Entries for 'Saudi Arabia'

Lower government spending has decreased medium-term fiscal vulnerabilities to lower oil prices. As the PIF is taking a leading role in public investments, capital expenditures in the budget have declined significantly. Despite fiscal headwinds, non-oil growth is expected to remain solid at 2.7%.

We expect non-oil growth to accelerate to 3.0% as private sector confidence improves and the monetary stance eases. However, overall growth will likely drop to 0.5%, dragged down by a significant cut in crude oil production. 

Non-resident capital inflows to the MENA region are projected to rise from $165bn last year to $200bn in 2019 before moderating to $173bn in 2020. With the increasing inflows, inclusion into global indices, and ongoing reforms, the MENA region is becoming more prominent on the EM investment map. 
 

We expect growth in the MENA region to slow to 1.4% in 2019 from 1.8% in 2018, dragged down by the deep recession in Iran and the compliance with the OPEC + deal. This aggregate picture, however, hides considerable heterogeneity in economic paths across the region.

Recent attacks on Saudi oil facilities led to the worst supply disruption in last 50 years. Aramco’s full return to normal crude oil production may take more than a few weeks. The impact on the Saudi economy includes a small contraction in overall real GDP and a wider fiscal deficit.

Portfolio investments will be the main driver of foreign capital inflows increase to Saudi Arabia in 2019. Supported by the MSCI upgrade, Saudi Arabia has attracted $18 billion in foreign equity inflows so far this year.

We still expect Brent oil prices to average $65/b in 2019 and $62/b in 2020. Growth in non-OPEC supply combined with deceleration in global oil demand growth in 2019 and 2020, is offsetting upward pressure on oil prices from rising geopolitical tensions that could disrupt supply.

The GCC countries followed the Fed and cut their key policy rates, given their pegged exchange rates. Lower interest rates will encourage borrowing and stimulate non-oil growth, which has been weak in recent years. We expect non-oil growth to pick up from 2.1% in 2018 to 2.8% in 2019. 
 

Supported by MSCI upgrade Saudi Arabia has attracted $10.8bn in foreign equity inflows so far this year. In contrast, renewed trade tensions sparked a sharp decline in portfolio equity flows to other EMs. Saudi Arabia can count on an additional $40bn in equity inflows in the coming years. 
 

Holdings of U.S. Treasuries have increased, driven by portfolio restructuring in GOSI and the PIF. As across the GCC, public foreign assets exceed official reserves of the central bank. A further increase in the PIF’s assets abroad is set to improve the country's international investment position. 

In this edition of Sticky Notes, we look at key issues facing the incoming U.S. Congress, new realities in Mexico, U.S.-China trade talks, and potential auto tariffs.

We develop a measure of core capital flows for Saudi Arabia, which has a similar intuition to widely-used core inflation metrics. Core CPI strips o

At this time last year we warned that political uncertainty had risen to remarkably high levels. Now the questions may have changed, but risks remain.