MENA Economic Outlook 2021: Cautiously optimistic

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MENA Economic Outlook 2021:

Cautiously optimistic

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The MENA region will start to post robust recovery in 2021, but this will not be all-encompassing. The uncertainty regarding the length of the pandemic, new variant(s) of COVID-19, and muted oil demand will remain key downward risks to the speed of recovery globally this year. Oil demand in MENA is expected to remain anaemic and reach 8M bpd this year, a 500k bpd increase from 2020 levels, with the highest levels expected in Q2 2021, in line with historic seasonal demand patterns. But compliance to OPEC+ targets is at risk following Saudi Arabia’s voluntary gesturing of an additional 1M bpd cut for the next two months.

The GCC countries are set to register improving growth and fiscal balances in 2021, more rapidly than their regional counterparts. This will be predominantly supported by their greater access to vaccines and the ability to cut the pandemic-related stimulus measures. Low-interest rates are expected to remain a key monetary policy for central banks across the region. But given the weaker aggregate demand, inflation is projected to remain relatively steady for most countries in the region. The balance sheets across MENA will likely continue to deteriorate despite sharp budgetary cuts. The severely constrained medical capabilities and a rising death rate in less well-equipped MENA countries like Iraq and Iran, and in GCC states like Oman, could also temper the growth of demand in 2021.

With vaccines being rolled out much earlier than anticipated, we are optimistic. We are keeping our ears to the ground as the region forges ahead on the bumpy road to recovery.

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