IMF publishes regional growth projections

Shady Elborno - Head of Macro Strategy
Published Date: 20 October 2021


  • The International Monetary Fund said on Tuesday that GDP in the MENA region is expected to expand by 4.1% this year and next after the coronavirus crisis caused a 3.2% contraction in 2020. Growth for the Caucasus and Central Asia region is seen at 4.3% this year and 4.1% next, after dropping 2.2% in 2020. The GCC is forecast for growth of 4.2% next year. The fund added that rising inflation due to higher commodity prices and pandemic-related supply shortages could limit the space for supportive monetary policies. In MENA, inflation is projected to increase to 12.9% this year from 10.4% last year, while in Central Asia it is seen at 8.5% this year compared to 7.5% last year.
  • US housing starts dropped 1.6% m/m to a seasonally adjusted annual rate of 1.555 million units last month, the lowest level since April according to data from the Commerce Department. Data for August was revised down to a rate of 1.580mn units from the previously reported 1.615mn units, supporting expectations that economic growth slowed sharply in Q3. Starts have declined from the 1.725mn unit level in March which was the highest in almost 14 years. Single-family starts, which account for the largest share of the housing market, were unchanged at a rate of 1.080mn units last month.  While Single-family homebuilding rose in the West and Midwest, it fell in the Northeast and the densely populated South, likely depressed by Hurricane Ida, which caused unprecedented flooding.
  • Richmond Federal Reserve President Thomas Barkin said on Tuesday that US labour shortages may outlast the coronavirus pandemic and limit overall economic growth unless the country comes up with better education, health and childcare policies to boost the number of people willing and able to work. The prospect of limitations on U. labor participation is a key issue for the Fed as it considers a shift towards post-pandemic monetary policy. More workers than expected retired during the crisis, while others, particularly women and those in lower-paid jobs, stopped working because of family care responsibilities or concerns about health risks.
  • Lebanon and the IMF have resumed their discussions about a potential policy programme and bailout for the embattled economy, which has been enduring multiple crises since a debt default in March last year. Regional IMF representative Jihad Azuor said that ‘It’s very important to address the issues that the financial sector has faced, mainly the financial losses’, but talks around this have failed previously as political interests have stalled progress. With a newly appointed government that is reportedly aiming to provide the Fund with the requisite paperwork and figures in the next several days there is greater optimism that a deal can be reached, but there are major hurdles to overcome first. Parliament voted yesterday to hold legislative elections on March 27, leaving little time with which to secure a deal.

Today’s economic data and releases

10:00 GB CPI (YoY) (Sep) Forecast 3.20%

13:00 EU CPI (YoY) (Sep) Forecast 3.40%

16:30 CA Core CPI (MoM) (Sep) Forecast 0.20%

18:30 US Crude Oil Inventories Forecast 0.702M

Fixed Income

  • Yields on 10-yr USTs rose 3.7bps yesterday to 1.6372, its highest level since May. They were given a boost by comments by Federal Reserve Governor Christopher Waller that tapering should start next months as the sufficient criteria have been met. Spreads widened as the 2-yr fell 3.0bps to 0.3953.
  • BoE Governor Andrew Bailey’s comments that ‘something must be done’ about inflation continues to stoke expectations that a rate hike in the UK is imminent, with markets pricing in an 80% probability of a rise in interest rates next month. Yields on 2-yr gilts added another 1.3bps yesterday to 0.725%, levels last seen in H1 2019. Spreads widened a little after narrowing sharply on Monday, as the 10-yr yield climbed 3.2bps to 1.167%.
  • Indonesia’s central bank kept its benchmark rate on hold at 3.50% at yesterday’s meeting, in line with expectations. Expectations were also met in Hungary, where the central bank raised rates by 15bps to 1.80%. Turkey’s central bank is due to meet tomorrow, where another 100bps cut is expected after the change to the rate-setting committee last week. Russia is due to set on Friday.


  • The dollar lost ground against its major pairings yesterday to see the DXY drop -0.2% to 93.734, back at levels last seen a couple of weeks ago. Expectations of rate hikes by other central banks sooner than by the Fed are outweighing the risk-off tone that had boosted the greenback in recent weeks.
  • GBP hit a one-month high against the dollar, with traders buying into the narrative that rate hikes are coming sooner than later after comments by BoE Governor Andrew Bailey. It gained 0.5% to 1.3797 while the Euro added 0.2% to 1.1633.
  • The Yen fell to levels last seen in November 2017 yesterday, adding 0.1% to 114.52.


  • East Asian equity markets started the trading day off on the front foot with the Shanghai Composite and the Nikkei gaining 0.7% and the Hang Seng 1.5%. On the other hand, Indian equity markets lost some of their momentum seen on Monday (driven by government assurances over stimulus) yesterday, as the Sensex lost -0.1% and the Nifty -0.3%. Both indices have seen substantial ytd gains however, of 29.2% and 31.7% respectively.
  • European markets were fairly lacklustre through most of the day, before picking up later in the session as strong US earnings started to come in. France’s CAC lost -0.1%, but there were gains elsewhere with the composite STOXX 600 and the DAX adding 0.3%, while the UK’s FTSE 100 closed 0.2% higher on the day.
  • In the US, there were gains across the board as earnings season continued at a robust clip. The tech-heavy NASDAQ and the broad-based S&P 500 led the charge with a 0.7% gain, while the blue chip Dow Jones climbed 0.6%. All three remain off their record highs set over August and September, however.


  • Weakness in the dollar provided further impetus to oil markets yesterday, as Brent futures climbed 0.9% to USD 85.1/b, while WTI added 0.6% to USD 83.0/b, a seven-year high. Both are ceding some ground this morning but remain at highly elevated levels compared to recent historical averages.
  • API reported that US crude inventories rose by 3.3mn bbl last week, which would be the fourth week in a row that stockpiles have climbed if confirmed by the official data later today.

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