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Recent weeks have been characterized by tightening monetary policy and a deteriorating growth outlook for most of the world, although the GCC and other hydrocarbon exporters of the region such as Algeria are seeing a comparatively more benign outcome.
GCC economies have enjoyed robust growth year to date and are likely to remain fairly strong over the coming months, even as the global slowdown becomes more pronounced. Dubai’s tourism sector in particular has seen a strong expansion through the year so far, and while recent PMI surveys for the UAE and Saudi Arabia have been encouraging, higher interest rates and a stronger US dollar are likely to prove headwinds in 2023.
The outlook for developed market economies is worsening. The latest FOMC meeting was stark in its warnings around the trajectory for growth and unemployment as it hiked rates by a further 75bps this month. The Fed signalled that it is set to remain aggressive in its tightening as it looks to tame inflation, even if it prompts a recession.
In the UK, support for households and businesses announced by the new government under Prime Minister Liz Truss will help mitigate pressures from high energy costs over the coming months, but the unfunded tax cuts and seeming lack of consensus among Bank of England policy-makers have not been well received by the market. The pound and gilts have sold off sharply, which will further fuel inflation and make it more expensive for the government to fund its larger deficit.
Emirates NBD Research
