Recovery to disappoint even if oil price recovers

Fears about the coronavirus outbreak have weighed on oil prices and clouded the near-term outlook for the Gulf countries. Lower oil prices and a possible deepening of oil production cuts will act as a headwind to growth in early 2020. But even if the virus is brought under control soon, we think that tight fiscal policy means any subsequent economic recovery will disappoint. Outside the Gulf, painful balance of payments adjustments lie in store in several countries. In Lebanon, this will come alongside a debt restructuring. Egypt will remain the region’s bright spot as fiscal and monetary policy are loosened.