Middle East & North Africa Economic Forecast

Economic Snapshot for MENA

January 12, 2021

The MENA economy should rebound this year. Oil exporters should gain from higher crude prices and the reduction of OPEC+ cuts, while countries across the region should gain from some progress in the vaccine rollout and stronger demand abroad. That said, geopolitical tensions, fragile fiscal positions and uncertainty around the course of the pandemic pose downside risks.

MENA Countries Monetary & Financial Sector News

Regional inflation jumped to 12.6% in November from 11.6% in October, amid rising price pressures in Egypt and Iran. This year, regional inflation is set to ease somewhat, as depreciation-fueled price pressures in Iran and Lebanon lessen, and the impact of the VAT hike in Saudi Arabia fades. However, many countries will see stronger price pressures on rebounding activity.

Most central banks in the region manage currency pegs and thus lack independent monetary policies. Among those with independent policies, the central banks of Egypt, Israel and Tunisia stayed put in meetings held recently. This year, monetary policy stances will likely remain ultra-accommodative.

The Israeli shekel appreciated notably against the USD over the last month, while the Egyptian pound lost ground. 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/or the EUR. In December, Iraq devalued its currency to facilitate the payment of public salaries.

 

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