Monthly Insights - November 2020

As an eventful 2020 draws towards its close we take stock of how developments towards the end of the year - not least the positive news with regards potential Covid-19 vaccines - have boosted market optimism, while at the same time cautioning that the recovery will be uneven in many quarters and that there remain difficult months ahead.

Global macro: The rapid-fire succession of positive news with regards to Covid-19 vaccine trials in recent weeks has instilled a sense of optimism into global markets not seen in months. Nevertheless, the next several months will remain difficult, and policy missteps could slow the 2021 recovery.

GCC macro: Positive news on Covid-19 vaccines suggests there is light at the end of the covid tunnel.  However, we expect the recovery in the GCC next year to be slow and uneven.   

MENA macro: Oil production curbs and the Covid-19 pandemic have weighed heavily on the Iraqi economy in 2020, and we project a contraction of -12.5% this year. Looking ahead to 2021 we anticipate a return to growth, but output will remain substantially lower than it was in 2019 still, as a potential extension of OPEC+ mandated oil production curbs and a lingering pandemic fallout weighs on the recovery. We forecast a 3.4% expansion next year.

Currencies: The US election has dominated the FX landscape in the last few weeks. With that now behind us policy developments in the UK and EU will set the scene for a weaker USD as we head into 2021.

Financial Markets: US treasury markets have now absorbed the impact of Joe Biden becoming president-elect and several successful Covid-19 vaccine candidates. As yields have pushed upward we think there are still some strong forces ahead that will prevent them from popping too much higher.

Commodities: OPEC+ faces a challenging final meeting of the year as oil demand conditions remain soft and members begin to chafe at perpetual production restrictions.

Sector report: Dubai’s real estate market had an interesting year in 2020 as enthusiasm for Expo 2020 supported market dynamics in Q1, before Covid-19 lockdowns in Q2 ground much of the activity in the market to a halt. Activity has picked up in Q3, however Covid-19 has changed the dynamics.

This is our last Monthly Insights publication for 2020; we will resume in January 2021 and wish all our readers well over the festive season. 

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