Monthly Insights: March 2021

Global Economics

Mounting DM debt loads an issue for another day Fiscal deficits and public debt loads have expanded significantly through the Covid-19 crisis but with a growing light at the end of the tunnel the conversation is turning towards a post-pandemic future, and politicians are increasingly acknowledging the widening hole in their finances.

WFH adoption will pose challenges to policymakersThe Covid-19 pandemic crisis has accelerated the transition to more remote patterns of working for many sectors, which poses fundamental questions regarding not only how we will work in future, but equally how we will live. 

Indian GDP returns to growth but misses expectations India’s real GDP growth surprised to the downside in the third quarter of the current fiscal year ending in March. The October-December 2020 period saw an expansion of 0.4% y/y, compared to consensus expectations of a slightly stronger 0.6%

Regional Economics

OPEC+ decision is good for budgets, drag on growth Extended oil production cuts will weight on headline GDP growth this year.  We expect governments to prioritise deficit reduction over increased spending.

Renewed focus on structural reforms to drive GCC growthHigher oil prices will provide a short term boost to budgets and sentiment but structural reforms will be key to driving growth over the medium term.

Dubai Tourism: Future focus Dubai’s tourism sector focuses on long-term dynamics.

Central Bank of Egypt keeps rates on hold in March The Central Bank of Egypt kept its benchmark rates steady at its March 18 MPC meeting. While the domestic conditions arguably provided room for the bank to enact a rate cut, board members would have had an eye on international developments in bond markets, and ultimately chose to maintain their cautious approach.

Markets

USD buoyed by stimulus and vaccinesAs the US economy benefits from the USD 1.9trn American Rescue Plan and a strong pace of Covid-19 vaccinations, its growth differential to major peer economies is improving. We expect that strength to play out now more considerably in FX markets with EURUSD and USDJPY set to experience sustained periods of dollar strength.

OPEC and allies to keep oil market hotOPEC+ does now appear to be intentionally targeting oil prices moving higher. We would expect then for production to continue to be restrained even if prices pushed considerably higher.

Oil at 100 No. But even as OPEC+ keeps the oil market tight we don’t expect prices to sustain a rise to USD 100/b given there is ample spare capacity available.

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