MENA | Saudi Q1 GDP; Regional inflation and Iran breakthrough

Saudi Arabia’s GDP fell 3.0% y/y in Q1 according to newly released data, slightly less than preliminary estimates suggested. The decline was mainly driven by oil output cuts, while non-oil activity expanded by 2.9%, rebounding from 0.8% y/y contraction seen in Q4 last year.

What you will learn:

• Saudi inflation rose to 5.7% y/y in May from 5.3% y/y in April, but we still expect the rate to ease in H2 as base effects from last year’s VAT hike fade. Meanwhile, Qatar registered a second consecutive positive inflation rate, up to 2.5%, following a sustained period of deflation.
• The US has lifted some sanctions on Iran’s energy sector in a move characterised as a “good faith approach” by the Biden administration.
• Despite some progress in the Vienna talks, a full return to the JCPOA is likely to be further complicated with an expected win for hardliner front-runner Ebrahim Raisi in the upcoming presidential elections.