Monthly Insights - March

Developments in the banking sectors in the US and Europe have increased uncertainty about the outlook for rates, with markets now significantly more dovish than at the start of the year, and central banks holding the line with rate hikes in March. With inflation still well above target across developed markets, there are likely still more hikes to come, provided the financial sector stability issues are addressed and contained. The current squall in financial markets has hit oil markets hard, and although we believe the fundamentals remain constructive, we have revised our annual price forecast lower to USD 88/b on Brent from USD 105/b previously.

This will have implications for GCC budgets, as oil remains a key contributor to government revenues in the region. We now expect Saudi Arabia to run a largely balanced budget this year, and the UAE’s projected surplus will likely be smaller than last year’s 10.5% of GDP. However, the outlook for growth in the region remains unchanged for now, as we had not expected a meaningful increase in oil output this year coming into 2023.

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