The 15th Annual One on One Conference 2019 Frontier Emerging Markets
Navigating the Path to Opportunities

3 - 6 March 2019 | Atlantis, The Palm, Dubai, UAE

Regional Outlook

With developed economies witnessing consistent growth, central banks have changed tactic from quantitative easing and near-zero interest rates towards tighter monetary policies. A strengthening US dollar is proving increasingly attractive to investors seeking risk-adjusted returns, with demand and yields on US government bonds continuing to rise while emerging markets have witnessed the biggest capital outflows since the taper tantrum in 2013. Compounded by geopolitical tensions, an escalating trade war between the US and China and the restoration of sanctions on Iran, the shifting dynamics of 2019 are putting to question the resilience of key frontier emerging markets.


A USD10bn support package from fellow GCC countries has notably reduced the country's macro risks, allowing the country to re-access international markets. However, the government still needs to deliver on tough economic reforms, starting with the implementation of VAT and pushing for spending cuts, to bring the budget deficit back to a sustainable level.


Solid domestic demand is set to continue driving nearly 7% real GDP growth with inflation remaining within the central bank's targeted level. However, the country's current account deficit is growing on the back of rising imports, partially due to higher oil prices, despite rising exports.


The Egyptian economy is expected to continue its strong growth performance of 0.5%, driven by recovery in the tourism sector, higher gas production and continued public investment. Inflation however, is likely to remain elevated at around the 13%-mark as the government moves to liberalize fuel prices in mid-2019 as one of the last major milestones within the IMF program.


Growth is likely to remain robust thanks to the implementation of significant structural reforms, thereby overcoming a potential slowdown in credit growth on the back of a tighter monetary policy. Inflation is likely to remain in low single-digits on relative stability of the currency and an appropriate monetary policy stance.


Jordan's challenging growth environment is set to continue with fiscal tightening, as part of the IMF program, and rising oil prices, which continue to weigh on economic activity. With the Syrian civil war coming to an end, allowing for the re-opening of the borders with Syria, exports are expected to grow significantly, providing some relief to overall challenging macro conditions in the Kingdom.


Growth is likely to uphold strong trends thanks to government spending and restored political stability. However, rising oil prices, concerns over rising public debt and sustained interest rate caps will be clear challenges to the country's medium-term growth.


Kuwait's strong fiscal position and rising oil prices will provide the government with more than ample room to continue implementing its investment plans, providing decent support to the country's overall GDP growth. Equity markets are also set to reap the benefits of credible market reforms, leading to increased capital inflows.


Political uncertainty, with the continued delay in the formation of a new government, is weighing heavily on Lebanon's economic activity. These factors also raise the risk of the country's financial stability, with bond yields and CDS rising to record levels. The Central Bank continues to ensure possession of high level of foreign reserves, but investors continue to nervously wait for economic reforms.


Economic growth in the Mauritius is expected to nudge towards 4% thanks to public infrastructure projects and a pick-up of investments in the country's tourism sector. Inflation is likely to remain in the low single digits due to the high food prices base effect of 2018 although the recent spike in oil prices remains a downside risk.


Growth in Morocco set to remain within the 3-4% range with a likely strong agriculture season boosting growth and non-agriculture economy growing by 3.5%. Macroeconomic stability is likely to be maintained thanks to low inflation and a very gradual transition to a more flexible exchange rate regime.


Economic recovery in Nigeria is expected to remain anemic, with rising oil prices proving insufficient to boost the country's GDP growth amidst a lack of economic reforms. Additionally. sustained fuel subsidies and a tighter monetary policy to maintain currency stability are proving key constraints on growth. Political uncertainty also persists ahead of the country's 2019 general elections.


Rising oil prices have provided the Oman's economy with much-needed relief, pushing the country's twin deficits back to low single-digits. Nevertheless, its growth outlook remains challenging, with the government budget not yet in a position to provide support to economic growth, especially with the government having lagged on economic reforms (such as the application of VAT and serious spending cuts).


Pakistan's economy will be going through an adjustment to rebalance the major misalignment in its economy, with higher inflation, rising interest rates and fiscal consolidation measures driving a notable slowdown in economic activity. The country is yet to formally sign an IMF agreement in order to ensure availability of funding for the medium-term.


Strong growth is expected to continue in Portugal, though set to slightly decelerate on the back of weaker private consumption and exports. Unemployment is expected to continue to decline while the country's external position stability is maintained. High public debt of c.120% of GDP remains a key challenge for Portugal's medium-term macro stability.


Qatar's comfortable fiscal position amidst rising oil and gas prices, and the government's focus to increase local production of a number of goods in light of the blockage from its neighbors will continue to boost economic growth. Non-oil growth is recovering despite ongoing pain in the tourism sector as a result of the blockage.


Real GDP growth in Rwanda is set to remain strong, supported by continued diversification of the country's export base, public investment spending, and more resilient agriculture as a result of extensive irrigation programs. Inflation is expected to remain within the central bank's target range.

Saudi Arabia

An expansionary fiscal policy amidst rising oil prices and the Saudi government's commitment to boosting employment is likely to ensure a continued gradual pick-up in non-oil economic activity. In the long-term, growth remains hinged on the government's ability to implement ambitious reforms and growth targets laid out in Vision 2030.

Sri Lanka

Political tensions, which risk a constitutional crisis, mark a clear uncertainty on Sri Lanka's short-term growth outlook. Political uncertainty is driving capital outflows, weighing on external balances which are already being challenged by rising oil prices.


Stagnating credit growth amidst rising NPLs likely mean that growth in Tanzia will remain under pressure. Slow budget implementation is another risk for the country's general economic activity though structural reforms are likely to boost its growth outlook in the short-term.


Over 2019. Turkey's economy is expected to adjust to the sharp devaluation of the Lira, ensued higher inflation and tightening of its monetary policy, likely resulting in a contraction in economic activity.


Uganda's economic outlook is set to remain positive anchored on improved political conditions following the approval of constitutional amendments and favorable weather conditions boosting agricultural output. A tightening monetary policy is expected in light of the country's widening current account deficit which could lead to pressure on the Ugandan Shilling.


The UAE's economic outlook is set to improve with fiscal loosening by Abu Dhabi – best represented in the creation of an AED50bn stimulus package – as well as continued investment in Dubai ahead of its highly-anticipated Expo 2020 providing support to overall economic activity. The economy is still challenged though by a cyclically strong dollar and rising cost of doing business.


While remaining strong at +6%, GDP growth in Vietnam is set to decelerate as an unfavorable external environment, stronger dollar, rising oil prices and trade wars weigh on export growth. Rising public debt is emerging as a medium-term challenge to the country's macro-stability.