Middle East & North Africa Economic Forecast

Economic Snapshot for MENA

October 1, 2019

While oil production cuts have significantly weighed on MENA’s economic growth this year, this situation could reverse if the OPEC+ deal ends in March 2020 as planned. Irrespective, regional geopolitical threats and domestic political unrest will continue to put downward pressure on growth this year and, probably, also in 2020

MENA Monetary & Financial Sector News

Regional inflation fell for the third consecutive month in August, to 7.1% from 8.0% in July. Lower readings in Algeria, Egypt and Iran led the decrease in August. Overall, the recent downward trend reflects cheap oil prices, subdued economic growth in some key economies in the region and a severe downturn in certain real estate markets such as Qatar and Saudi Arabia.   The U.S. Federal Reserve’s more dovish stance and mild price pressures are allowing central banks in the region to maintain their accommodative monetary policies or even cut interest rates. That said, most central banks in MENA have currency pegs, mostly against the USD, and thus lack independent monetary policies.

In Egypt, the Central Bank cut rates in recent weeks amid low inflation and rising political tensions. That said, most central banks in MENA manage currency pegs, mostly against the USD or a basket of currencies including the USD or the EUR, and thus lack independent monetary policies.

The Egyptian pound continued to strengthen in recent weeks, while a shortage of U.S. dollars has led to speculation that Lebanon could drop its peg against the greenback. That said, 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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