The MENA (Middle East and North Africa) economy should rebound notably next year. Domestic demand is set to increase strongly due to a low base effect and as oil-exporting countries are supported by recovering demand for energy exports. That said, geopolitical tensions, fragile fiscal positions and volatile oil prices due to uncertainty around the pandemic pose downside risks.
Regional inflation jumped to 11.3% in October—the highest rate since November 2017— (September: 9.8%) due to rising price pressures in Egypt, Iran and Lebanon. Next year, inflation is set to ease from 2020, despite stronger economic output, as the impact of the collapse of the Lebanese Pound fades and price pressures ease in Iran.
Most central banks in the region manage currency pegs and thus lack independent monetary policies. In November, the Central Bank of Egypt cut all of its key rates by 50 basis points to bolster activity, while Kuwait’s Central Bank lowered some rates but held its key discount rate in late October. Next year, monetary policy stances will likely remain ultra-accommodative.
The Israeli Shekel appreciated notably against the USD over the last month, while the Egyptian Pound also gained some ground. Most remaining countries in the region maintain a de jure or de facto currency peg against the U.S. dollar or a basket of currencies mostly composed of the USD and/or the EUR.
Middle East: GDP in 2020
This graph below shows the real GDP percentage in 2020 included 10 middle eastern countries. The most GDP reduction belongs to Lebanon and the least to Qatar.



This article is in our Market Outlook 2021