巴黎银行-新兴市场-宏观策略-海湾合作委员会 ：挂钩和通货紧缩导致了降息-20190719-9页 (2).pdf

|FOCUS 19/07/2019 1 Emerging market and GCC rates remain supported by easing global financial conditions,particularly in the US and Europe(see EM Look at systemic factors and see the future).We expect rates markets and sovereign credit across the region to be supported by global trends.The spread of the SAR rates curve to the USD widened in May and June,but has tightened since the beginning of July(Figure 2).We expect the spread to tighten further as geopolitical risk in the region subsides.Forward swaps continue to predict monetary easing around 50bp of cuts are priced over the next year.MARKET VIEW FOCUS|CEEMEA 19 July 2019 GCC Pegs and deflation to usher in rate cuts KEY MESSAGES Stubborn deflation and low economic activity make the GCCs macro climate ripe for rate cuts,in our view.Although we expect the first rate cuts by Gulf central banks to take place on 31 July,we think deflation in Saudi Arabia and the UAE will persist for much of Q3.We revise down our 2019 CPI forecasts for Saudi Arabia and the UAE.For the UAE,we also cut our 2019 real GDP growth projection,reflecting limited upside for both the oil and non-oil economies.The largest GCC economies are in the grip of stubborn deflation:Qatar has the longest recent deflation track recordsince January 2017while Saudi Arabia and the UAE are newcomers to negative price growth territory(Figure 1).Similar trends across the GCC:While still confined to the boundaries of inflation,price growth has been anaemic in Kuwait and Oman since Q1 2018,and Bahrain since Q4 2018.Underlying this trend is a general softness in domestic housing market brought on by the impact of the 2014 oil price collapse.We therefore think GCC economies stand ready to benefit from an anticipated rate cut at the end of July,followed by another in September that may help revive local demand conditions,albeit with limited impact on GDP growth.Please refer to important information at the end of this report Fig.1:Old and newcomers to deflation Fig.2:Spread compression in July likely to continue Sources:Bloomberg,BNP Paribas EM ECONOMICS|EM STRATEGY Mohamed Abdelmeguid,Middle East and North Africa Economist|Shaun Daly,CEEMEA Strategist|BNP Paribas London Branch 0.40.50.60.70.81.52.53.54.5SAR 5Y SwapUS 5Y SwapSpread(RHS)-4.0-2.00.02.04.06.0Jul-18Oct-18Jan-19Apr-19Saudi Arabia CPI(%y/y)UAE CPI(%y/y)Qatar CPI(%y/y)Sources:national statistics agencies,BNP Paribas|FOCUS 19/07/2019 2 Ex-housing inflation:Spending restraint by governments and individuals has reduced demand for foreign workers which,together with low wage growth,has contributed to a supply glut in the housing market.Saudi Arabia is experiencing its steepest decline in house prices as a natural consequence of a 1.2m net expat outflow since October 2016.Boasting the heaviest weighting in regional CPI baskets,housing accounts for as much as 34.1%in the UAE and as little as 21.89%in Qatar.Ex-housing CPI looks healthier:If housing and associated items are excluded from the CPI calculation,we estimate that Saudi Arabia and the UAE would return to healthy inflation readings of 1.0%and 1.2%,respectively,whereas Bahrain would regress to deflation(Figure 3),given the positive contribution from housing to the CPI calculation.(Bahrains housing market has begun to tighten gradually since the final quarter of 2018).What drives the housing downturn?There are idiosyncratic factors,although the case of Qatar,where the market downturn began to level off only recently,illustrates a common root cause of housing woes across the Gulf bloc.After surging to 10.6%y/y in 2014,population growth has decelerated sharply,falling to 1.3%in 2018 as the LNG-related infrastructure buildout concluded and the oil price-linked economic slowdown further reduced demand for foreigners in Qatar(Figure 3).The IMF forecasts Qatars population growth will taper even more over the next five years to an annual average of just 0.2%in 2020-2024,keeping demand for housing in check.Simultaneously wage growth across sectors,),affected by public spending,has decelerated since 2014,affecting housing affordability(Figure 4).Similar trends can be seen in the rest of the GCC,including in Saudi Arabia and the UAE,although the 2017 regional boycott of Qatar has also crimped foreign purchases of property by GCC nationals.Housing market woes May CPI(%y/y)Avg CPI,DecMay(%y/y)Share of CPI basket in deflation,May(%)Inflation ex-housing,May(%)Sectors in deflation Saudi Arabia-1.5-1.3 43.1 1.0 Housing&utilities,communication,recreation,miscellaneous UAE-1.1-1.7 59.3 1.2 Food,textiles,housing,medical care,miscellaneous Qatar-0.5-0.9 58.7-0.6 Food,communication,recreation,housing,miscellaneous Kuwait*0.7 0.5 42.5 1.6 Housing,restaurants&hotels,miscellaneous Oman 0.2 0.4 44.4 0.3 Clothing,housing&utilities,healthcare,communication,miscellaneous Bahrain 0.5 1.2 25.9-0.2 Clothing,furnishing,healthcare,recreation,restaurants Fig.5:Excluding housing from the CPI softens the deflation footprint 02468101214161820Mid-year population estimate(%growth y/y)Sharp deceleration since 2014 Fig.3:Population growth is slowing in Qatar(%)Fig.4:Qatars wage growth is also easing Sources:Planning and Statistics Authority,IMF,BNP Paribas.Dotted line denotes IMF forecast Sources:Planning and Statistics Authority,BNP Paribas-15-10-505101520Jan-14Jan-15Jan-16Jan-17Jan-18Jan-19Fitted trendline suggests a negative trajectory for salaries growth Average monthly salary per quarter(%y/y)*data for April and NovemberApril;Sources:national statistics agencies,BNP ParibasEM ECONOMICS|EM STRATEGY Mohamed Abdelmeguid,Middle East and North Africa Economist|BNP Paribas London Branch|FOCUS 19/07/2019 3 Forecast downgrades:In light of these trends,we have revised down our Saudi Arabia and UAE annual average CPI forecasts for 2019 to-0.7%y/y and -0.5%,respectively,with an expectation of a negative contribution from housing to the CPI index during the remaining months of the year(Figures 6 and 7).In 2020,we foresee inflation returning to positive price growth terrain,thanks mostly to favourable base effects.However we still expect price pressures to remain subdued,with further expat departures likely in Saudi Arabia and the housing market continuing to adjust to weak demand.In a similar vein,we have lowered our GDP growth forecast for the UAE to 1.8%(from 2.4%),with deflation already trickling into non-housing sectors and the upside to oil production capped by the OPEC+supply cuts agreement until March 2020.We had already revised down our Saudi growth outlook in early July(see Saudi Arabia Oil constraints weaken economic growth,dated 3 July).A case for a rate cut forecast:Commitment to USD pegs across the GCCwith the notable exception of Kuwait,which pegs its currency to an undisclosed basket of currenciesmeans central banks have limited ability to combat deflation.However,the rate cuts we expect should boost business and consumer credit,as well as the local mortgage markets.In our view,all six states are likely to track the US Federal Reserve movements.We now expect the latter to deliver two rate cuts of 25 basis points each,one in July and another in September(see US Outlook and FOMC:Insurance policy,dated 10 June).This puts the policy rates of Saudi Arabia and the UAE at 2.50%and 2.25%by end-September,respectively,in line with the broader context in emerging markets(see EM monetary policy outlook After the Fed,dated 11 July).Ripe for rate cuts EM STRATEGY|EM ECONOMICS Fig.6:Saudi Arabia deflation set to persist through Q3 Fig.7:We expect further deflation in UAE Sources:Saudi Arabian Monetary Agency,Central Department of Statistics&Information,BNP Paribas,Dotted lines are BNPP forecasts Sources:Central Bank of the UAE,Federal Competitiveness&Statistics Authority,BNP Paribas,Dotted lines are BNPP forecasts Repo rate(%)Fig.8:Growth likely to disappoint Sources:UAE Federal&Competitiveness&Statistics Authority,Saudi Arabian Central Department of Statistics&Information,BNP Paribas,Dotted lines are BNPP forecasts-2.0-1.00.01.02.03.04.05.06.02013201420152016201720182019Saudi Arabia real GDP(%y/y)UAE real GDP(%y/y)-3-2-101234Jan-19Apr-19Jul-19Oct-19CPI(%y/y)-3-2-101234Jan-19Apr-19Jul-19Oct-19Repo rate(%)CPI(%y/y)BNP Paribas forecasts BNP Paribas forecasts BNP Paribas forecasts Mohamed Abdelmeguid,Middle East and North Africa Economist|BNP Paribas London Branch Legal Notice This document has been written by our Strategist and Economist teams within the BNP Paribas group of companies(collectively“BNPP”);it does not purport to be an exhaustive analysis,and may be subject to conflicts of interest resulting from their interaction with sales and trading which could affect the objectivity of this report.This document is non-independent research for the purpose of the UK Financial Conduct Authority rules.For the purposes of the recast Markets in Financial Instruments Directive(2014/65/EU)(MiFID II),non-independent research constitutes a 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