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The sharp fall in oil prices today will push current account and budget positions into deficit across the Gulf, but these can be financed from large savings for some time. Dollar pegs should stay intact and the Gulf won’t backtrack on plans to raise …
9th March 2020
The news that Lebanon’s government won’t repay a $1.2bn Eurobond maturing has caused bond prices across the curve to fall and all eyes will now turn to the government’s plans to restructure its debts. A swift deal is looking increasingly difficult to …
Lebanon’s government is set to decide tomorrow on whether to repay a $1.2bn Eurobond maturing on Monday. Whatever the decision, a debt restructuring inevitably lies in store and the government will probably try to concentrate losses on holders of …
6th March 2020
The spread of the coronavirus has prompted us to lower our 2020 GDP growth forecasts for the MENA region by 0.5-2.0% and the risks remain skewed to the downside. The UAE is the most vulnerable economy and the fallout threatens to ignite concerns over …
3rd March 2020
In light of the accelerating spread of the coronavirus – and the economic disruption that is likely to follow – we are pulling down our GDP growth forecasts for Q1 and Q2 of this year. Growth is likely to rebound over the second half of the year, but most …
2nd March 2020
Our GDP Tracker suggests that the downturn in Saudi Arabia’s economy deepened in Q4 of last year and, while the worst has probably now passed, the downside risks to the outlook are mounting. Saudi Arabia’s quarterly GDP data are published with a …
27th February 2020
The Central Bank of Egypt’s (CBE) decision to keep interest rates unchanged last night for a second consecutive meeting suggests that policymakers are more concerned by the recent uptick in inflation than we had originally thought. As a result, we’ve …
21st February 2020
Current account positions in the largest MENA economies (particularly in the Gulf, but also Egypt) have improved over the past few years. But deficits elsewhere remain large. And Algeria, Tunisia and, to a much greater extent, Lebanon face sharp currency …
19th February 2020
Lebanon’s new government appears to be warming to the idea of going to the IMF, which would reduce the risk of a disorderly debt default that causes severe strains in the local banking sector. But even if the authorities go to the Fund, any deal is still …
13th February 2020
Morocco’s economy has slowed over the past few years, but we think that a recovery will take hold in 2020. Further out, we expect that the country will record growth in excess of 5% a year by 2030. After peaking at 4.0% in 2017, GDP growth in Morocco has …
5th February 2020
Our GDP Tracker suggests that the downturn in Saudi Arabia’s economy deepened at the end of last year as the drag from oil production cuts intensified. A recovery is likely to take hold this year, but it is likely to be weaker than most currently …
27th January 2020
The Egyptian pound has strengthened further at the start of this year but it is now making exports uncompetitive and, with support from high real interest rates likely to fade, the currency will probably give up some of its gains over the rest of this …
23rd January 2020
In a surprise move, the Central Bank of Egypt (CBE) left interest rates on hold yesterday even though policymakers don’t seem to be worried by the recent rise in inflation. We think that the easing cycle will be resumed in the coming months and forecast …
17th January 2020
The swift appointment of Haitham bin Tariq as the Sultan of Oman, following the death of Sultan Qaboos, has eased fears that the country would enter a prolonged period of political uncertainty. But the new leader faces a difficult task of securing …
13th January 2020
Fears of a direct conflict between the US and Iran have eased over the past day or so, but the risk has not disappeared and the rest of the MENA region is vulnerable to any retaliation by Tehran. Attacks on oil facilities or an attempt to close the Strait …
7th January 2020
The Gulf states are likely to have recorded their second weakest pace of aggregate growth since the global financial crisis in 2019 due to oil output cuts and poor performances from non-oil sectors. While we think there will be a recovery in 2020-21, it …
The assassination of Qassem Soleimani, a major figure in the Iranian regime, in a US airstrike last night has significantly raised the chances of an outright conflict between the US and Iran. We’ve previously estimated that a US-Iran war could shave …
3rd January 2020
Saudi Arabia’s 2020 budget makes clear that the authorities are preparing for a prolonged period of low oil prices by introducing fresh fiscal austerity. This, combined with the deeper oil production cuts agreed with OPEC+ last week, has prompted us to …
9th December 2019
The OPEC+ oil quota cuts announced today are unlikely to have a significant economic impact on most Gulf economies, but they will on Saudi Arabia. The direct impact of the output cuts means GDP growth in Q1 there might be some 0.6%-pts weaker than we …
6th December 2019
The political situation in Lebanon shows little sign of improving and the risk of a disorderly devaluation, sovereign default and banking crisis are rising by the day. Our sense is that the authorities will eventually turn to the IMF, probably before …
4th December 2019
Our GDP Tracker suggests that Saudi Arabia’s economy contracted by around 0.5% y/y in Q3 as a greater drag from oil production cuts (as well as the temporary disruption from the attacks on oil facilities in September) more than offset stronger growth in …
27th November 2019
Pressure is growing on Lebanon’s dollar peg and, in the event of a devaluation, the pound could fall by as much as 50% against the dollar. A messy sovereign default and a deep recession would follow. But over a longer horizon, a more competitive currency …
19th November 2019
The 100bp interest rate cut delivered by Egypt’s central bank today is likely to be followed by further easing in the coming months. While we expect inflation to edge up in the near term, it will remain below the central bank’s target. As such, we …
14th November 2019
The boom in credit in Qatar since the turn of the year has caused a renewed build-up of vulnerabilities in the banking sector. Severe balance sheets strains should be avoided, but the recent pace of credit growth won’t be sustained, which will add to the …
13th November 2019
The decline in Egyptian inflation to a 14-year low of 3.1% y/y in October raises the risk that the central bank lowers interest rates by more than the 100bp that we have pencilled in for Thursday’s meeting. Inflation is likely to rise from here, but we …
11th November 2019
Many of the non-oil producing countries in the region have tended to support their dollar pegs by maintaining a level of FX reserves sufficient to cover the monetary base. In Egypt and Jordan, reserves are more than enough to cover the monetary base. But, …
7th November 2019
The upcoming sale of a stake in Saudi Aramco would probably make the government less inclined to implement fresh austerity. The long-term impact on the Saudi economy will depend on whether this leads to renewed impetus behind reform, although we are …
4th November 2019
Our Tracker suggests that the impact of oil production cuts caused the Saudi economy to contract in Q3. And output probably fell at a steeper pace in Q4. Saudi Arabia’s quarterly GDP data are published with a significant delay – figures for Q3 won’t be …
28th October 2019
The protests in Lebanon (and policymakers’ response) underline that pushing through the austerity needed to stabilise the public finances is politically impossible. With large debt repayments due over the next year, a crunch point is approaching fast. A …
21st October 2019
Economic growth in Kuwait is likely to remain sluggish in the coming years due to the impact of oil production cuts as well as ongoing tensions between the government and parliament, which will prevent fiscal loosening. Our GDP growth forecasts lie well …
15th October 2019
Tunisia’s new president will face the immediate challenge of a fractured parliament and, amid what are set to be arduous coalition talks, policy paralysis is likely to set in. The country’s large imbalances will be left unchecked, raising the risk of a …
14th October 2019
Our GDP Tracker suggests that the intensifying drag from oil production cuts caused the Saudi economy to slow even further at the start of Q3. Things are likely to get even worse in the coming months and our GDP forecast for 2019 as a whole of 0.3% lies …
9th October 2019
Dubai’s economy slowed in 2018 and the activity data for this year suggest that growth has stayed weak. The 2020 World Expo will provide a fillip to the economy, but a number of other factors mean that GDP will grow at rates of 1-2% over 2019-21, well …
2nd October 2019
The Central Bank of Egypt shrugged off the market volatility following recent protests across the country and lowered interest rates by another 100bp, to 13.25%, at today’s meeting. So long as the protests don’t escalate, weak inflation pressures mean …
26th September 2019
Protests in Egypt over the past few days have ignited concerns that the country is on the cusp of another period of political upheaval. Past experience suggests that this would be disruptive for the economy and government efforts to quell unrest, such as …
23rd September 2019
There is still a lot of uncertainty surrounding the attacks on Saudi Arabia’s Abqaiq oil facility but, so long as the worst of the disruption to oil supplies lasts no more than a few days, the hit to global energy markets and the Saudi economy should be …
16th September 2019
The slowdown in Qatar’s economy over the past decade should come to an end in the coming quarters as the start of production at the Barzan gas project boosts growth in the hydrocarbon sector. But tight fiscal policy and a slowdown in credit growth are …
11th September 2019
The change at the helm of the Saudi energy ministry raises the chances that the current OPEC+ output deal is extended beyond its current expiry date of March next year, which would probably require the Kingdom to keep its oil output below its quota. The …
9th September 2019
The recent sharp rise in Saudi banks’ wholesale borrowing isn’t yet a major cause for concern, but it does mean that credit growth is more vulnerable to a shock that causes external financing conditions to tighten. Saudi bank’s foreign liabilities have …
3rd September 2019
Our GDP Tracker suggests that Saudi Arabia’s economy slowed further in Q2, to just 1.0% y/y, as the drag from the oil sector intensified. We think that GDP growth will be even softer in the coming months and we’re comfortable with our below-consensus …
27th August 2019
The Egyptian central bank cut its overnight deposit rate by a larger-than-expected 150bp last night (to 14.25%) and with inflation likely to fall further in the coming months, much more easing lies in store. We have revised down our year-end forecast to …
23rd August 2019
The sharp rise in Egyptian external debt in the last few years has triggered alarm in some quarters. But it has been accompanied by a large increase in FX reserves, suggesting that risks are currently manageable. Egypt’s external debt has increased …
20th August 2019
The planned IPO of Aramco – which reports suggest is back on – will probably make the government less inclined to impose fresh austerity measures in response to lower oil prices. The partial sale of the company itself won’t do much to improve the …
12th August 2019
Financial support from the Gulf means that Bahrain and Oman should avoid damaging devaluations and acute sovereign debt problems. Even if their governments fail to implement the fiscal tightening that the other Gulf countries demand (as seems increasingly …
7th August 2019
Government debt-to-GDP ratios across the Gulf have risen significantly over the past five years but only in Bahrain and Oman do we hold serious concerns over the health of the public finances. Financial support from their neighbours should prevent …
31st July 2019
Our GDP Tracker suggests that the slowdown in Saudi Arabia’s economy at the start of this year extended into Q2 and it looks set to intensify over the rest of 2019. Our forecast for GDP growth of just 0.3% over this year as a whole lies well below …
30th July 2019
Household consumption in Saudi Arabia expanded at its fastest pace in more than three years in Q1 but the prospect of fresh subsidy cuts and tax hikes means that this recent strength won’t last. The latest quarterly national accounts data, which now …
17th July 2019
Economic growth in the UAE will slow over the rest of this year due to the impact of oil production cuts. But preparations for the World Expo will help to drive a rebound in 2020 and we expect the economy to be the best performing in the Gulf. The latest …
4th July 2019
Our GDP Tracker suggests that Saudi Arabia’s economy slowed further at the start of Q2 as the drag from the oil sector intensified and the recent pick-up in the non-oil sector started to peter out. We expect growth to slip further over the rest of this …
25th June 2019
Saudi Arabia’s new bankruptcy law, which was approved by King Salman last month, will make it easier to deal with the fallout from corporate failures and, through improving access to credit, support the development of small and medium-sized enterprises …
1st March 2018