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UAE near-term growth outlook remains strong

Daniel Richards - MENA Economist
Published Date: 22 November 2022


  • The IMF has completed its 2022 Article IV mission to the UAE, concluding that the near-term growth outlook remains strong, with high oil prices set to support strong fiscal surpluses and inflation to slow. The Fund recommends keeping a prudent fiscal policy in play and to keep the focus on reforms under the UAE 2050 Strategy in order to diversify growth and complete the energy transition.
  • German PPI inflation came in at -4.2% m/m in October, confounding expectations for a 0.6% gain. The unexpected decline, the first time prices were lower than the previous month since May 2020, was driven by lower energy prices. PPI inflation was still at 34.5% y/y but this was compared to projected 42.1% and was down from 45.8% in September. The lower producer prices raised market hopes that inflation was peaking, although there was has been pushback from ECB officials in recent days regarding the prospect of its rate hiking cycle coming to an end yet.
  • In the US, the Chicago Fed national activity index fell to -0.05 in October, below the neutral 0 level at for the first time since June, indicating below-trend growth. Consensus had predicted the index would be at 0 while September’s reading was revised up to 0.17.
  • Tourist arrivals to Turkey were up 38.4% in October, compared with 55.8% in September. Base effects as the sector has continued to recover from the widespread curbs on travel through the pandemic period have resulted in strong growth this year, which has been further boosted by an uptick in Russian visitors given the restrictions on their travel elsewhere this year. Meanwhile, President Erdogan has said that there would be cabinet discussions around further penalties for stores charging excessive prices in Turkey. CPI inflation is at 85% in Turkey, but the central bank continues to adopt an unconventional policy of rate cutting in the face of higher price growth.
  • Caretaker Lebanese prime minister, Najib Mikati, has said that the World Food Programme would allocate USD 5.4bn in aid to Lebanon over the next three years. The aid would be evenly split between Lebanese and Syrian refugees, while in the past 70% went to Syrian refugees, in an illustration of the ongoing economic collapse of the country that has pushed millions below the poverty line.

Key Economic Data and Events

  • 17:30 Canada retail sales, % m/m, September. Forecast: -0.5%

Fixed Income

  • US Treasury yields started the week on a softer footing though managed to trade in a relatively narrow range. Yields on the 2yr UST added almost 2bps overnight to close at 4.5523% while the 10yr held flat by the end of the day at 3.8269%. Minutes from the November FOMC will give the next direction for US Treasuries in the near term.
  • European bonds closed higher on the day with gilt yields down 5bps at 3.174% while 10yr bund yields dropped 2bps to 1.985%.


  • The US dollar put paid to rumours of its imminent death, gaining against all peers overnight. EURUSD dropped for a third day running, down by 0.8% to 1.0242 while GBPUSD fell 0.6% to 1.1823. USDJPY rose for a fourth day in a row, up 1.3% to 142.14.
  • Commodity currencies were also weaker against the greenback with AUDUSD dropping the most, down 1% to 0.6605. USDCAD added 0.6% to 1.3448 while NZDUSD fell 0.8% to 0.6101.


  • The threat of renewed severe restrictions around Covid-19 in China contributed to risk-off sentiment on the first day of the trading weak, especially in East Asia. The Hang Seng ended the day down -1.9% and the Shanghai Composite -0.4%, although the Nikkei did manage to close up 0.2%.
  • In Europe, the FTSE 100 closed down -0.1%, the CAC -0.2%% and the DAX -0.4%. In the US, the Dow Jones, the S&P 500 and the NASDAQ lost -0.1%, -0.4% and -1.1% respectively.
  • Locally, the falling oil price weighed on equity markets. The DFM ended the day down -0.4% and the ADX -0.6%. Saudi Arabia’s Tadawul lost -1.1%, while Egypt’s EGX30 dropped -0.6%.


  • Oil futures endured some very choppy trading as markets bounced off of competing news reports. A report that Saudi Arabia was considering increasing output targets at the December OPEC+ meeting prompted an initial sell off, with Brent futures falling about USD 5/b to about USD 82/b before that story was denied, with Saudi officials saying the opposite: that they may endorse more production cuts at the December meeting.
  • Even as markets swung sharply, the overnight close was minimal with Brent futures down 0.2% at USD 87.45/b and WTI off by 0.4% to USD 79.73/b. We noted earlier this week that OPEC+ may indeed move to support the market to prevent any disorderly sell-offs and the story this week will increase the likelihood of their intervention to put a floor under prices.

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