Arab stock markets improved by 7.7% and Gulf Cooperation Council equity markets increased by 8.6% in the first quarter of 2019, relative to expansions of 6.3% and 5.9%, respectively, in the same quarter of 2018. In comparison, global stocks grew by 11.5% and emerging markets equities increased by 10.1% in the first quarter of 2019. Activity on the Egyptian Exchange jumped by 13.1% in the covered quarter, the Saudi Stock Exchange rose by 12.7%, the Bahrain Bourse expanded by 5.7%, the Dubai Financial Market increased by 4.2%, the Boursa Kuwait grew by 3.8%, the Abu Dhabi Securities Exchange improved by 3.2%, the Khartoum Stock Exchange rose by 2.1%, the Amman Stock Exchange expanded by 0.3%, and the Palestine Exchange grew by 0.2%. In contrast, activity on the Iraq Stock Exchange dropped by 11.3% in the first quarter of 2019, the Muscat Securities Market declined by 7.9%, the Beirut Stock Exchange retreated by 6.4%, the Tunis Bourse decreased by 5.6%, the Casablanca Stock Exchange regressed by 4%, the Qatar Stock Exchange contracted by 1.9%, and the Damascus Securities Exchange declined by 0.3%. In parallel, activity on the Tehran Stock Exchange improved by 14.8% in the first quarter of 2019.     
Source: Local stock markets, Dow Jones Indices, Byblos Research

The World Bank projected real GDP growth in the Middle East & North Africa (MENA) region to slightly decelerate from 1.6% in 2018 to 1.5% in 2019, amid expectations of volatility in global financial markets and weaker global economic activity. It noted that the region's growth this year will be supported by improved economic activity in oil importers. Further, it projected growth in the MENA region to accelerate to 3.4% in 2020, amid ongoing policy reforms to diversify the economy and strengthen the business environment. But it considered that the modest recovery in the MENA region will be insufficient to address its low per capita GDP levels. Further, the Bank indicated that risks to the MENA region's outlook are mainly tilted to the downside and include tightening global financial conditions and a slowdown in activity in the region's key trading partners.

In parallel, the World Bank projected growth in the region's oil-exporting countries to slow down from 1.1% last year to 0.9% in 2019, reflecting stable growth in Gulf Cooperation Council (GCC) economies and an economic contraction of 3.8% in Iran due to U.S. sanctions. It forecast real GDP growth in GCC economies to be nearly unchanged at 2.1% in 2019, supported by the countries' planned diversification programs, infrastructure projects and medium-term reform plans. In contrast, it projected economic activity in non-GCC oil exporters to contract by 0.9% in 2019, as the expected expansion in Algeria, Iraq and Yemen will be offset by the contraction in Iran and the slowdown in Libya's growth. Further, the Bank anticipated real GDP growth in oil-importing economies to pick up from 3.8% last year to 4% in 2019, supported by improved tourism activity in Egypt and Tunisia. It noted that the economic performance of MENA oil importers remains tightly linked to developments in GCC countries, due to the positive impact on their growth from increased capital, FDI and remittance inflows from GCC economies.
Source: World Bank

Goldman Sachs indicated that the volatility of the Turkish lira increased significantly in the second half of March 2019. It noted that the 6.7% depreciation of the lira against the dollar on March 22 was triggered by a decline in the Central Bank's foreign currency reserves, as well as by weak European growth data, given the large share of Turkish exports to Europe. But it said that the lira recovered some of its losses to trade at around TRY5.48 against the dollar on April 1, 2019. It considered that the reasons for the currency's volatility differ significantly from the factors that led to the depreciation of the lira in August and September 2018. It said that an overheating Turkish economy in early 2018, a wide current account deficit and the large external funding needs of the banking system exposed the economy to significant external risks last year. In comparison, it noted that the Turkish economy is currently operating below its potential, while the current account is balanced. As such, it considered that the renewed lira volatility towards the end of March 2019 was caused by a loss of confidence in the currency and by uncertainties about the authorities' ability or willingness to preserve its value, rather than by concerns about Turkey's external financing needs. Further, Goldman Sachs projected Turkey's real GDP to contract by 2.5% in 2019 and for the current account to post a surplus of 1.5% of GDP this year. It also expected the annual inflation rate to decline faster than anticipated to 12% by the end of 2019, in case of a gradual depreciation of the lira.
Source: Goldman Sachs