Global investment bank JPMorgan Chase projected Saudi Arabia's fiscal deficit to narrow from 8.9% of GDP in 2017 to 3.7% of GDP in 2018 based on its Brent oil price assumption of $69.5 p/b this year, which is well below the government's deficit target of 7% of GDP. It indicated that the Kingdom's fiscal deficit narrowed significantly from SAR46.5bn or 7.5% of GDP in the second quarter of 2017, to SAR7.4bn or 1% of GDP in the second quarter of 2018, on the back of higher oil receipts. However, it said that the non-oil fiscal deficit widened from 33% of non-hydrocarbon GDP in the second quarter of 2017 to 40% of non-oil GDP in the second quarter of 2018, despite the introduction of the value-added tax and other fees. It added that authorities have raised about $26bn in financing so far this year, including a $6bn syndicated loan, $11bn in external debt issuance and about $9bn in domestic issues. But it noted that higher-than-anticipated expenditures would constitute risks to the fiscal outlook amid subdued economic activity. 

In parallel, the investment bank forecast Saudi Arabia's public debt level at 18.5% of GDP at end-2018, relative to 17.2% of GDP at end-2017. It said that authorities have planned to finance 40% of the 2018 budget deficit through drawing down foreign currency reserves at the Saudi Arabia Monetary Authority (SAMA). However, it noted that authorities have changed their strategy due to reduced financing requirements, and that they no longer intend to tap foreign currency reserves this year. As such, it attributed the decline in the current account and reserve account at SAMA to transfers to other entities such as the Public Investment Fund. Overall, it forecast foreign currency reserves at SAMA to rise from $496bn at the end of 2017 to $508bn at end-2018, due to reduced fiscal pressures. 
Source: JPMorgan Chase

Fitch Ratings anticipated that higher oil prices would improve Iraq's economy, public finances and external balances during the 2018-19 period. It projected real GDP to grow by 1% in 2018 and 3.3% in 2019, relative to a contraction of 1.3% in 2017. Further, it forecast the fiscal balance to shift from a deficit of 2.3% of GDP in 2017 to surpluses of 3% of GDP in 2018 and 1% of GDP in 2019. It noted that the government's finances are highly reliant on hydrocarbon receipts, which generate between 85% and 90% of public revenues. It estimated that an increase of $1 p/b in oil prices generates $1.2bn in additional revenues to the government, assuming stable export volumes. It added that its fiscal forecast does not include a full oil-sharing agreement with the Kurdistan Regional Government. It anticipated Iraq's fiscal balance to shift to a deficit of 1.9% of GDP in 2020 in case oil prices gradually decrease from $70 p/b in 2018 to $65 p/b in 2019 and $57 p/b in 2020. 

In addition, Fitch expected the government's debt level to decline from 60.1% of GDP at the end of 2017 to 50% of GDP at end-2018 and 48.7% of GDP at end-2019, in case of budget surpluses and higher nominal GDP. It noted that the government is planning to repay some Treasury bills and does not intend to issue more Eurobonds. However, it forecast the debt level to increase to 50.4% of GDP at end-2020 when the fiscal balance shifts to a deficit and oil prices decline. It expected foreign currency reserves to grow from $48.9bn at end-2017 to $53.7bn at end-2018 and $54.8bn at end-2019. In parallel, it indicated that Iraq's three-year Stand by Arrangement with the International Monetary Fund is on hold due to differences about the 2018 budget, as weak governance and political tensions in Iraq are constraining the implementation of fiscal and structural reforms. It noted that it is unclear whether Iraq still wants to have the arrangement with the IMF. But it considered that the IMF is open to negotiations with the upcoming government, with a focus on a supplementary 2018 budget or the 2019 budget, which could incorporate more realistic oil prices and additional reconstruction costs.
Source: Fitch Ratings

Figures issued by Bureau Van Dijk and Zephyr show that there were 39 private equity (PE) deals targeting companies in the Middle East & North Africa region for a total value of $569m in the first half of 2018. In comparison, there were 27 PE deals worth a total of $202m in the first half of 2017. The figures show an increase of 44.4% in the volume of deals and a surge of 181.7% in their value year-on-year in the first half of 2018. The value of PE transactions in Saudi Arabia reached $267m in the first half of the year, and accounted for 47% of the region's aggregate deal value in the covered period. Egypt followed with PE deals of $97m (17%), then Morocco with $93m (16.3%), Lebanon with $61m (10.7%), the UAE with $49m (8.6%) and Jordan with $3m (0.5%). In volume terms, the UAE had 19 PE deals in the first half of the year, followed by Egypt with eight transactions, Jordan and Morocco with three deals each, and Saudi Arabia, Lebanon and Tunisia with two transactions each. In addition, the value of PE deals targeting the construction sector reached $76m, or 13.4% of total value in the first half of 2018, followed by banks with $60m (10.5%), the education and healthcare sectors with $56m (9.8%), the wholesale and retail trade sector with $40m (7%), the insurance sector with $18m (3.2%) and the machinery, equipment, furniture & recycling sector with $2m (0.4%), while the remaining $316m in PE deals, or 55.5% of the total, targeted other services. 
Source: Zephyr, Bureau Van Dijk, Byblos Research