MENA Quarterly: Q4 2021

Khatija Haque - Head of Research & Chief Economist
Edward Bell - Senior Director, Market Economics
Shady Elborno - Head of Macro Strategy
Daniel Richards - MENA Economist
Published Date: 14 October 2021


As we head into the final quarter of 2021, GCC oil exporters are seeing their budget deficits narrow sharply on higher oil prices and increased oil production.  So far, this has not deterred them from continuing with fiscal reforms, with Saudi Arabia retaining budget cuts for next year in the October pre-budget statement, Bahrain announcing plans to raise the VAT rate to 10% from 2022 and Oman benefitting from a rating outlook upgrade. Higher oil production since August has also led to GDP growth upgrades for 2021 and 2022 across the GCC. 

Non-GCC MENA economies are still facing significant challenges however, as the post-Covid recovery has been slower than we had anticipated at the start of this year.  Higher energy prices will fuel inflationary pressures in oil importing countries, leaving little scope for easier monetary policy which may have helped to boost the economic recovery.                                                                               

Oil market update Energy shortages to keep oil prices high.


UAE We expect the consolidated budget to move into surplus this year after recording a deficit of -2.4% of GDP in 2020. Oil revenue is set to rise by 30% on the back of both increased production since August and higher oil prices, but we expect the UAE to maintain a conservative approach to government finances and target spending towards strategic initiatives to boost longer-term growth prospects.   

Saudi Arabia Fiscal policy remains disciplined despite higher oil prices.  In the pre-budget statement, the government revised up revenue estimates for 2022 and 2023 but kept expenditure projections unchanged from the 2021 budget medium term forecasts. 

Oman Fiscal reforms and higher oil prices trigger a ratings outlook change from S&P.

Qatar: PMI survey data point to a solid recovery in the non-oil private sector in Q3 2021, with the headline PMI hitting an all-time high of 60.6 in Sept. This year we expect non-oil sectors to expand 4.0% as the country prepares to host the 2022 FIFA World Cup, and as activity and travel continue to normalize in H2 2021. 

Bahrain The government has proposed raising the VAT rate to 10% from next year in order to put the budget on a more sustainable footing.


Egypt Egypt is in a good position to cope with the expected tightening in global financial conditions over the coming year.

Iraq Once Iraq’s new government is formed following October elections it will have to deal with persistent economic challenges, but the oil sector should give the economy a boost over the coming year.

Jordan Jordan’s economic recovery is set to strengthen in 2022 as pandemic pressures ease on the transport and tourism sectors. 

Lebanon The formation of a new government in Lebanon is positive news following months of stalement, but the challenges facing the country remain substantial.

Tunisia Tunisia’s economy remains under pressure as both the ongoing pandemic crisis and elevated political risk weigh on the outlook. 

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