Weekly Economic Commentary – May 30, 2021



Download a PDF copy of this week’s economic commentary here.


Stock markets across the globe gained, with China recording one of the highest gains since Jul. In the US, spending plan proposed in the Biden budget boosted market sentiment even as data pointed to a jump in Apr inflation. Europe’s Stoxx 600 gained on the pace of vaccination and reopenings across the region. Regional markets were mixed, with Egypt’s market down by 4.6% (largely due to blue-chip) while Dubai gained for the fourth consecutive week, up 2.4% on property and financial stocks. Among currencies, the yuan advanced to its strongest since 2018.  Oil prices inched closer to the USD 70-mark while gold price inched up by 1.2% crossing the USD 1900 mark (it is up almost 7.6% this month).

Weekly % changes for last week (27-28 May) from 20 May (regional) and 21 May (international).



Global Developments


  • The second estimate of Q1 GDP showed growth at a 6.4% annualized pace – no change from the preliminary estimate; upward revisions to consumer spending and nonresidential fixed investment were fully offset by downward revisions to exports and private inventory investment. PCE price index grew by 3.7% in Q1 (Q4: 1.5%) and core PCE was up by 2.5% vs 1.3% in Q4.
  • Personal income contracted by 13.1% mom in Apr, following Mar’s 20.9% surge. Spending slowed as well, rising by 0.5% compared to the previous month’s 4.7% increase. Spending on services rose 1.1% last month while spending on goods fell 0.6%.
  • The US budget plan with its USD 6trn spending (with USD 800bn for the fight against climate change, USD 2.3trn jobs plan, USD 115bn for roads and bridges, USD 160bn for public transit and railways, and USD 1.8trn families plan) would see debt surge to 117% of GDP by 2031; this, in spite of the at least USD 3trn in proposed tax increases on corporations, capital gains and the top income tax bracket.
  • Durable goods order in the US fell by 1.3% mom in Apr (Mar: 1.3%), with transportation orders down by 6.7%. Nondefense capital goods orders excluding aircraft increased by 2.3%, following a 1.6% rise in Mar.
  • US Chicago Fed National Activity Index declined to 0.24 in Apr from the 8-month high of 1.71 in Mar. The 3-month moving average slid to +0.07 in Apr from +0.35 in Mar.
  • Chicago PMI for May rose to 75.2 in May (Apr: 72.1) – the highest level in 47 years. The gauge for new orders gained 7.7 points to the highest level since Dec 1983, while the production index slowed 2.3 points as supply constraints remained a pressing issue.
  • Michigan Consumer Sentiment Index slipped to 82.9 in May, from April’s 88.3 reading. The current economic conditions gauge fell to 89.4 (Apr: 2) and consumer expectations slipped to 78.8 in May (Apr: 82.7).
  • S&P Case Shiller home price indices increased for the 10th consecutive month, up by 13.2% yoy in Mar (Feb: 12%), as high demand exists alongside near record-low supply.
  • New home sales dropped by 5.9% mom to a seasonally adjusted 863k units in Apr, following a 917k rise the month before. Pending home sales slipped by 4.4% mom in Apr (Mar: 1.7%). At the end of Apr, there were only 1.16mn houses for sale in the US, down 20.5% yoy.
  • Initial jobless claims tumbled to 406k in the week ended May 22nd from 444k the week before. The 4-week average fell to 458.75k, the lowest since Mar 2020. Continuing claims fell by 96k to 3.64mn in the week ended May 15, bringing the four-week moving average down to 3.68 mn.


  • EU GDP contracted by 3.1% yoy and 1.8% qoq in Q1 this year, in the final estimate published by Eurostat. Separately, France fell into recession in Q1 with a 0.1% contraction, following a 1.5% dip in Q4 2020.
  • The IFO business climate increased to 99.2 in May (Apr: 96.6), the highest value since May 2019, alongside upticks in both current assessment (up to 95.7 from 94.2) and expectations (102.9 from 99.2). More optimistic expectations led to the service sector’s Business Climate Index rising to its highest value since Feb 2020.
  • GfK consumer confidence survey improved to -7 in Jun (May: -8.6), due to a decline in coronavirus infections and advances in vaccinations.
  • UK government borrowing fell to GBP 31.7bn in Apr, down GBP 15.6bn lower compared to a year ago. The ONS estimates that the government borrowed a total of GBP 3bn in the financial year to March – the highest level since the end of WWII.

Asia Pacific:

  • Profits of China’s state-owned enterprises soared by 240% yoy to CNY 1.36trn (USD 213.42bn) in the Jan-Apr this year, according to the ministry of finance. Separately, profits at Chinas industrial firms rose by 57% yoy to CNY 63bn (USD 120.22bn) in Apr, down from 92.3% in Mar. For the Jan-Apr period, profits grew by 106% to CNY 2.59trn.
  • Inflation in Tokyo declined by 0.4% yoy in May (Apr: -0.8%) and core consumer prices fell by 0.2%.
  • Japans jobless rate rose to 2.8% in Apr from 2.6% in Mar, with the jobs-to-applicants ratio at 1.09, down from the previous month’s 1.10.

Bottomline: The OPEC meeting is scheduled for later this week. It is likely that gradual easing of oil cuts will be maintained, on expectations of increased demand the US and countries in Europe reopen (also for international travel). Iran’s return to the oil market is a possibility – if so, adding up to 2mn barrels per day. Meanwhile, keep an eye out for successful cases of climate activism and its impact on Big Oil (check the Media Review segment). Inflation data from the Eurozone is likely to be scrutinized this week, especially ahead of the ECB meeting on 10th Jun. PMIs  are likely to indicate a recovery in activity amid higher input costs and supply constraints (cost of shipping goods to Europe from Asia soar to a record high of USD 10k last week).  

Regional Developments

  • Bahrain’s central bank has instructed banks to postpone all loan installments for individuals and companies by a further 6 months. Separately, a 2-week shutdown has been announced to contain the Covid19 surge: during this period non-essential services will remain closed.
  • About USD 1.6bn in government contracts were issued in Q1 this year: this is up 23% yoy. Oil and gas sector, with contracts worth USD 767mn, accounted for 48% of the total, followed by the aviation sector (USD382mn) and construction and engineering (USD 194mn). Infrastructure projects spending accounted for USD 32bn.
  • Around 80% of Bahrainis have been vaccinated with Sinopharm: with Saudi not recognising the vaccine (in spite of being WHO-approved), the country is in discussions to allow entry to these Bahrainis.
  • S&P revised Bahrain’s outlook to negativefrom stable, citing the country’s pace and ability to service its finances and external debt.
  • Egypt and Bahrain are discussing the establishment of a direct trade hub between the two nations: the country and broader GCC will have access to agricultural and food products.
  • Non-oil exports from Egypt grew by 11% yoy to USD 9.8bn in Jan-Apr 2021, with the engineering sector exports surging by almost half to USD 969mn. Imports picked up by 5% to USD 23.1bn in the same period.
  • Egypt’s central bank deputy governor stated, in an interview with Al Arabiya, that a new financing agreement with the IMF was unlikely, with the country expected to receive the last tranche of IMF’s USD 8bn loan in Jun.
  • Net foreign assets in Egypt’s banking sector declined by 13% mom to USD 17.7bn in Mar while net foreign liabilities inched up by 2% to USD 20.05bn.
  • Egypt reduced its debt by 20% in the past three years, disclosed the finance minister.
  • A draft law that would govern fintech in Egypt was given a preliminary approval by the Parliament. The Financial Regulatory Authority will have supervisory power over fintech startups and will regulate the use of fintech to deliver non-banking financial services.
  • Revenues from the Suez Canal increased by 16% yoy to USD 551.5mn in Apr, with the number of ships passing through up by 4.8% yoy to 1814.
  • Egypt’s finance minister stated that EGP 25bn has been allocated to cover the wage increase of public sector employees (to be enforced from Jul).
  • Since the start of the year, 10 Egyptian startups have raised USD 55.3mn in funding, according to MAGNiTT, while four others obtained financing of less than USD 1m
  • Egypt will complete the local manufacture of 2mn doses of the Covid19 vaccine within 6-7 weeks, revealed the health minister.
  • A USD 14mn reconstruction project in Iraq – of a major bridge that was destroyed during the war – has been awarded to an Egyptian company. Separately, an Iraqi official disclosed that there are about 6225 stalled projects worth USD 90bn in the country, largely due to mismanagement and lack of funds in addition to the wars.
  • Iraq is likely to complete the construction of a new oil pier within the port of Khor Al-Zubair – its main fuel export and import facility – this year, with over 70% complete already. The new platform, which includes modern equipment will enable speedy pumping and offloading operations that will enable the entry of more ships.
  • Private sector exports from Qatar to Jordan reached USD 11mn in Q1 this year; last year exports had totalled QAR 140mn.
  • Jordan’s public sector employees will return to normal working hours from today.
  • Kuwait is planning to privatise 8 public sectors by 2025, reported Al-Anba daily, with the process expected to raise at least KWD 800mn (USD 2.6bn). This covers the power sector in addition to industrial zones, ports and also the Kuwait International Airport.
  • In light of the postponement of payment of loans and installment financing during the pandemic, the balance of debts to be paid to Kuwait’s banks totalled about KWD 12bn (USD 40bn) as of Mar 2021, according to the central bank. Total balance including the interest and returns due on those loans until the end of its terms is about KWD 15.1bn.
  • The central bank of Kuwait warned against dealing or investing in the so-called cryptocurrencies, given the recent fluctuation in prices.
  • Kuwait eased quarantine restrictions for travelers who have taken the Covid19 vaccine or recovered from this; non-citizens of Kuwait are still banned from visiting until further notice.
  • Lebanon’s caretaker health minister disclosed that the Central Bank would not be able to cover the USD 1.3bn cost of subsidised medical supplies as it would require dipping into its mandatory reserves.
  • S&P estimates government debt restructuring and asset write-downs in Lebanon could cost banks between 30-134% of forecast 2021 GDP.
  • The World Bank agreed with Lebanon’s government that the disbursement of the USD 246mn loan would be made in USD instead of LBP as was announced initially.
  • Following multiple protests in Oman demanding jobs, the government announced the creation of up to 32k full and part-time government jobs and also wage subsidies for those entering the workforce for the first time.
  • Oman’s tourism ministry revealed that around 10% of employees in the tourism sector were Omani nationals. At end-2020, there were around 15,500 Omanis working in the tourism sector (out of a total 142,240 jobs). Separately, plans are underway to invest OMR3bn in the tourism sector over the next 3 years.
  • S&P estimates GCC government deficits to narrow to USD 80bn this year from USD 143bn in 2020, with oil price assumed at a n average USD 60 for the rest of the year. Furthermore, GCC government debt issuance is expected to average about USD 50bn per year from 2021 to 2024, versus USD 70bn last year and close to USD 100bn in 2017.
  • Average hotel occupancy rates in the Middle East stood at 53.1% during the week from May 10-16 (Eid holidays), according to STR: this is slightly below the rates in 2019.

Saudi Arabia Focus

  • In an interview with the FT, Saudi Arabia’s finance minister revealed that the country aims to raise around USD 55bn over the next four years through its privatisation program. With a pipeline of 160 projects across 16 sectors, it is expected that the nation could raise USD 38bn via asset sales and USD 16.5bn through PPPs.
  • Non-oil exports from Saudi Arabia grew more than 23% yoy to SAR 60bn in Q1 2021. This accounted for just 28% of the total exports in Q1, as the quarterly value of oil exports topped SAR 152k, the highest since Q4 2019.
  • Services contributed SAR 47trn (USD 392bn) to Saudi GDP in 2020 (down by 1.6% yoy) and accounted for a record 56.7% of GDP, reported Al Eqtisadiah citing official data.
  • Saudi Arabia issued SAR 53bn (USD 941mn) of riyal-denominated debt as part of the local currency sukuk program for May; of these SAR 3.31bn will mature in 2028.
  • The cumulative net income of Saudi Arabia’s listed banks (excluding Samba financial group) rose by 20% yoy in Q1, thanks to lower provisions, higher non-financing income and improved efficiency. Loan assets grew 13% yoy with nearly 40 percent of new loans related to mortgages. Samba has not reported its results following its merger with National Commercial Bank.
  • Aggregate net profits of listed companies in Saudi Arabia surged by 44% yoy to SAR 107.88bn (USD 28.77bn) in Q1 2021. Profits of energy and banking sectors jumped by 28% and 20% during this period.
  • Listed companies in Saudi Arabia invested more than SAR 177bn (~USD 47bn) on Capital Expenditure (CAPEX) in 2020, roughly equivalent to 7% of Saudi’s GDP last year.
  • Entertainment activities in Saudi Arabia have been allowed to resume, at 40% capacity; those who are vaccinated will be permitted entry.
  • Hotel occupancies in Saudi Arabia stood between 20%-50% during Q1 this year, with Makkah and Madinah markets witnessing the steepest declines of 64% and 48% while Riyadh posted a 20% decline and Jeddah had the lowest 1% drop.
  • Saudi Arabia will resume the issuance of tourism visas for 11 countries from this Sunday, including visitors from UAE, Germany, US, Ireland, Italy, Portugal, UK, Sweden, Switzerland, France and Japan.

UAE Focus

  • UAE’s foreign assets (held by the central bank) increased by 1.1% qoq to AED 392.4bn at end-Q1. Money supply, M2, increased by 0.6% qoq and 2.2% yoy to AED 1.4875bn as well during the same time period.
  • Bloomberg reported that the Abu Dhabi Exchange (ADX) was reaching out to state-run firms and family-owned companies to kickstart another stream of IPOs; various incentives were being offered to making these listings attractive including flexibility on the minimum stake size required for share sales and promising to reduce or forgo listing fees.
  • The Dubai Economy issued 15,475 new licenses in Q1 this year, up 18.8% yoy; of these licenses, 58% were professional licenses and 41% for commercial activities.
  • UAE’s freezones contributed about a third of commercial traffic and imports last year and more than half of all re-exports, according to the minister of economy. He also stated that about 80% of the first phase to support economic sectors has been completed.
  • The CEO of Dubai Tourism, in an interview, disclosed that while the Dubai emirate welcomed 40k visitors in Jul 2020, that number had jumped to 450k in Mar this year.
  • Dubai’s real estate sales touched 4,832 transactions (+4.2% mom) worth AED 10.98bn (USD 3bn, +0.6% mom) in Apr – the highest value in four years, according to Dubai’s official sales price index. Total number of properties sold this year reached 16,577 worth AED 36.12bn. Off-plan sales constituted 40% of total sales transactions in Apr.
  • Abu Dhabi’s ADNOC raised USD 64bn by issuing exchangeable bonds and additional shares to investors in its listed retail unit ADNOC Distribution.
  • UAE has been rated Aa2 stable in Moody’s annual credit analysis, though highlighted were a few aspects including “limited institutional transparency and the absence of public data on the composition of offshore assets and some aspects of the emirates’ public finances”.
  • UAE announced that Covid19 vaccinations will be mandatory for people attending all “live events” from June 6 This follows a similar announcement from Dubai the week before.
  • Hotels in Sharjah, Abu Dhabi and Dubai reported occupancy rates of 67.2%, 63.6% and 59.7% during the Eid holiday week (May 10-16), according to STR.

Media Review

MEI Lebanon Policy Conference: Panel discussion (Dr. Nasser Saidi joined as a panelist)


The Federal Reserve is no longer markets’ best friend: El-Erian


An investment boom is coming


Wall Street’s new love affair with China


The Post-Pandemic Whiplash Awaiting the World’s Poor


Big Oil faces its reckoning: a wake-up call



Carbon Prices now apply to over a fifth of GHG emissions: State and Trends of Carbon Pricing 2021, World Bank

https://pmiclimate.org/pmi-report# (blog)

https://openknowledge.worldbank.org/handle/10986/35620 (download report)

Dr. Nasser Saidi’s interview with Al Arabiya (Arabic) on GCC recovery & fiscal deficits


Dr. Nasser Saidi’s outlook for the dollar, Al Arabiya’s Business Lounge Podcast (Arabic)



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