Monthly Insights June 2020

• Global macro: The coronavirus pandemic is causing untold disruption to global output, with a severe contraction expected for every major economy. Central bank and government efforts to cushion the blow through monetary and fiscal stimulus are seeing previous economic dogmas abandoned, with unknown consequences for the future.
• GCC macro: GCC economies are faced with a triple whammy of lower oil production, sharply lower oil prices – which together have hit budget revenues - and contracting non-oil sectors this year.   
• MENA macro: The burden the coronavirus crisis has exerted on external and fiscal balances has seen countries around the world go to the IMF for support, including a number from the MENA region. While this emergency funding will help tide them over for now, the fact that countries are also engaging in renewed longer-term programmes with the Fund should provide an effective policy anchor and reassurance for private investors in the wake of the crisis.
• EM Focus: India’s economy appears to have suffered an outsized impact from the coronavirus outbreak. An already slowing economy, limited fiscal space and the need for longer than expected restrictions on economic activities have exacerbated the pain. Financial markets though, like their global peers, remain relatively resilient on account of monetary stimulus and ample liquidity.
• Currencies: With lockdowns starting to be relaxed we have adjusted our FX forecasts to allow for a gradual dollar depreciation predicated on a very gradual recovery in the US and the global economy.
• Financial Markets: The chasm between the financial market’s performance and the uncertain outlook over economic growth has grown wider since the first bout of selling in March 2020.
• Commodities: OPEC+ has called out countries for failing to hit their production cut targets. However, internal inconsistencies across members will make long-lasting compliance hard to achieve.
• Sector Outlook: Tourism in the UAE has come under strain as a result of the Covid-19 pandemic. Regulators across the industry are taking steps to ease the pain and allow the industry to bounce back once the virus subsides.

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