2022 Economic & political outlook:
Continuity on the cards
The first case of the COVID-19 Omicron variant was detected almost six weeks ago, reminding us that pandemic-related disruption is far from over. Yet if the initial data is an indicator of what to expect, the new variant is unlikely to rattle markets as much as we first feared. Oil demand has so far remained on course. At Monday’s OPEC+ meeting, the group firmly backed its decision to unwind production cuts and to gradually reintroduce around 400K bpd each week.
Additionally, governments are curbing the spread of Omicron by rapidly accelerating their vaccination programmes as opposed to imposing new restrictions. Bahrain, Saudi Arabia and the UAE are the region’s inoculation leaders. However, those MENA players who lag behind will contribute to an uneven regional recovery. The way in which we manage the pandemic as we know it may well be over. This is underscored by regional governments’ budget plans. Although social spending is still a priority, the levels we saw in 2020 and 2021 have reduced. Nonetheless, GCC governments will continue to spend generously in order to realise their visions.
Politically, 2022 has endured a volatile start. Nuclear negotiations between Iran and the US recommenced this week, though expectations for a breakthrough remain low. Iran is likely to use its advancements in enriching uranium to pressure the US to make concessions in the coming weeks. With both sides unwilling to concede, we do not feel optimistic that an agreement will be reached any time soon. Libya’s future continues to look uncertain following a postponed presidential election, while the resignation of Abdalla Hamdok as Sudan’s prime minister has dealt the chances of the country transitioning to civilian rule a severe blow.