Monthly Insights - October 2020

Global macro: Although the IMF has upgraded its 2020 growth forecasts, it has revised down those for 2021. While some of this is attributable to base effects, the ongoing pandemic crisis and governments’ fiscal response to this will also be key, with the scale and scope of further support in question.

GCC macro: We highlight a few key themes that emerged when we analysed the economic and survey data across the GCC in recent months.       

MENA macro: Despite the disruption caused by the pandemic crisis, price growth in North African countries has been fairly benign through 2020, with CPI inflation generally falling short of where we had expected it to, aided by favourable food prices and appreciating currencies. We expect that inflation will largely pick up from hereon in, or at least that the disinflation will slow, as currency appreciation peters out and domestic demand picks up again as economies recover from the coronavirus crisis.

India macro: Although India is on course for its biggest economic contraction on record, our belief is that the worst is now past, and the nascent recovery we have seen in recent data points should start to become entrenched over the coming months.

Currencies: Political developments – US presidential elections, Brexit – and the impact of surging coronavirus cases in Europe are likely to be the main drivers for currency markets in the coming weeks.

Financial Markets: Egypt launched the MENA region’s first sovereign green bond, opening up the region’s financial markets to a new pool of investors. Take-up of green debt has been so far limited in MENA but has scope for expansion thanks to ambitious renewable energy targets.

Commodities: Oil markets face a tentative outlook in the final months of 2020 as Covid-19 cases re-emerge and fiscal support for economies expires. OPEC+ will need to carefully monitor demand conditions in coming months to assess whether the market can indeed absorb an increase in production from the start of 2021.

Sector report: Dubai’s tourism sector is gradually charting a path to normalization, after Covid-19 mandated significant lockdown measures. Normalization will remain dependent on the development and global rollout of a vaccine and the resumption of global travel.

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