Weekly Insights 6 Jan 2022: Covid19 cases rise in the GCC, but economic activity is supported by high vaccination rates, oil & consumer spending

1. Covid19 cases have been rising in the GCC given the Omicron variant. The vaccination pace is strong & boosters are being rolled out. Stringency has ticked up slightly.

2. GCC PMIs remain expansionary in 2021. Divergent wrt other Middle East nations

Average PMI in 2021 stayed above 50 in UAE, Saudi and Qatar, with the latter’s activity much higher than recorded in its 5-year history. Egypt and Lebanon saw the 2021 average reading lower than in 2019, but substantially higher compared to 2020
The resurgence of Covid19 cases in GCC has led to a decline in sentiment in Dec 2021 with concerns about the spread of the Omicron variant and potential curbs on travel/ business
Input prices are rising => inflation is a rising concern (firms in Qatar are passing on costs to the consumer); strong competition (& offering of discounts) is another concern (in Saudi & UAE)

3. Oil continues to play a dominant role in Saudi Arabia’s economic activity

Saudi Arabia’s oil production and supply have been gradually rising, in line with OPEC+ decisions. Production hit the highest since Apr 2021
The latest OPEC+ meeting upheld the decision to raise production by 400k bpd in Feb, which will result in a surge in oil GDP growth in the quarter
Thanks to rising demand and higher prices, oil exports accounted for 78% of the total in Oct 2021, with Asia the key import partner

4. Unemployment rate for Saudi nationals held steady at 11.3% in Q3

Supported by measures to boost local employment in the private sector, unemployment rate remains unchanged at 11.3% in Q3 2021
As seen previously, female labour force participation rates are rising (34.1% in Q3 2021); wage disparity continues to widen for ages 15-54

5. Consumer spending in Saudi Arabia is on the rise, in line with economic recovery

Consumer spending has been rising in Saudi Arabia, with Point of Sales (20.5% yoy & 2% mom) and e-commerce (83.5% yoy and 7.7% mom) transactions driving the increase in Nov. Significant increases in spending has been recorded in sectors like hotels (47.7%) education (33.3%), transportation (39.8%) and restaurants (31%)
In Nov, credit disbursed to the public sector (govt + quasi-govt institutions) ticked up by 4% mom vs private sector’s marginal 0.6% rise. Mortage lending continues to remain a strong contributor to loan growth.

6. Credit growth in the UAE remains soft; private sector loans turn a corner

Credit disbursed to the UAE’s private sector grew by 1.3% yoy in Oct, turning positive after 18 consecutive months of year-on-year declines.
The share of credit to the public sector (i.e. govt & state-owned firms) stayed just under one-third of the total in Oct 2021 while business sector loans was lower than 50%
Outward remittances from the UAE grew by 9.2% yoy in Q3 2021 to USD 43.8bn. India remained the top recipient, but its share is much lower (26% in Q3 vs 37.8% pre-pandemic)