
28th June 2022
Whilst OPEC+ has been failing to meet its production quotas in recent months, it will technically finish unwinding its pandemic-related supply cuts come September. We think OPEC+ will then move to a more liberal approach and allow the few members with …
23rd June 2022
Egypt’s public debt dynamics look increasingly fragile due to a combination of the extremely short average maturity of its debt, rapidly rising yields, and a growing share of debt denominated in foreign currency. That said, for now, there are reasons to …
20th June 2022
Egypt’s government is set to kick off its latest privatisation drive later this year, but its track record provides little hope that it will meet targets. The authorities are likely to retain a high degree of control over the economy, holding back Egypt’s …
6th June 2022
Saudi Arabia’s economy grew at its fastest pace in a decade in Q1 and we think this strength will carry on over the rest of this year. The combination of rising oil output and the increasing likelihood of looser fiscal policy underpin our above-consensus …
18th May 2022
Headline inflation in Saudi Arabia rose to 2.3% y/y in April and we think that it will continue to accelerate over the coming months. Unlike in other parts of the emerging world, however, inflation will not surge to multi-year highs and, if anything, the …
The passing of the UAE’s President Sheikh Khalifa bin Zayed al Nayhan today is unlikely to alter the economic outlook with GDP set to grow rapidly amid stronger oil output and looser fiscal policy. That said, the next president will face several …
13th May 2022
The war in Ukraine has compounded strains in Egypt’s balance of payments and prompted officials to devalue the pound. The key risk now is that the authorities revert to heavily managing the nominal exchange rate (as they appear to have done since the …
9th May 2022
Saudi Arabia’s economic recovery has strengthened in recent months and, with oil output set to be raised further, the economy will record its fastest rate of growth in over a decade in 2022. Final GDP figures for Q4 confirmed that the Saudi economy grew …
19th April 2022
Egyptian inflation rose to a near-three year high in March and will continue to pick up on the back of the spillovers from the war in Ukraine and last month’s devaluation. We now think interest rates will be hiked by a further 350bp, to 12.75%, by …
11th April 2022
Lebanon has secured a staff-level agreement with the IMF, but we think that it is highly unlikely that policymakers will push through the long list of reforms that are needed to unlock that financing. An end to the country’s crisis is still nowhere in …
8th April 2022
Political developments and spillovers from the war in Ukraine have compounded concerns over Tunisia’s public finances and cemented our view that the government will default sooner rather than later. Tunisia’s President Saied has taken further steps in …
6th April 2022
The spillovers from the war in Ukraine will further drive divergence in economic growth across the Middle East and North Africa. The Gulf economies stand to benefit as oil production is likely to be raised more quickly which, combined with higher oil …
23rd March 2022
The Central Bank of Egypt’s (CBE) decision to hike interest rates by 100bp, to 9.25%, and devalue the pound by 10% against the dollar suggests that policymakers have finally woken up to the worsening external position. The move could pave the way for a …
21st March 2022
Were Saudi Arabia to accept renminbi for its oil exports to China, it would be a symbolic move but it would also run into a number of economic practicalities, especially given that the Kingdom could quickly accumulate large holdings of renminbi. It may be …
18th March 2022
Central banks in the Gulf will have to follow the US Federal Reserve in raising interest rates by virtue of their dollar pegs, which will weigh on domestic demand and recoveries in non-oil sectors. And higher debt servicing costs could cause concerns in …
16th March 2022
Saudi Arabia has so far resisted pressure from the US to raise oil production in order to dampen prices but, with Russian oil production and exports set to be disrupted, we think that a move in this direction is now more likely than not. While the Kingdom …
11th March 2022
After a small hit to activity earlier in the year on the back of the Omicron wave, Saudi Arabia’s economic recovery appears to have strengthened more recently. The Kingdom is not overly exposed directly to the war in Ukraine, but the possibility of a …
8th March 2022