Middle East and North Africa Economic Outlook: Recovery - Suren Vardanyan, Economist Gega Todua, Economist Alex Cohen, Economist
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Middle East and North Africa Economic Outlook: Recovery Suren Vardanyan, Economist • Gega Todua, Economist • Alex Cohen, Economist May 2021
Presenters
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.
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.
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.Agenda
1. Middle East & North Africa Outlook
2. UAE Outlook
3. Algeria Outlook
May 2021 31 Middle East & North Africa
OutlookGlobal Business Cycle Status
April 2021
Expansion
Recovery
At risk
In recession
Source: Moody’s Analytics
May 2021 5Monitoring COVID-19 in GCC
Reported cases per million population, 7-day MA
700
600 Bahrain Kuwait Oman
500 Qatar KSA UAE
400
300
200
100
0
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-21
Sources: WHO, Moody’s Analytics
May 2021 6Monitoring COVID-19: Middle East non-GCC
Reported cases per million population, 7-day MA
1200
1000 Algeria Jordan Lebanon
800 Egypt Turkey Israel
600
400
200
0
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-21
Sources: WHO, Moody’s Analytics
May 2021 7Divergence in Vaccination Progress
Total vaccines administered, % of adult population, MENA and benchmarks
Israel
UAE
Bahrain
U.S.
U.K.
Qatar
Germany
Saudi Arabia
Turkey
Kuwait
China
Jordan
Lebanon
Oman Green = MENA countries
Egypt Blue = Other countries
Algeria
0 10 20 30 40 50 60 70 80 90 100 110 120 130
Source: Moody’s Analytics
May 2021 8Double Crisis Weighs on Oil Exporters
Real GDP, % change, March 2021 forecast
10
8 2020 2021 2022
6
4
2
0
-2
-4
-6
-8
-10
-12
CHN ISR US TUR EUZN BHR DZA SAU GCC EGY QAT ARE OMN JOR KWT
Source: Moody’s Analytics
May 2021 9Recovery Will Lag in GCC Region
Quarter when real GDP exceeds 2019Q4 level
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
Source: Moody’s Analytics
May 2021 10Small Global Oil Deficit in 2021
Mil bpd
10 107
Global balance (L)
8 104
Global demand (R)
101
6 Global supply (R)
98
4 95
2 92
89
0
86
-2 83
-4 80
19Q1 19Q3 20Q1 20Q3 21Q1E 21Q3F
Sources: IEA, Moody’s Analytics
May 2021 11Oil Demand Does Not Fully Recover
World oil consumption, mil bpd
60
2021F OECD 2021F non-OECD
2020F OECD 2020F non-OECD
56
52
48
44
40
19 20 21 22 23 24 25
Sources: IEA, Moody’s Analytics
May 2021 12Brent Crude Oil Prices
$ per bbl
125
115
105
95
85
75
65
55
45
35
2010 2012 2014 2016 2018 2020 2022 2024
Source: Moody’s Analytics
May 2021 13Stronger Oil Prices Will Be a Plus
Price of oil needed for a balanced budget, $ per bbl
180
160
2019 2021
140
120
100
80 2021 Brent price
60
40
20
Algeria Bahrain Kuwait Oman Qatar Saudi Arabia UAE
Sources: IMF, Moody’s Analytics
May 2021 14Fiscal Pressure Continues
Government debt as % of GDP, Brent crude oil price
160
Brent price Bahrain Kuwait
140 Oman Qatar KSA
120 UAE Algeria
100
80
60
40
20
0
2012 2014 2016 2018 2020 2022 2024
Source: Moody’s Analytics
May 2021 15Risk Matrix
» Vaccine-resistant virus strain
» Oil price volatility
» Fiscal sustainability
» Geopolitical risks
May 2021 162 UAE Outlook
Non-Oil Private Sector PMI vs Oil Production
Purchasing Managers’ Index (PMI) vs thousands of bpd
54 84
Non-oil PMI (L)
52 Oil Price bpd (R) 75
66
50
57
48
48
46 39
44 30
Jan-20 Mar-20 May-20 Jul-20 Sep-20 Nov-20 Jan-21 Mar-21
Sources: Economena, Organization of the Petroleum Exporting Countries, Moody’s Analytics
May 2021 18Other Sectors Are Gaining on Oil…But at a Crawl
UAE real GDP by economic activity, %
2018
Other
27.15% Oil & natural gas
29.96%
Manufacturing
8.46%
Construction &
Finance & real estate
insurance 14.34%
Wholesale & trade
8.53% 11.56%
Sources: Economena, Moody’s Analytics
May 2021 19Nonoil Fuels the UAE’s Recovery
Contribution to real GDP growth, ppts
4
2
0
-2
-4
Oil GDP
-6 Nonoil GDP
-8
18 19 20E 21F 22F
Sources: UAE Federal Competitiveness and Statistics Authority, Moody’s Analytics
May 2021 20Monetary & Fiscal Support
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
May 2021 21Government Finances
150 70
100 60
50
50
0
40
-50
30
-100
Budget balance, AED bil (L) 20
-150
Govt debt-to-GDP ratio, % (R)
-200 10
18 19 20F 21F 22F 23F
Sources: Federal Competitiveness and Statistics Authority, Moody’s Analytics
May 2021 22Property Prices
35 155
30 Composite house price index, % change yr ago (L)
145
25
Composite house price index, 2010=100 (R) 135
20
15 125
10
5 115
0 105
-5
95
-10
-15 85
13 14 15 16 17 18 19 20 21F 22F 23F 24F
Sources: Bank for International Settlements, Moody’s Analytics
May 2021 233 Algeria Outlook
Expenditure Rises, Brent Crude Falls
Tril. Algerian Dinar (L), USD per bbl (R)
10 120
9 Government revenue (L)
8 100
Government expenditure (L)
7 80
Brent Crude (R)
6
5 60
4
3 40
2 20
1
0 0
90 92 94 96 98 00 02 04 06 08 10 12 14 16 18 20F 22F 24F
Sources: IMF, SIX Financial Information, European Central Bank (ECB), Moody’s Analytics
May 2021 25For Algeria, Breakeven Is a Long Way Off
$ per bbl
175
2021 fiscal breakeven price
150 2019 fiscal breakeven price
Brent Crude forecast
125
100
75
50
21 23 25 27 29 31 33 35 37 39 41 43 45 47 49 51
Sources: IMF, SIX Financial Information, European Central Bank (ECB), Moody’s Analytics
May 2021 26Investment Is a Quarter of 2021 Budget
%
2.65
5.35
7.25 All other expenditure
Misc. investment
12.31
Infrastructure investment
Housing investment
72.44
Agriculture investment
Sources: Algerian Ministry of Finance, Moody’s Analytics
May 2021 27Falling Current Account Shrinks Import Coverage
40 40
30 35
20 30
10 25
0 20
-10 15
Balance on current account, bil USD (L)
-20 Import coverage, mo (R) 10
-30 5
02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20F 21F 22F
May 2021 28Imports Comprised of Key Capital Goods
2019, %
Machines
22.93
Transportation
45.56
Metals
11.75
Chemical products
10.89
Other
8.87
Sources: United Nations Statistical Division, Moody’s Analytics
May 2021 29Oil Sector a Drag Through 2021
% change
10
5
0
-5
Non-oil Oil Total
-10
-15
19 20F 21F 22F
Sources: IMF, Moody’s Analytics
May 2021 30Algeria’s Recovery Trails the Region
% change
10
8
6
4
2
0
-2
-4
-6 19 20 21F 22F 23F
* 2020 values forecasted
-8
-10
Algeria* Egypt* Morocco Tunisia
Sources: United Nations Statistical Division, The World Bank, Moody’s Analytics
May 2021 31Consumption, Government Driven Recovery
Contribution to real GDP growth, % change
10
5
0
-5
Private consumption Government consumption
-10
Total investment Exports
Imports GDP
-15
17 18 19 20F 21F 22F
Sources: United Nations Statistical Division, Moody’s Analytics
May 2021 32Summary
» 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.
May 2021 33Questions?
Please email help@economy.com
May 2021 34Contact Us: Economics & Business Analytics Offices
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