Entries for 'Middle East North Africa'

Higher oil prices so far this year have been supported by the partial recovery in demand and temporary production cuts. We expect oil prices to average $60/b in 2021. 

GCC authorities took forceful steps to mitigate the fallout from COVID-19, and we expect a modest recovery in 2021 supported by higher oil prices. However, the region confronts an ongoing exodus of expats and decelerating growth of capital stock, underscoring the need for broad structural reforms.

While the pandemic hit the economy hard, timely measures have limited the health and economic effects. Uzbekistan entered the pandemic with strong fundamentals and policy buffers. We expect real GDP to pick up to 4.5% in 2021 from 1.6% in 2020.

Measures to contain the pandemic combined with the drop in oil prices triggered a deep recession. The large twin deficits will narrow significantly in 2021 supported by higher oil and gas prices. We see foreign reserves declining further to levels well below conventional adequacy metrics by 2023.

The kingdom has seen a limited impact of the pandemic due to its low share of services and young population. Non-oil real GDP will grow by 3% in 2021 following a contraction of 2.7% in 2020. The fiscal deficit will narrow to 4% of GDP in 2021, supported by fiscal consolidation and higher oil prices.

Improved market sentiment will allow African sovereigns to return to the market in ‘21. We expect Egypt, Nigeria, Ghana, and South Africa, among others, to issue Eurobonds. However, debt sustainability and liquidity concerns are rising in the context of COVID-19. African countries face Eurobond repayments of close to $100 bn in the coming years. An end to the current low-interest rate environment could make rolling over of debt costly.

The Egyptian economy has weathered the COVID-19 pandemic relatively well. Monetary policy was appropriately eased and has some scope for additional support to underpin the recovery. Reining in fiscal deficits and debt will require a commitment to fiscal discipline once the COVID-19 crisis abates. 

The UAE has seen limited health impacts from the pandemic. The vaccine rollout, partial oil price recovery, and progress in digital transformation offer hope for the UAE economy. Technological progress will develop new growth drivers and raise potential growth over the medium-term. 

The economy has been hit hard by the pandemic, unstable political situation, and the decline in oil prices and production. The devaluation combined with a modest recovery in oil prices could put the fiscal stance on a more sustainable footing. Improved governance is also needed to implement reforms. 

Lebanon’s political, economic and financial situation is highly uncertain. Absent real reforms, Lebanon's economic trajectory seems headed toward that of a “failed state.” Carrying out reforms could lead to an agreement with the IMF and unlock financial support from the international community.
 

We expect Brent oil prices to average $47/b in 2021, but upside risks are significant. Low interest rates, a weaker US$, tighter supply, and strong demand from East Asia are boosting non-fuel commodity prices. 

Despite Biden’s election, the future of the nuclear deal (JCPOA) remains uncertain due to hardliner resistance in Iran and a divided US Congress. Failure to renegotiate the deal would likely keep the economy fragile. On the other hand, Iran’s economic potential is high if U.S. sanctions are lifted. 

Kazakhstan’s flexible exchange rate and use of ample policy buffers have limited the effect of COVID-19 on the economy. Vulnerabilities remain high due to low oil prices and structural weaknesses. Key reforms need to be implemented to reduce dependency on oil and promote private sector growth.

Sovereigns are increasingly tapping capital markets to finance fiscal deficits. Private inflows to the MENA region continue to be dominated by Saudi Arabia, the UAE and Qatar. Resident outflows are declining but still exceed inflows. FDI remains subdued and concentrated in the energy sector. 

Progress is being made on fiscal adjustment and structural reforms. The sharp fall in oil revenues will exceed the cut in public spending, leading to a large fiscal deficit. Strong adjustment and partial recovery in oil prices could make the fiscal position more sustainable. 

We forecast a deep contraction in 2020, followed by a modest recovery in 2021. The biggest economies, with their large buffers and low debt, are best prepared for the difficult environment. Broadly, the region needs to implement major reforms to improve competitiveness and curtail corruption. 
 

We expect the economy to contract by 5.2% in 2020 and grow by 2.3% in 2021, driven mainly by the non-oil private sector. The Kingdom responded to COVID-19 and the plunge in oil prices with major fiscal consolidation, but deep structural reforms are needed to raise potential non-oil growth. 

We expect Pakistan to return experience modest growth in FY2020/21 following a small contraction in FY2019/20. However, risks to the economic outlook are tilted to the downside. Recurrent outbreaks of COVID-19, a large fiscal deficit, and high public indebtedness remain major challenges. 

The explosion in Beirut is calling attention to a pervasive culture of negligence, corruption, and complacency among Lebanon's ruling elite. The blast will deepen the contraction in the economy, but may spur badly needed political and economic reforms. If not, the country will continue to sink. 

The Caucasus and Central Asia (CCA) region was hit hard by COVID-19, with energy exporters also enduring the oil price collapse. Exchange rate flexibility, support from the IMF, and low risk of sovereign debt distress will help most CCA countries remain stable through 2021 absent further outbreaks.