As MENA countries mostly adopt a reactive market approach, leading sectors in the GCC are directly affected by the Fed’s monetary policies.
The indecisive statistics for the interest rate outcome in the US taps into the grounds of the UAE’s economic model, which aims at amplifying its revenues from trade, transport, tourism and technology. According to the Central Bank of the UAE (CBUAE), their latest rate decision remained unchanged, at 5.4%, in tandem with the latest Fed rate decision. In other words, despite of the region’s resiliency, the state of borrowing costs is directly tied with the awaited inflation, employment, and economic growth figures of the U.S.
“Aside from the interplay between the hawkish and dovish rate outlook, another inflation driver in the region is oil, supported by the transportation sector”,statesRitu Singh, Regional Director of StoneX Group Inc.“With a combination of geo-political tensions and OPEC output cut plans, the region remains resilient with Saudi Arabia and UAE in the lead”,Singh adds.
The adopted anti-fragile business model of the UAE has only 30% of its GDP tied to oil revenues, and thus, maintains positive non-oil private sector PMI statistics above 57.
In terms of overall GCC growth forecasts, the World Bank puts it at 3.6% in 2024, with projections to reach 3.8% in 2025. Strategic investments in tourism related infrastructure in Saudi Arabia and UAE stillattract the greatest number ofinvestors, especially with the committed 1 trillion dollar Saudi Ministry of Tourism investment plan for 2030. The UAE records a Non-Oil Real GDP percentage change of 4.2% between 2020 and 2022, with expectations to grow by 4.2% in 2024 and 5.2% in 2025, according to CBUAE.
From an equity market perspective, the UAE ETF MSCI chart, which tracks the performance of UAE equity market, has a similar direction. It currently shows a neutral to bullish course with respect to its smoothed price action, moving average, and relative strength index, anticipating the next breakout direction with the upcoming policies.
Tracing inflation rates, the overall GCC trends have been going down between June 2022 and December 2023, with targets in tandem with that of the Federal Reserve. However, non GCC countries like Egypt still struggle with containing rising inflationary pressures, striving to implement contractionary monetary policies to bring down the rates.
With quite an ambiguous year ahead, MENA economies are doing their best to remain resilient amidst the FED’s outlook and decisions.Stay in the know with more insightful articles by www.forex.com.
