Middle East & North Africa Economic Forecast

Economic Snapshot for MENA

July 31, 2019

Economic activity in MENA to be expected to be stable in 2019  compared to last

Growth in MENA is seen fairly stable this year compared to last, held back by the recently extended OPEC oil cuts. However, this masks greatly differing performances among countries; Iran will contract sharply as U.S. sanctions savage the economy, while Iraq is seen bouncing back from last year’s decline. Geopolitical tensions and volatile oil prices pose downside risks.

MENA Monetary & Financial Sector News

Regional inflation fell from 9.0% in May to 8.1% in June, likely on the recent drop in oil prices. Outside Egypt and Iran—which are grappling with successive subsidy cuts and U.S. sanctions respectively—price pressures are generally mild. Over 2019 as a whole, inflation is seen largely unchanged from 2018, as higher inflation in Iran is offset by lower prices in the GCC. 

A more dovish Federal Reserve should allow central banks in the region that use interest rates to tune their monetary policies to maintain similarly accommodative stances. That said, most central banks in MENA do not have independent monetary policies as they have currency pegs, mostly against the USD.

Solid domestic momentum and the rising expectation of a Fed rate cut supported the Egyptian pound and the Israeli shekel in recent weeks. Most remaining countries in the region maintain a de jure or de facto currency peg against the U.S. dollar or a basket of currencies mostly composed of the USD and the EUR.

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