Positive developments in recent months, most notably the Ras El-Hekma, deal bode well for Egypt. The macroeconomic ramifications of these developments should help boost growth, reduce inflation, put public debt on a downward sustainable path, and improve the external position.

This note summaries the main topics discussed during our online investor trip to Egypt. Overall, participants outlook on the Egyptian economy was broadly positive, with many citing the massive liquidity injection stemming from the Ras El-Hekma deal has the main upside development.

After bottoming out over the past two years, the momentum of nonresident capital flows to emerging markets has shifted. This in large part due to a better EM outlook relative to advanced economies, with average EM output growth likely to be higher and EM interest rate spreads likely to widen.

Saudi Arabia's short-term macroeconomic outlook remains favorable, despite tighter global financial conditions. We expect non-oil growth to remain robust at 5%, driven by consumption and investment. The current account will continue to narrow, while capital outflows will outweigh capital inflows.

The historic Ras El-Hekma deal will bring in $35bn of immediate financing within the next couple of months. The cash windfall will help cover Egypt s external financing needs over the foreseeable future and, combined with an expanded IMF program, can boost gross reserves to over $50bn.

In this report we highlight the potential fallout to the global economy of a wider, prolonged, war in the Middle East. We focus on two scenarios, and see how each scenario affects commodity prices, trade disruption, and global inflation and growth.

The ongoing conflict in Gaza will widen the current account deficit. Gross financing needs will remain very high and available financing will be insufficient unless an IMF program resumes which would usher in additional official financing.

Gross foreign assets of the GCC countries are forecasted to grow to $4.4 trillion by the end of 2024, in this note we analyze where these petrodollars are being invested.

We analyze the impact of a potential spike in oil prices on advanced and developing countries, as well as the global economy as whole. We find that the overall effect is much less severe than in previous oil shocks due to structural changes including the reduction in the intensity use of oil.

This report analyzes the possible political, social, and economic implications of the Israel-Hamas war on the MENA region.

CCA growth continues to surprise, driven by strong domestic demand and inflows from Russian migrants. The dynamics seen since the invasion of Ukraine are forecasted to continue benefitting the region in 2024, however risks remain tilted to the downside.

We look at the expected impact of the recent earthquake on Morocco's economy. In the long-term, boosts from the planned reconstruction may offset the initial negative impact, as the Moroccan government seizes the opportunity to curb pre-existing technological disparities in the affected regions.

We look into the issue of exchange rate misalignment in Egypt. We find that the current real effective exchange rate is overvalued by around 10%. The results support our view that Egypt's currency must be allowed to float, and that this must also be accompanied by tighter structural policies.

Capital inflows are set to rebound in 2023 as sovereigns, particularly Saudi Arabia, issue more debt to finance fiscal deficits. However, resident outflows, largely GCC transfers to sovereign wealth funds, will continue to far exceed nonresident inflows.

This note is the third installment of our series of reports focusing on Egypt. We look at the composition of privatization proceeds in FY 2022/23 and then analyze potential prospects for privatization in FY 2023/24.

We continue our series of reports focusing on Egypt by analyzing the fiscal outlook for the next fiscal year.

This note kicks off a series of reports focusing on Egypt, which we plan to release over the coming months. Today s note will discuss Egypt s external financing picture for FY23 and FY24.

The real estate prices will continue to rise in the UAE and Saudi Arabia, albeit at lower pace.

The magnitude and multiplicity of the challenges facing Lebanon require close collaboration with the IMF, including undertaking a comprehensive reform program.

We expect average oil prices to decline from $100 a barrel in 2022 to $85 in 2023 and $80 in 2024. The main downside risk to the oil price forecast is weaker than-expected global growth. Growth accelerated to 7.9% in 2022, driven by a substantial increase in hydrocarbon output and elevated oil prices.

MENAP non-oil countries are facing unprecedented challenges. We expect growth to slow sharply, and the current account and fiscal deficits to remain large.

CCA countries have successfully managed to avoid any negative spillovers from Russian sanctions. Higher remittances and energy prices led to strong growth. However, risks of secondary sanctions remain, as Western officials begin to clamp down on countries potentially aiding sanction evasion.

Authorities reluctance to implement the needed reforms has aggravated Tunisia s preexisting debt problems. In the absence of an IMF program, persistent fiscal and balance of payments financing shortfalls will jeopardize macroeconomic stability.

Although vulnerabilities have increased, Egypt s challenges are not insurmountable. The government s ambitious and comprehensive program with the IMF could bring fundamental policy changes, transforming Egypt into a more open, market-oriented, economy.

Overall growth is set to decelerate, dragged down by stagnant oil production while non-oil real GDP growth will remain robust. The current account and fiscal surpluses will narrow in 2023 due to moderation in oil prices. The authorities have made significant progress in implementing crucial reforms.

The short-term macroeconomic outlook remains favorable, supported by elevated oil prices. Structural reforms are needed to help diversify the economy.

Investor sentiment towards oil exporters in the region will remain favorable due to elevated energy prices. Total capital inflows will remain modest in 2023, as sovereigns issue less debt due to continued fiscal surpluses. FDI will become the main conduit for nonresident capital inflows.

Growth in the nine MENA oil exporters will accelerate. The impact of tighter global financial conditions is expected to be limited. The combined current account and fiscal balances will remain in large surpluses. Risks to the outlook are well contained given the ample public foreign assets.

Potential IMF financial support would help meet the large financing needs and strengthen confidence in the economy more broadly.

Prolonged inaction by the authorities has worsened economic conditions and deepened the financial crisis.

The impact of U.S. interest rate increases on the GCC will be limited in an environment of high oil prices.

The country has been in political paralysis without a new government and president since October 2021. We expect growth to accelerate to around 9% in 2022 supported by higher oil prices and production.

Growth will accelerate to 5.9% in 2022 supported by higher oil production and prices. The combined current account surplus is poised to surge to 16% of GDP and the fiscal surplus to 7% of GDP. Inflationary pressures remain relatively modest.

Subdued tourism revenue, higher food prices, and tighter global financial conditions have increased vulnerability of the Egyptian economy. Monetary tightening, exchange rate flexibility, financial support from the GCC, and an increase in natural gas exports will help to mitigate the external shock.

The authorities and the IMF have reached a staff-level agreement on a comprehensive economic program. Approval by the IMF Executive Board is contingent a series of prior actions. The program is based on two pillars–-a unified market-determined exchange rate and a confidence-inspiring banking system.

Political tensions and major structural challenges combined with the war in Ukraine have exacerbated economic vulnerabilities. Current and fiscal deficits and high public debt pose significant financial risks. An IMF program is needed to close the financing gap and restore macroeconomic stability.

The sanctions and the contraction of the Russian economy will have adverse economic spillovers to the CCA. The degree of the effect on each country will depend on its exposure to Russia. Elevated inflation is expected to persist with ongoing supply chain disruptions and higher commodity prices.

The war has increased downside risks to growth, raised inflationary pressure, and would lead to wider current account and fiscal deficits. Worsening external financing conditions have encouraged capital outflows and raised the financing needs.

Key senior government officials, representatives from IFIs, and private sector experts will discuss the unprecedented and difficult nature of the Lebanese economic and financial crisis.

Russia’s strategy of interrupting oil and gas flows for political gain will encourage Europe to find alternative energy suppliers. In the near term, alternative supplies to Russian gas are limited. In the medium-term, the U.S., Qatar, and Australia may overtake Russia as the primary gas providers.

Growth will moderate in 2022 and inflationary pressures could start to ease in 2022H2 as global food inflation moderates and central banks in the region maintain their tight policy stance. Higher energy prices will improve the external and fiscal balances in Azerbaijan, Kazakhstan, and Turkmenistan.

Investor sentiment towards the GCC region will improve further due to higher oil prices. Government-Related Entities (GREs) and the financial sector are expected to slightly increase their debt issuance. The pace of ESG issuance is accelerating.

Uzbekistan coped well with the pandemic. Growth will remain around 6% in 2022, inflation is declining, the fiscal deficit is projected to narrow gradually, and the public debt will remain modest.

High oil prices since end-2020 are largely driven by pervasive supply shortages from the lack of adequate investment. Current futures contracts point to Brent average oil prices of $73/bbl and $69/bbl in 2022 and 2023, respectively.

Inflation is rising due to higher food and energy prices, deglobalization, and supply chain disruptions. In addition, the recent increases in global CPI stem from widespread monetary easing and expansionary fiscal policy. Inflation may exceed central bank targets through 2022 and into 2023.

The result of higher oil prices is a shift in purchasing power from oil consumers to producers. Oil exporters are getting a boost to their terms of trade, leading to wider CA and fiscal surpluses. Higher energy prices will hurt several EMDEs that remain heavily dependent on petroleum imports.

The MENA region has weathered the economic storm from the health crisis. The economic recovery continues to gain momentum. Higher energy prices will improve the fiscal and current account positions in oil exporters. In oil importers, deficits, government debt, and unemployment will remain high.

The pandemic combined with the current political paralysis have exacerbated vulnerabilities in the economy. Tunisian policymakers face difficult choices in stimulating growth while reducing macroeconomic imbalances.

The IMF and World Bank approved Sudan’s eligibility for debt relief under the HIPC Initiative in recognition of the significant reforms implemented by authorities. We expect growth to pick up and fiscal and external imbalances to reduce as the country reintegrates into the international community.

We expect a 50% chance that the new cabinet will carry out the reforms needed to achieve macroeconomic stability and arrest further deterioration, which would lead to an agreement with the IMF and unlock financial support from the international community.

Higher oil prices will lead to modest growth, shift the CA to a surplus, and narrow the fiscal deficit. The resurgence of COVID-19 has set the recovery back, but progress on vaccination has improved resiliency. Key reforms to reduce oil dependency and promote private sector growth are needed.

While the election of Ebrahim Raisi as the new president will not derail the nuclear negotiations, the U.S. may not be able to extract concessions on critical issues. The likely outcome for the JCPOA negotiations is a return to the 2015 agreement, which would keep many sanctions in place.

The vaccine program and higher oil prices will support the recovery. Speakers agreed that significant progress has been made in implementing the kingdom’s economic and social reform agenda. However, they underscored the need for deeper structural reforms to support diversification and growth.

The vaccine program, strengthening of energy prices, and end of the rift with other GCC countries will support the recovery in Qatar. We expect the current account and fiscal balances to shift to sizeable surpluses in 2021 and 2022.

The COVID-19-induced collapse in international tourism was unprecedented. Even in an optimistic scenario, tourism revenues will remain subdued in 2021. As a result, the economic recovery in countries such as Thailand will be slower. Furthermore, external pressures are set to rise as imports rebound strongly.

Our baseline projections do not envisage recovery in tourism to pre-pandemic levels before 2023. Faster recovery in tourism hinges on rapid advancements in vaccine distribution.

We compare the cases of 12 countries that have attempted to unify their FX markets. Unified exchange rate systems eliminate distortions, reduce rent-seeking, and boost fiscal revenues. However, successful unification hinges on consistent underlying credit and fiscal policies and broad reforms.

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.

We examine currencies in the MENA region with large secondary market discounts, the biggest of which are in Lebanon, Syria, Iran and Sudan. The divergence of official and parallel FX rates in these countries reflects decades of economic mismanagement, public corruption, and international sanctions.

EM are experiencing an unprecedented and synchronized growth slowdown in ‘20. Restrictions remain in place in many countries, as the health crisis is far from over. The fiscal response has been uneven in EM, with some running out of policy space. Most EM central banks cut rates aggressively, and QE has become part of the toolkit. Asset price recovery and a modest return of capital flows should provide support.

The recent rise in oil prices is supported by the cut in global oil production and partial recovery in demand. We still expect Brent oil prices to average $40/b in 2020 and $45/b in 2020. Downside risks include poor OPEC+ compliance with the cuts and a continued global economic slowdown.

Shocked by COVID-19 and the plunge in oil prices, the six GCC states will experience their worst recession in history. However, most GCC public sectors and banks are well positioned to absorb the shocks due to their large buffers and aggressive fiscal adjustments.

Capital inflows to the MENA region will remain high despite the global backdrop. We expect the plunge in oil prices and widening fiscal deficits will lead to a decline in private non-resident capital flows to oil importers, but will be partly offset by higher official flows.

Lebanese authorities have developed a five-year comprehensive reform program, which could be supported by the IMF’s Extended Fund Facility. If implemented effectively we expect the macroeconomic situation to stabilize and an orderly debt restructuring, though significant challenges remain.

We expect the IMF to approve, in the coming weeks, the Egyptian authorities’ request for financial assistance through a Rapid Financing Instrument (RFI) and a Stand-By Arrangement (SBA). This financial support package would help strengthen confidence in the economy and meet large financing needs.

We project a deep recession in 2020 due to COVID-19 and the plunge in oil prices. Saudi Arabia can accommodate widening deficits given its large financial buffers and low debt.

The OPEC+ bloc agreed to cut oil production by a record 9.7mbd. Assuming full compliance, we expect Brent crude to average $40/bbl in 2020. Cuts will last through April 2022, at lower levels. Major non-OPEC+ producers will cut by up to 3.5mbd. Inventories should peak in Q2 and then drop in H2.

Russia’s fiscal breakeven oil price, around $40/bbl in 2020, is the lowest among major oil exporters. While Saudi Arabia’s fiscal and external breakeven prices should decline due to a cut in non-priority spending and a fall in imports, fiscal breakeven prices remain well above $60 in much of MENA.

Our MENA growth forecast stands at -0.3% with additional downside risks and high uncertainty over the duration of the shutdown and an additional potential fall on oil prices. We project recession in most oil exporters, the lowest growth in oil importers since the early 1990s, and wide twin deficits.

Authorities aim at boosting capital spending through the credit channel. Turkey’s external vulnerabilities have been somewhat reduced in 2019. Credit growth buffered the economy from weaker growth last year. Global recession risks pose significant challenges for growth in 2020.

We have lowered our average Brent oil price assumption by $10/bbl to $54/bbl for 2020 due to lower global demand for oil. Such a decline exposes significant vulnerabilities among MENA oil-exporting countries, especially Oman and Bahrain. External and fiscal positions are expected to weaken.

The fixed exchange rate was not adequately supported by other policies. Loose fiscal policy pushed public debt to unsustainable levels, while a slowdown of capital inflows, corruption, and regional conflicts weakened economic prospects. A viable economic program with international financing is key.

The formation of a government based on a "cabinet of experts" raises the chances of reforms that could arrest the country’s downward economic spiral and facilitate access to already-pledged concessional loans. However, restoring growth will require additional capital inflows from official sources.

U.S. sanctions have almost wiped out Iran’s ability to sell crude oil, pushing the economy into recession for a second year and spurring the authorities to increase taxes and cut subsidies. While they are reluctant to renegotiate the nuclear deal, the country's medium-term potential is considerable.

Five months into the IMF’s $6 billion EFF program, Pakistan’s progress looks better than anticipated. • We expect official reserves to continue recovering as the current account narrows and capital inflows improve. However, gross external financing needs at around 9% of GDP warrant caution.

The extra 0.5 mbd cut may not be enough to rein in projected oversupply in 2020, since the OPEC+ bloc has already made cuts well beyond the 1.2 mbd target of the previous agreement. Consequently, we expect a decline in average Brent oil prices to $60 a barrel in 2020.

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%.

Protests have continued since February, with the public calling for an overhaul of the ruling elite, but we expect limited change in the power structure. Economic activity will remain weak, as twin deficits persist and reserves fall. The 2020 budget envisages tightening, but deep reforms are needed.

Iraq’s path to recovery is inhibited by continuous political instability and a lack of institutional capacity. While the PM has resigned, there is much uncertainty on meeting protesters’ demands for economic and political reforms. The economic recovery from the war has been at a slow pace.

Lebanon's capital controls may avert short-term crisis. Yet they can pose a long-term cost by discouraging inflows, which play a pivotal role in the country's economic model. Timely formation of a new government with a strong commitment to reform can boost confidence and enable removal of controls.

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.

Nationwide protests continue, triggered by economic strain and deep-rooted dissatisfaction with the sectarian-based leaders. Permanent fiscal measures and deeper structural reforms are needed to achieve macroeconomic stability and raise growth.

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.

Following the change in political leadership, Uzbekistan embarked on a path of structural reforms and economic opening. Growth is expected to pick up driven by large public investments. Continued credit boom, slowing reform momentum and external shocks present key challenges to the outlook.

Bank lending and accommodative policies helped output recover in 2019H1,but a continued fall in investment limits the pace of real GDP growth. TRY depreciation has led the current account to shift to a surplus, and FX reserves appear sufficiently large to cover external debt repayments.

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.

Promoting nonhydrocarbon growth and diversifying away from traditional sectors remain key challenges. We expect nonhydrocarbon growth to reach 1.9% in 2019 and 2.2% in 2020, aided by stimulus in Abu Dhabi and Expo 2020-linked spending in Dubai, but then recede. More emphasis on innovation is vital.

Borrowing costs have fallen sharply as a result of policy changes. Lending remains subdued due to concerns over bank asset quality. Credit-fueled growth has increased private sector indebtedness. Banks remain well-capitalized and profitability is set to increase.

Lebanon’s economy is at a turning point. Despite the recent downgrades we still believe that Lebanon will not default given its sizable international reserves, robust banking system, and a track record of having never defaulted on foreign-currency debt.

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.

CCA countries have diversified their economic linkages. The EEU and the Belt Road initiative serve as channels for Russia and China to exert influence. While Russia remains a key partner with respect to trade, labor markets and FDI in some countries, China's prominence is increasing markedly.

Egypt has successfully completed the 3-year EFF arrangement with the IMF. Growth has accelerated, unemployment has decreased, the twin deficits have narrowed, core inflation has fallen, and the public debt ratio has started to decline.

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.

Real GDP growth in the Caucasus and Central Asia (CCA) remains strong in 2019, recovering from earlier external shocks of a fall in oil prices and sanctions on Russia. Growth should remain strong beyond the near term, although lower commodity prices and slowdown in major partners could pose risks.

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.

Addition to the MSCI EM Index would acknowledge capital markets reform and send a positive signal to investors. We expect foreign inflows of $1.8 billion from passive investors and up to $7 billion from active investors in 2020-2022.

Neglect of structural distortions has prevented Morocco from matching its more successful EM peers in raising its standard of living.

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.

Lebanon once again is at a crossroads. Painful measures are needed in difficult situations, and achieving fiscal sustainability, rebuilding confidence, and preserving the peg to the dollar inevitably will re-quire strong adjustment.

Loose monetary and fiscal policies have led to the build-up of macroeconomic imbalances. The IMF deal of $6bn will be adequate only with additional foreign inflows and significant rollovers. Decisive policy action and substantial external financing will be needed to achieve macroeconomic stability.

Oversupply and weak demand have weighed on real estate prices since 2014. Vulnerability stems from an unrealistic economic model amplified by adverse external factors, with detrimental effects to growth and financial stability. However, policy responses may slow the pace of future price declines.

Growth in 2019 will come from ongoing structural reforms to support non-oil activity, as the country has signaled that it will comply with the OPEC+ cuts. Medium-term prospects remain favorable. While the country has a new president, he is expected to remain committed to Nazarbayev's reform agenda.

Nationwide protests continue, triggered by dissatisfaction with the Al-Bashir regime. Sudan has contended for years with FX shortages and high inflation. Restoring confidence will require new leadership with the credibility and will to implement reform, and we expect a transition to take place.

In the face of popular pressure, President Bouteflika stepped down after 20 years in power, yet much uncertainty remains about the transition to a new government. Algeria’s growth model of hydrocarbon-financed public spending is not feasible with low oil prices, and wide-ranging reforms are needed.

Non-resident capital flows to MENAP are projected to rise slightly to $215 billion in 2019. Strong fundamentals in key countries, including large financial buffers and low debt, should support flows. Sovereign bond issuance will remain the main source of non-resident capital inflows.

Average growth in MENAP is foreseen to decelerate slightly to 2.2% in 2019-below the population growth. This aggregate picture, however, hides considerable heterogeneity in economic paths across the region. Non-resident capital inflows to MENAP should rise marginally this year to $189 billion.

Egypt is making good progress on economic reforms in the context of an IMF-supported program. However, to sustain the progress and to lift the growth trajectory durably over the long term, deeper and more fundamental reforms are urgently needed.

A soft exit out of the debt overhang is possible and the authorities now recognize the urgency of committing to meaningful and widespread reforms to improve long-term fiscal sustainability and rebuild confidence. However, the scope of credible reforms for 2019 remains unclear.

Expansionary fiscal policy will continue to drive non-oil growth, as fragile investment sentiment and regional tensions continue to hinder growth of the private non-oil sector. We expect overall growth to moderate to 2.0% in 2019, dragged down by compliance with the recent OPEC+ deal.

In our last edition of Sticky Notes in 2018, we look at President Xi's reform anniversary speech, Venezuela's future, NAFTA termination, oil markets, and a potential U.S. government shutdown.

Sentiment on oil prices remained weak amid doubts that the planned production cuts will be enough to rein in oversupply, and as investors suspect that OPEC+ would honor their pledge to cut production. We expect Brent oil prices to average $67/bbl in 2019 if the OPEC+ agreement is fully implemented.

Ongoing geopolitical tensions have created headwinds, but Qatar’s economy has shown signs of resiliency. We expect growth to accelerate to 2.9% in 2019, driven by natural gas production and public investment. Exiting from OPEC sends a symbolic message that the country wants to chart its own course.

In this edition of Sticky Notes, we look at oil markets ahead of the OPEC+ meeting, consumer privacy laws, U.S.-China trade talks, and end-of-year book recommendations.

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.

On November 5, the U.S. sanctions on Iran's financial and energy sectors took effect.' The temporary allotments, combined with the increased global oi.

The external balance remains in an enviable position. We expect the current account surplus to widen to 8.6% of GDP in 2018, and FDI wi.

Growth rebounded on the back of increased oil output, ' and will remain relatively strong this year and next. High public debt and fragile banks are.

More permissi.

Increasing access to finance would help MENA economies grow faster. MENA lags the world on financial inclusion metrics, both in established and emergi.

Growth has been robust, the current account and fiscal deficits have narrowed, core inflation has fallen to high single digits, and the public debt ra.

Loose monetary and fiscal policies have led to the build-up of macroeconomic imbalances. Decisive policy action and substantial external financing wil.

Oil prices are likely to remain high through end-2019, on concerns of supply disruptions in Venezuela and the impact of U.S. sanctions on Iran. We hav.

Re-imposition of sanctions have begun to cut oil and condensates exports A rapidly depreciating currency is feeding into soaring inflation and contrac.

Higher oil prices, doll.

The economy is suffering from a protracted economic stagnation, as the lack of reforms and delay in the formation of the new Cabinet have dampened pri.

Achieving rapid and sustained growth depends on dee.

However, legacy fi.

The impact on gasoline prices of selling 11 or even 30 million barrels of oil from SPR is negligible. Moving forward the planned sale of 288 million b.

Higher oil prices have raised inflationary pressures, given the weight of fuel and energy in the CPI baskets. They have also aggravated current accoun.

Widening fiscal and current account deficits have led to a substantial decline in international reserves. The State Bank of Pakistan has devalued the.

We have raised our growth forecast given the expected significant increase in oil production. High oil prices will provide a boost to non-oil economic.

Investors' concerns over rising public debt and large twin deficits pushed Bahraini dinar to a 17-year low. While support from Saudi Arabia, Kuwait, a.

OPEC and Russia have agreed to lift oil output starting July 2018.' The agreement is ambiguous with no concrete output targets and country level alloc.

High oil prices will provide a boost to economic activity through additional public spending. The external position will strengthen and the fiscal def.

Recent large-scale protests over austerity measures have led to a new aid pledge from the Gulf. The recent tax bill, which focused on regressive measu.

Supply outages, extension of the OPEC production cuts, and geopolitical risks pushed oil prices higher. Continued supply disruption in Venezuela and p.

The impact could be muted if the main energy trading partners of Iran secure exemptions from the U.S. or can find a way.

Higher oil prices will widen the current account surplus from 2.5% of GDP in 2017 to 9.6% in 2018. The fiscal deficit, including investment income, wi.

The underlying economic situation remains challenging with low growth, large deficits, and high public debt. Private sector confidence continues to be.

Non-oil economic growth is improving with stronger consumer confidence and a healthy project pipeline. The fiscal deficit, excluding investment income.

Economic prospects have improved somewhat, supported by fiscal stimulus and higher oil prices. The fiscal situation in Saudi Arabia is now on a firmer.

Following the recent rise in oil prices to over $60 per barrel, there is a sense that the worst is behind the UAE's economy and confidence is graduall.

The central banks of Saudi Arabia raised its policy rates by 25 basis points last Thursday The preemptive hike in policy rates may be partly due to co.

While political reforms may be delayed, a shift to private sector-led growth and diversification away from hydrocarbons would help to achieve sustaine.

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.

Non-resident capital inflows to MENA should rise to $224 billion this year, equivalent to about 8% of the region's GDP. The projected increase for MEN.

This report presents our analysis and projections of 14 economies in the Middle East and North Africa (MENA) region (Saudi Arabia, UAE, Qatar, Kuwait,.

The Pakistani economy experienced robust growth in the past two years driven largely by consumption and some progress in structural reforms. We expect.

The real challenge is Saudi labor force di.

While narrowing, we expect the fiscal deficit to remain large at 9.3% of GDP in 2018. Pressure on credit ratings will increase as public debt surpasse.

Recent protests have been fueled by unmet economic, social, and political expectations While the protests have ebbed in recent days, their underlying.

Iraq's post-war infrastructure rebuilding will help propel the economy's recovery. The recent oil price rise has alleviated some of Iraq's immediate f.

The economic situation has deteriorated since the Arab Spring in 2011. Fiscal consolidation, continual high unemployment, and rising inflation have tr.

The serious fiscal consolidation efforts of the past three years along with low debt, readily available financing, and currently weak economic activit.

The recent monetary tightening comes at a time when bank lending to the private sector remains subdued. Further interest rate hikes next year threaten.

The recent withdrawal of Hariri's resignation, as prime minister, and the commitment of the cabinet to stay out of regional conflicts, will ease the p.

Growth will moderate due to fiscal consolidation. The fiscal deficit, while narrowing, remains large and the debt-to-GDP ratio is increasing rapidly.

We examine the trends and outlook in the Saudi Arabia's balance of payments. The deterioration in 2015-2016 was in the current account as falling oil.

We expect several months of political stalemate, but exclude a recourse to violence or war with Israel. A protracted political stalemate will weigh he.

The UAE has been relatively resilient to the impact of the slump in oil prices owing to a relatively diversified economy, excellent infrastructure, po.

The public debt-to-GDP ratio is expec.

The statistical appendix provides summary data for the 14 countries that IIF Middle East Department covers (Algeria, Bahrain, Egypt, Iran, Iraq, Jorda.

We expect GCC growth to pick up to 2% in 2018 from 0.2% in 2017, as oil production stabilize.

Key recent economic indicators point to continued sluggish growth and deterioration in external position. Further fiscal consolidation needs to includ.

The sizeable fiscal consolidation underway should put the fiscal positions on a more sustainable footing. Non-hydrocarbon growth will decelerate on th.

Kuwait is well placed to withstand low oil prices given its low debt and enormous financial buffers, which allow the authorities to pursue gradual fis.

The Qatari economy continues to adjust to the effects of sanctions by some Arab countries. Given the large public foreign assets, Qatar is a strong po.

The Constitutional Council has suspended the new tax law. Fiscal adjustment should include both improvement in tax compliance and new tax measures. Wi.

Our preliminary estimate' of real hydrocarbon growth in fiscal year 2016/17 is about 20%, much more modest than 62% as reported by Iranian authorities.

Prolonged low oil prices and the need for further fiscal consolidation has shifted the economy to a lower growth path, which will not create sufficien.

The financial sector is in a strong position to weather challenges of lower oil prices.' Further deceleration in deposits could curtail credit growth.

Growth remained subdued, the deficits large, and public debt has risen to 151% of GDP. Without reforms the public debt burden will continue to rise, a.

The oil crash has taken its toll on GCC stock markets which are still well below their average for 2014, with a market capitalization of $940 billion.

With oil and gas prices expected to remain low, we are projecting the GCC fiscal deficit, excluding investment income to remain large, at $120 billion.

Today's change in succession will reinforce the economic and social reforms of the 2030 Vision.' It puts an end to decades of conservative Saudi polic.

Based on our detailed macroeconomic framework for the GCC countries, we expect fiscal breakeven oil prices to decline further in the coming years Gove.

The Omani economy is one of the most vulnerable of the MENA countries to prolonged lower global oil prices. We expect real GDP growth to slow to less.

Matching the Fed's interest rate hike yesterday, four Gulf central banks raised their key policy rates in the context of the peg against the dollar.

Inflation will decline gradually from around 30% in May to 18% by the end of this year helped by a tight monetary stance and the waning effect of the.

Audio titled IIF's HUUGE Podcast Episode 4: An In-Depth Look at US Energy Policy by IIF's Huuge! Podcast wit.

Saudi Arabia, UAE, Bahrain, Egypt, Jordan, and few other allied countries have cut diplomatic ties and transport links with Qatar, the largest LNG exp.

GCC public foreign assets have been relatively resilient and are projected at a still sizable $2.3 trillion in 2017 (140% of GDP), down from a peak of.

The Saudi economy is highly vulnerable to prolonged lower global oil prices. With still glut in the oil market, the potential of recovery in oil produ.

While the adjustment underway has been painful, it will help Egypt restore macroeconomic stability and promote higher and sustainable growth beyond th.

The authorities have recently published quarterly fiscal data for the first time. Although the figures are better than expected, recent rollbacks in s.

Limits on fiscal consolidation. King Salman has recently reversed some of the fiscal consolidation measures by restoring allowances and bonuses for pu.

Our recent visit to Bahrain coincided with the Grand Prix, with its success reflecting the fading impact of unrest after the Arab Spring. Despite the.

GCC Central Banks Match the Recent Rate Hike in the US Despite a slowdown in economic activity due to serious fiscal consolidation and the oil crash,.

We expect president Hassan Rouhani to be re-elected for a second four-year term in May 2017.' Real GDP growth is expected to reach 5.7% in FY 2016/17,.

The UAE economy has been relatively resilient to the impact of the slump in oil prices as it has benefited from a relatively diversified economy, exce.

Is the reflation trade coming back? China - capital outflows remain large India - RBI surprises, keeping rates on hold MENA - short-term pain, long-te.

We expect Brent oil prices to average $52 per barrel this year and stay in the range of $52-60 per barrel through 2020. Higher global oil prices will.

The 2017 budget envisages spending increase of 6% as compared to the 2016 budget. However, the settlement of arrears caused actual spending in 2016 to.

Despite the crash in oil prices, economic activity has been surprisingly resilient and the adverse impact of unrest in 2011 has faded. Tourist numbers.

In spite of the oil price shock, economic activity has been robust until recently, but we expect nonoil growth to slow to about 1% in 2016.' With larg.

There is room for optimism in Lebanon. After 29 months of presidential vacuum, on October 31 the parliament elected Michel Aoun, 81 years old, as the.

Government initiatives have been launched to promote financial inclusion, namely to support wage payments through the banking system and to require ba.

In August, Egypt reached a staff-level agreement for a three-year $12 billion Extended Fund Facility from the IMF. This agreement is subject to approv.

On our recent visit to Bahrain, we were impressed with the relative resilience of activity despite the crash in oil prices. The economy has put the ad.

On our recent visit to Oman, we found the pace of economic activity decelerating as the authorities grapple with large twin deficits. Growth had been.

The banking sector has remained a strong pillar of the economy, despite political paralysis and regional turmoil. Financial intermediation in Lebanon.

Fiscal reforms have narrowed the deficit and reduced vulnerabilities in a difficult external environment. Nonetheless, continued fiscal adjustment is.

NPLs have also improved, contrary to expectations last quarter, consiste.

Egypt urgently needs to rectify serious macroeconomic imbalance as a prelude to tackling deeply embedded structural distortions in the economy. Underl.

Growth for the region as a whole slowed last year and we expect it to weaken further in 2016, although the extent of the slowdown has been less pronou.

Qatar has been weathering the sharp fall in energy prices. Economic activity has moderated relative to the rapid pace of growth in recent years due to.

The Saudi government has unveiled a sweeping economic plan of structural and fiscal reforms. The plan aims to reduce the Kingdom's dependence on oil,.

With the economy sliding into recession and inflation surging, the Central Bank of Nigeria announced plans to abandon its fixed exchange rate policy a.

Annual core inflation accelerated to 12.2% in May, up from 9.5% in April. Food prices have also been rising at a rapid pace for several years (Chart 1.

The recent government' overhaul signals the King's and Deputy Crown Prince Mohammed bin Salman's determination to reform the Saudi economy. New leader.

Our recent visit to Riyadh coincided with the unveiling by the Deputy Crown Prince, Mohammed Bin Salman (the King's son), of a sweeping new economic p.

Growth in the MENA oil exporters has weakened because of oil price declines and fiscal consolidation efforts. GCC growth is expected to slow further t.

The UAE economy has been relatively resilient to the impact of the slump in oil prices as it has benefited from a relatively diversified economy, exce.

In the absence of tighter fiscal policy or exchange rate flexibility, the fiscal deficit will remain large and public debt will rise further to about.

Yellen cheers the markets-but for how long? March Madness - EM portfolio flows surge to 21-month high Brazil-abandoning a sinking ship GCC authorities.

During our recent visit to Qatar, we were impressed by the robust, albeit moderating, pace of economic activity, reflecting the continued large spendi.

" ' On March 14, the Central Bank of Egypt (CBE) devalued the pound by 14% and stated that it will adopt a more flexible exchange rate policy (Chart 1.

Iran's February parliamentary elections were, overall, a victory for Iran's moderates (who favor economic and political reforms and engagement with th.

The economy has been hit hard by the war with ISIS and the slump in oil prices, with severe consequences for Iraq's external position and budget reven.

Minister Gordhan delivered a commendable budget that reduces the deficit quicker than had been anticipated in last October's Medium Term Budget Policy.

During our recent visit to Tanzania, we were impressed by confidence that growth will remain robust despite the commodity bust and volatile weather th.

Lebanon continues to suffer from political paralysis and the fallout of the civil war in Syria. The country has been without a president since May 201.

Government officials and bankers with whom we met painted a mixed picture of current conditions and prospects for the UAE economy. While most official.

Discussions during our recent visit to Kuwait highlighted improvement in the implementation of the five-year development plan and gradual fiscal conso.

Actual spending declined by 12.6% in 2015 due to better than expected cost control measures. Nonetheless, the sha.

Following the oil price crash, GCC states are drawing down their reserves ($2.4 trillion or 145% of GDP in 2014) and fiscal buffers to soften the blow.

Real GDP growth is projected to decelerate to 3.5% in FY2015/16, from an estimated 4.3% last year. The delays with reforms, an overvalued Egyptian pou.

Speakers at the 2015 IIF MENA Regional Economic Forum in Cairo last week painted a somber picture of current conditions and prospects for the region's.

For the 15 MENA countries as a whole, we expect growth to be 3% in 2015, considerably below the average of 4.5% from 2005-2014. The drop in oil prices.

Potential investors are now focusing on the Central Bank of Egypt's exchange rate policy. The current policy of capital controls to defend a highly ov.

High oil prices over the past decade, combined with the safe-haven status of the UAE, have helped the UAE build large fiscal and external buffers to s.

President Barack Obama has secured enough Senate votes to support the nuclear agreement between Iran and the P5+1. Once IAEA confirms that Iran has ta.

Les politiques appropri es des autorit s combin es au faible cours du p trole ont contribu maintenir la stabilit macro conomique et r dui.

One year dollar riyal forwards have risen sharply in reaction to ongoing oil price weakness, large projected fiscal deficits and the start of public d.

The Moroccan authorities have implemented strong policy actions in the past three years to achieve macroeconomic stability and reduce vulnerabilities.

The shift in strategy pursued by the Saudis, from one of price stability to one of market share, was aimed at reining in high-cost producers and ultim.

Le statu quo politique a t maintenu. Les r cents troubles ethniques (affrontements entre gangs rivaux Berb res et Arabes) seront vraisemblableme.

Oil Prices: We expect prices to remain under pressure from persistent external forces and resilient production numbers from both OPEC and non-OPEC sou.

With the budget already strained due to rapid growth in government spending in recent years, lower oi.

A more secure political order since the election of President al-Sisi in May 2014 has shored up investor sentiment, leading to a significant pickup in.

The recent decision by the Capital Market Authority to publish regulations governing direct ownership of shares listed on the stockmarket, Tadawul, by.

The UAE is in a relatively strong position to withstand low oil prices. Ample public foreign assets will mitigate the adverse impact. Growth is expect.

The sharp drop in oil prices since mid-2014 implies a sharp drop in capital outflows from oil exporters, including reserve accumulation. While in abso.

A more secure political order since the election of President El-Sisi has shored up investor sentiment, leading to a significant pickup in economic ac.

Slightly tighter market fundamentals and an overlay of increased geopolitical risks have led us to raise our forecast for the average Brent benchmark.

Algeria's growth model based on hydrocarbon-financed fiscal spending and heavy-handed government intervention in the economy is not sustainable. Softe.

Bahrain's fiscal situation is coming under increasing strain, with the government debt-to-GDP ratio having soared over the past five years due to pers.

The economy is recovering and gaining traction after a series of shocks in recent years. Although we expect growth to slow to 4.4% in 2014 as oil prod.

The large fiscal deficit and the high and persistent inflation are key macroeconomic challenges facing Egypt. Growth could accelerate to 4% in 2014/15.

In the three months since the ouster of President Morsi, the military has clamped down hard on the Muslim Brotherhood, alienated the movement from the.

The six Gulf Cooperation Council (GCC) countries registered an average real GDP growth of 5.2% in 2012. Growth is projected to moderate to 4.1% in 201.

Egypt's second attempt at a transition to democratic rule has begun against a backdrop of serious social and political divisions and dire economic con.

The fiscal breakeven oil price increased further to $130/b in 2012, driven by a decline in hydrocarbon output and a large increase in public spending.

Nonhydrocarbon growth remained strong, supported by government spending. Hydrocarbon output is expected to continue declining at least until 2015. Str.

Egypt urgently needs to rectify serious macroeconomic imbalances as a prelude to tackling deep embedded structural distortions in the economy. Growth.

Bahrain is the only country in the GCC that is running a fiscal deficit. A sharply higher level of recurrent expenditure was locked in last year follo.

Political uncertainty in Syria continues to pose a major threat to Lebanon's political order and economic stability. Growth decelerated to 0.6% and th.

The oil market will continue to be well-supplied in 2013 as production capacity, especially outside of OPEC, will grow faster than demand, which will.

Prospects now look less favorable than a few months ago due to political uncertainty and delays in an IMF agreement. The recent move to a more flexibl.

Iraq's economy grew at an exceptionally high rate of 11% of GDP in 2012, driven by oil output, which rose to record levels. Oil revenue also provided.