middle east and north africa economic outlook: recovery
TRANSCRIPT
Middle East and North Africa Economic Outlook: Recovery
Suren Vardanyan, Economist • Gega Todua, Economist • Alex Cohen, Economist May 2021
Presenters
Gega Todua
Gega is the key analyst for the United Arab Emirates and Kuwait. He also contributes to projects focused on IFRS 9 and stress testing in the Middle East. Prior to joining Moody’s, Gega was a junior researcher at the Center for Economic Research and Graduate Education (CERGE-EI) in Prague and a lecturer at the Institute of Economic Studies, Prague.
Suren Vardanyan
Suren is responsible for macroeconomic and market risk forecasting. He provides commentary and research on economies in the Middle East and Ireland. As the key analyst for Saudi Arabia and Bahrain, Suren is responsible for macroeconomic baseline and scenario forecasts and narrative development.
Alex Cohen
Alex Cohen, an associate at Moody’s Analytics, covers Middle East and North African countries. Alex earned a bachelor’s degree in economics from The Pennsylvania State University, where his thesis addressed the implementation of a free market voucher school system in Chile.
May 2021 3
Agenda
1. Middle East & North Africa Outlook
2. UAE Outlook
3. Algeria Outlook
1 Middle East & North Africa Outlook
May 2021 5
Global Business Cycle StatusApril 2021
Source: Moody’s Analytics
Expansion
In recessionAt riskRecovery
May 2021 6
Reported cases per million population, 7-day MA
Monitoring COVID-19 in GCC
Sources: WHO, Moody’s Analytics
Mar-20 Apr-20 May-20 Jun-20 Jul-20 Aug-20 Sep-20 Oct-20 Nov-20 Dec-20 Jan-21 Feb-21 Mar-21 Apr-21 May-210
100
200
300
400
500
600
700
Bahrain Kuwait Oman
Qatar KSA UAE
May 2021 7
Reported cases per million population, 7-day MA
Monitoring COVID-19: Middle East non-GCC
Sources: WHO, Moody’s Analytics
Mar-20 Apr-20 May-20 Jun-20 Jul-20 Aug-20 Sep-20 Oct-20 Nov-20 Dec-20 Jan-21 Feb-21 Mar-21 Apr-21 May-210
200
400
600
800
1000
1200
Algeria Jordan Lebanon
Egypt Turkey Israel
May 2021 8
Divergence in Vaccination Progress
Source: Moody’s Analytics0 10 20 30 40 50 60 70 80 90 100 110 120 130
IsraelUAE
BahrainU.S.U.K.
QatarGermany
Saudi ArabiaTurkeyKuwaitChina
JordanLebanon
OmanEgypt
Algeria
Green = MENA countriesBlue = Other countries
Total vaccines administered, % of adult population, MENA and benchmarks
May 2021 9
-12-10-8-6-4-202468
10
CHN ISR US TUR EUZN BHR DZA SAU GCC EGY QAT ARE OMN JOR KWT
2020 2021 2022
Double Crisis Weighs on Oil ExportersReal GDP, % change, March 2021 forecast
Source: Moody’s Analytics
May 2021 10
Recovery Will Lag in GCC RegionQuarter when real GDP exceeds 2019Q4 level
Source: Moody’s Analytics
Country 2020 Q1 2020 Q2 2020 Q3 2020 Q4 2021 Q1 2021 Q2 2021 Q3 2021 Q4 2022 Q1 2022 Q2 2022 Q3 2022 Q4 2023 Q1 2023 Q2 2023 Q3 2023 Q4
China
Turkey
Israel
Egypt
U.S.
World
Jordan
Saudi Arabia
Euro Zone
Algeria
UAE
Qatar
Bahrain
Oman
Kuwait
May 2021 11
80838689929598101104107
-4
-2
0
2
4
6
8
10
19Q1 19Q3 20Q1 20Q3 21Q1E 21Q3F
Global balance (L)Global demand (R)Global supply (R)
Small Global Oil Deficit in 2021 Mil bpd
Sources: IEA, Moody’s Analytics
May 2021 12
40
44
48
52
56
60
19 20 21 22 23 24 25
2021F OECD 2021F non-OECD2020F OECD 2020F non-OECD
Oil Demand Does Not Fully RecoverWorld oil consumption, mil bpd
Sources: IEA, Moody’s Analytics
May 2021 13
$ per bblBrent Crude Oil Prices
Source: Moody’s Analytics
35455565758595
105115125
2010 2012 2014 2016 2018 2020 2022 2024
May 2021 14
20
40
60
80
100
120
140
160
180
Algeria Bahrain Kuwait Oman Qatar Saudi Arabia UAE
2019 2021
Sources: IMF, Moody’s Analytics
Stronger Oil Prices Will Be a Plus
2021 Brent price
Price of oil needed for a balanced budget, $ per bbl
May 2021 15
Government debt as % of GDP, Brent crude oil priceFiscal Pressure Continues
Source: Moody’s Analytics
0
20
40
60
80
100
120
140
160
2012 2014 2016 2018 2020 2022 2024
Brent price Bahrain KuwaitOman Qatar KSAUAE Algeria
May 2021 16
» Vaccine-resistant virus strain
» Oil price volatility
» Fiscal sustainability
» Geopolitical risks
Risk Matrix
2 UAE Outlook
May 2021 18
Non-Oil Private Sector PMI vs Oil ProductionPurchasing Managers’ Index (PMI) vs thousands of bpd
30
39
48
57
66
75
84
44
46
48
50
52
54
Jan-20 Mar-20 May-20 Jul-20 Sep-20 Nov-20 Jan-21 Mar-21
Non-oil PMI (L)Oil Price bpd (R)
Sources: Economena, Organization of the Petroleum Exporting Countries, Moody’s Analytics
May 2021 19
Other Sectors Are Gaining on Oil…But at a Crawl
Sources: Economena, Moody’s Analytics
UAE real GDP by economic activity, %
Oil & natural gas29.96%
Construction & real estate
14.34%Wholesale & trade11.56%
Finance & insurance
8.53%
Manufacturing8.46%
Other27.15%
2018
May 2021 20
-8
-6
-4
-2
0
2
4
18 19 20E 21F 22F
Oil GDPNonoil GDP
Nonoil Fuels the UAE’s RecoveryContribution to real GDP growth, ppts
Sources: UAE Federal Competitiveness and Statistics Authority, Moody’s Analytics
May 2021 21
Extended Measures
» AED 50 billion from the Targeted Economic Support Scheme (TESS) until June 2022
» Financing of loan deferrals until the end of 2021
» Additional AED 315 million Dubai stimulus package for January-June 2021
» Fiscal Consolidation: 2021 federal budget 7% lower compared with 2020
Monetary & Fiscal Support
May 2021 22
10
20
30
40
50
60
70
-200
-150
-100
-50
0
50
100
150
18 19 20F 21F 22F 23F
Budget balance, AED bil (L)Govt debt-to-GDP ratio, % (R)
Government Finances
Sources: Federal Competitiveness and Statistics Authority, Moody’s Analytics
May 2021 23
85
95
105
115
125
135
145
155
-15-10
-505
101520253035
13 14 15 16 17 18 19 20 21F 22F 23F 24F
Composite house price index, % change yr ago (L)
Composite house price index, 2010=100 (R)
Property Prices
Sources: Bank for International Settlements, Moody’s Analytics
3 Algeria Outlook
May 2021 25
Tril. Algerian Dinar (L), USD per bbl (R)Expenditure Rises, Brent Crude Falls
0
20
40
60
80
100
120
0123456789
10
90 92 94 96 98 00 02 04 06 08 10 12 14 16 18 20F 22F 24F
Government revenue (L)
Government expenditure (L)
Brent Crude (R)
Sources: IMF, SIX Financial Information, European Central Bank (ECB), Moody’s Analytics
May 2021 26
$ per bblFor Algeria, Breakeven Is a Long Way Off
50
75
100
125
150
175
21 23 25 27 29 31 33 35 37 39 41 43 45 47 49 51
2021 fiscal breakeven price2019 fiscal breakeven priceBrent Crude forecast
Sources: IMF, SIX Financial Information, European Central Bank (ECB), Moody’s Analytics
May 2021 27
%Investment Is a Quarter of 2021 Budget
72.44
12.31
7.255.35
2.65
All other expenditure
Misc. investment
Infrastructure investment
Housing investment
Agriculture investment
Sources: Algerian Ministry of Finance, Moody’s Analytics
May 2021 28
5
10
15
20
25
30
35
40
-30
-20
-10
0
10
20
30
40
02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20F 21F 22F
Balance on current account, bil USD (L)
Import coverage, mo (R)
Falling Current Account Shrinks Import Coverage
May 2021 29
2019, %Imports Comprised of Key Capital Goods
22.93
11.75
10.89
8.87
45.56
Machines
Transportation
Metals
Chemical products
Other
Sources: United Nations Statistical Division, Moody’s Analytics
May 2021 30
% changeOil Sector a Drag Through 2021
-15
-10
-5
0
5
10
19 20F 21F 22F
Non-oil Oil Total
Sources: IMF, Moody’s Analytics
May 2021 31
Algeria’s Recovery Trails the Region% change
-10-8-6-4-202468
10
Algeria* Egypt* Morocco Tunisia
19 20 21F 22F 23F* 2020 values forecasted
Sources: United Nations Statistical Division, The World Bank, Moody’s Analytics
May 2021 32
Contribution to real GDP growth, % changeConsumption, Government Driven Recovery
-15
-10
-5
0
5
10
17 18 19 20F 21F 22F
Private consumption Government consumptionTotal investment ExportsImports GDP
Sources: United Nations Statistical Division, Moody’s Analytics
May 2021 33
» MENA economies recover, with risks diminishing as vaccination progresses.
» Recovery of oil exporters will lag due to slower growth in oil demand.
» Vaccine-resistant virus strain remains a major risk.
Summary
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May 2021 36
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