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Middle East

Egypt Consumer Prices (Aug.)

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 little further over the rest of this year and with the pound set to be allowed to depreciate at a faster rate too, we think this will prompt a further 150bp of interest rate hikes, to 12.75%.

8 September 2022

Egypt: Amer’s resignation raises scrutiny of pound policy

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 fall further – our forecast is for the currency to fall to 25/$ by end-2024 (from 19.1/$ now) – and hike interest rates.

17 August 2022

The economic impact of the Qatar FIFA World Cup

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 sectors and strains in the banking sector.

15 August 2022
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Saudi Arabia Consumer Prices (Jul.)

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 anything, the risks are skewed to the downside given the growing likelihood of a cut to the VAT rate.  

Egypt: PIF steps up investment; CBE rate hike on the cards

Saudi Arabia’s Public Investment Fund has stepped up investments into Egypt this week that will help to ease external financing concerns. At the same time, electricity rationing will begin next week to free up more natural gas (which Egypt relies on for power) for export in an effort to narrow the large current account deficit. However, these measures will only provide a short-term reprieve and a weaker pound and steps to attract more direct investment will be key to putting the external position on a more sustainable footing. Meanwhile, rising inflation is likely to prompt the Central Bank of Egypt to resume its tightening cycle with a 50bp hike, to 11.75%, next Thursday.

Emerging Markets Capital Flows Monitor

Capital outflows from EMs have eased over the past month, helping to stabilise local asset prices. But we think outflows will pick up again before long. That’s a threat to those EMs whose current account deficits have widened or are widening sharply, including Turkey, Chile and parts of Central Europe. Emerging Europe Drop-In (11th Aug): We’re expecting downturns in Central and Eastern Europe, but how bad could it get? Join this 20-minute briefing on our Q3 Outlook report, including the latest on Turkey, Russia and whether Hungary’s forint has further to fall. Register now.

Egypt Consumer Prices (Jul.)

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 target range until early 2024. Greater flexibility of the pound has taken some pressure off policymakers to hike interest rates aggressively, but we still think rates will rise a further 150bp, to 12.75%, by the end of this year.

Qatar’s LNG boost still a few years away

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 Field expansion that comes online from 2025 will boost the country’s LNG capacity by over 60%, this wouldn’t be a panacea for Europe’s gas shortages. In view of the wider interest, we are also sending this MENA Update to clients of our Energy and Emerging Europe Services.

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