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Egyptian inflation is likely to rise over the next 6-9 months due to stronger food and fuel inflation, as well as a weaker pound, which will prevent the central bank from resuming its easing cycle for much of this year. But a drop in inflation late this …
13th January 2021
The announcement that Saudi Arabia will remove its three-year blockade of Qatar will help to strengthen political ties in the Gulf, but the direct economic benefits from the détente are likely to be limited. Instead, Qatar’s (and Saudi Arabia’s) economic …
5th January 2021
The roll-out of COVID-19 vaccines and easing of containment measures will boost all the MENA economies next year, although this will be quicker in the Gulf countries which have greater access to vaccines and will be also be supported by a rebound in the …
21st December 2020
The Saudi 2021 budget shows that the recent improvement in the oil market hasn’t swayed officials to alter their plans to keep fiscal policy tight in the coming years. This will help to keep the dollar peg intact and limit any further rise in government …
16th December 2020
A rebound in global economic activity triggered by COVID-19 vaccines will lift the oil market and, in turn, the Gulf economies over the coming quarters. But one legacy of the crisis is that these countries will have to contend with peak oil demand being …
7th December 2020
Policymakers across the region have drawn down foreign exchange reserves this year in order to prop up currency pegs and, in the Gulf countries at least, this can be sustained for some time to come. Even in Bahrain and Oman, financial support from their …
18th November 2020
The Central Bank of Egypt (CBE) unexpectedly moved to cut interest rates for a second consecutive meeting on Thursday evening and, with inflation set to remain weak, we think that the easing cycle has further to run over the next twelve months or so. The …
13th November 2020
Saudi Arabia’s economic recovery has lost momentum in recent months and persistent low oil prices reinforce our view that policymakers are unlikely to row back on fiscal austerity and there is rising probability that current oil production cuts are …
9th November 2020
The deterioration in Gulf public finances this year has pushed governments across the region to finance a significant portion of their budget deficits through international debt markets, which we expect to continue in the coming years. While this doesn’t …
5th November 2020
The latest fall in the price of oil increases the chances that current OPEC+ production quotas are extended beyond the end of this year and reinforces our view that governments across the Gulf are unlikely to row back on recent austerity measures. …
2nd November 2020
The weakness of Egypt’s inflation reading for September is likely to prompt another rate cut at the central bank’s (CBE’s) next meeting. With inflation persistently undershooting the CBE’s target (which expires this quarter), policymakers are likely to …
14th October 2020
Fears over Dubai’s debts have re-emerged in recent weeks and, in this Update , we provide revised estimates of the Emirate’s debt pile. The short point is that the debts of Dubai’s government and of government-related entities remain large, and with the …
6th October 2020
The passing of Kuwaiti’s Emir Sheikh Sabah al-Ahmad al-Sabah has raised some concerns over political stability in the country, and, while the transition will probably prove to be smooth, the new Emir will accede to the throne facing several tough …
29th September 2020
The Central Bank of Egypt (CBE) cut interest rates by 50bps at Thursday’s MPC meeting after a six month pause to the loosening cycle. Policymakers are likely to remain cautious about future easing, but we think rates will be reduced gradually over the …
25th September 2020
Consumer spending in Saudi Arabia seems to have bounced back quickly in recent months, but the steep VAT hike and the suspension of the Cost of Living Allowance means that this is unlikely to be sustained. Keeping track of Saudi consumer spending is …
16th September 2020
Egypt’s economic recovery, a fall in the pound and a small rise in global oil prices are likely to cause the headline rate of inflation to drift up over the coming months. But it is unlikely to reach the 9% mid-point of the central bank’s target range. …
9th September 2020
Saudi Arabia’s economic recovery has faltered in recent months and the backdrop of fiscal austerity, the partial suspension of pilgrimages and oil production cuts mean that it is likely to remain slow going. The latest signs are that the recovery in Saudi …
7th September 2020
The coronavirus crisis has caused domestic demand across the Gulf to slump and deflation is likely to persist, with the key exception of Saudi Arabia. Most places are well placed to deal with the negative repercussions of deflation and, if anything, …
2nd September 2020
Governments across the Gulf have managed to get on top of coronavirus outbreaks but Morocco, Tunisia, Jordan, and Lebanon have seen the virus spread rapidly in recent weeks. These economies are the most vulnerable in the region to a fresh tightening of …
26th August 2020
The worst of the strains in Egypt’s balance of payments is probably now over and the current account deficit should narrow over the coming quarters, but we still think that the pound will gradually weaken against the dollar. The current account position …
20th August 2020
The Central Bank of Egypt (CBE) kept interest rates on hold for a fourth consecutive meeting on Thursday as policymakers remained cautious about delivering more monetary stimulus. That said, with the CBE accepting that inflation will undershoot its …
14th August 2020
The normalising of relations between Israel and the UAE may pave the way for similar agreements with the other Gulf countries, notably Saudi Arabia. The move might help to foster economic relations between the two countries, although the experience from …
13th August 2020
Saudi Arabia’s budget deficit will narrow over the coming years as oil prices recover and the government ploughs ahead with austerity. But debt will rise further, reaching close to 40% of GDP by end-2022, having been less than 2% of GDP in 2014. And …
The major blast in Beirut yesterday has severe humanitarian consequences, and the incident threatens to deepen the country’s economic and political crises. Yesterday, a huge blast rocked Lebanon’s capital city, Beirut, that emanated from the local port. …
5th August 2020
The Saudi economy has embarked on a recovery in the past couple of months, but fiscal austerity and oil production cuts, as well as the ongoing suspension of pilgrimages, mean that it is likely to be slow going. The latest activity data suggest that Saudi …
30th July 2020
Saudi Arabia has grown increasingly frustrated with other oil producers’ failure to comply with the OPEC+ oil output cuts and, while we think that the current deal will remain intact for now, the risk of another price war will grow as demand improves. …
23rd July 2020
Tunisia’s public finances have deteriorated sharply over the past decade and the government’s debt burden appears to be on an unsustainable path. This would be exacerbated if external financing conditions tighten and the dinar weakens sharply. A sovereign …
8th July 2020
The Saudi economy contracted by 1% y/y in Q1 and the figures from Q2 point to an even sharper downturn in Q2 due to the coronavirus crisis. The lifting of the lockdown this month is helping to support a recovery but a fresh bout of fiscal austerity means …
30th June 2020
Banking sectors across the Middle East and North Africa are generally well placed to weather the current economic downturn but there are pockets of vulnerability, particularly in Qatar and parts of North Africa. And there is a growing risk of a wave of …
17th June 2020
Lebanon’s government has made little progress with its economic rescue plan and there’s a growing likelihood that the sovereign debt and currency crises already underway will ultimately lead to series of bank failures. We already expected the economy to …
15th June 2020
The tripling of the VAT rate from July will cause inflation in Saudi Arabia to jump, but the impact may be relatively less severe than it was when VAT was first introduced at the start of 2018. That said, the hit to households’ finances reinforces our …
10th June 2020
The measures to contain the coronavirus outbreak have shut down economies across the world, leading to job losses and falls in income. Migrant workers appear to have felt the brunt of this and the resulting drop in remittances will hit the economies in …
3rd June 2020
Our GDP Tracker suggests that the Saudi economy held up relatively well in Q1, but more timely low-profile data point to a collapse in activity in Q2. And, as lockdown measures are eased, the onset of fiscal austerity will hold back the economic recovery. …
1st June 2020
Saudi Arabia’s foreign exchange reserves are being depleted rapidly to protect the dollar peg, but we think that they would need to fall by more than $380bn to less than $100bn before the monetary authority could no longer commit to full convertibility …
20th May 2020
Oman is one of the most vulnerable economies in the Gulf to a period of ultra-low oil prices but we think that financial support from its neighbours will avert the need to abandon the dollar peg. Even so, the government is ramping up fiscal austerity more …
18th May 2020
The Central Bank of Egypt’s decision to keep interest rates unchanged today was not a major surprise given that efforts to prop up the pound have taken precedence over supporting the economy. If the IMF manages to persuade the central bank to loosen its …
14th May 2020
The austerity measures announced by the Saudi government today reinforce our view that it will rely on fiscal consolidation rather than a devaluation to make the adjustment to cheap oil. The measures mean that households may end up bearing a larger burden …
11th May 2020
There seems to be a lot of confusion as to exactly how Saudi Arabia uses its reserves to finance twin budget and current account deficits. In this Update , we shed some light on the matter. Oil prices have recovered some lost ground over the past week or …
5th May 2020
The announcement that Lebanon will formally seek financial assistance from the IMF should help to avoid a more disorderly outcome from the country’s current debt crisis. However, we hold reservations about parts of the rescue plan set out by the …
1st May 2020
Egypt has become the latest emerging market to turn to the IMF for assistance and one of the priorities for the Fund is likely to be for the central bank to loosen its grip on the pound. That said, there is unlikely to be a repeat of the 50% fall in the …
27th April 2020
Pressure is mounting on Saudi Arabia’s dollar peg and, while there is some opaqueness over the full size of the Kingdom’s FX reserves, we estimate that the authorities could prop up the riyal at current ultra-low oil prices for more than five years. This …
22nd April 2020
The collapse in oil prices has led to renewed pressure on dollar pegs in the Gulf and, while there could be some positive effects on balance sheets from devaluations, the costs would be politically unpalatable. The upshot is that we think that …
21st April 2020
The deal struck by OPEC and other oil producers to cut oil output sharply over the coming months will help to put a floor under oil prices, but the reduction in output simply adds to the reasons to expect a sharp downturn in the Gulf economies this year. …
14th April 2020
Egypt’s central bank is intervening to prop up the pound, but the experience from the previous decade is that such efforts ultimately prove futile. If policymakers try to support the pound for an extended period, this risks repeating the problems that, in …
8th April 2020
Brent crude is closing in on $20pb and, if there are no signs of a recovery in the coming months, the chances that Saudi Arabia pushes for fresh oil output cuts will grow. Meanwhile, we are approaching the point at which financial support for Oman needs …
31st March 2020
Governments across the Middle East and North Africa have taken increasingly draconian steps over the past couple of weeks to contain the coronavirus outbreak and, as a result, there will be much more economic damage than we had previously thought. We now …
25th March 2020
Efforts to contain the coronavirus outbreak look set to hit tourism sectors across the MENA region hard. The North African economies, as well as Dubai, Lebanon and Jordan, are most vulnerable and the direct hit will knock at least 2-3% off GDP this year. …
19th March 2020
The collapse in oil prices over the past week has put pressure on the Gulf’s dollar pegs, but we think that a wave of devaluations is extremely unlikely. Large foreign exchange savings provide substantial buffers and the likes of Bahrain and Oman, which …
16th March 2020
Efforts to contain the coronavirus will weigh heavily on non-oil sectors across the MENA region over the coming weeks and months. Dubai is the most vulnerable and this could ultimately ignite fears over the Emirates’ large debt burden. The most obvious …
The fact that the fall in oil prices will cause Saudi Arabia’s government to run a large budget deficit has prompted suggestions that it might have to shift oil policy to prop up prices. But the current account deficit is likely to play a larger role than …
10th March 2020