Arab stock markets improved by 6.2% and Gulf Cooperation Council equity markets increased by 7.3% in 2018, relative to a growth of 0.9% and a decline of 0.2%, respectively, in 2017. In comparison, global equities regressed by 11.7%, and emerging market equities declined by 15.7% in 2018. Activity on the Khartoum Stock Exchange jumped by 217% in 2018, the Qatar Stock Exchange rose by 20.8%, the Tunis Bourse surged by 15.8%, the Abu Dhabi Securities Exchange expanded by 11.7%, the Saudi Stock Exchange increased by 8.3%, the Damascus Securities Exchange improved by 3.5% and the Bahrain Bourse grew by 0.4%. In contrast, activity on the Beirut Stock Exchange declined by 25.1% in 2018, the Dubai Financial Market dropped by 24.9%, the Muscat Securities Market retreated by 15.2%, the Egyptian Exchange regressed by 13.2%, the Iraq Stock Exchange dropped by 12.1%, the Amman Stock Exchange declined by 10.2%, the Casablanca Stock Exchange decreased by 8.3%, the Palestine Exchange regressed by 7.9%, and the Boursa Kuwait contracted by 1.9% in 2018. In parallel, activity on the Tehran Stock Exchange increased by 68.9% in 2018.    
Source: Local stock markets, Dow Jones Indices, Byblos Research

Goldman Sachs projected Saudi Arabia's fiscal deficit at SAR237.7bn, or 7.9% of GDP, in 2019, which would be much wider than the official target of SAR131bn, or 4.3% of GDP, mainly due to its expectation of lower-than-budgeted oil revenues. It forecast hydrocarbon revenues to decline by 8.5% to SAR555.3bn, or 18.4% of GDP, in 2019, while it said that the Kingdom's 2019 budget stipulates a 9% rise in oil receipts to SAR662bn, or about 22% of GDP. It noted that the authorities' budgeted revenues for 2019 take into account an oil price assumption of $79 per barrel (p/b), which is significantly higher than Goldman Sachs' oil price projection of $65 p/b. In parallel, it anticipated non-oil receipts to rise by 8.9% to SAR313bn, or 10.4% of GDP, in 2019. Overall, it projected Saudi Arabia's total revenues to decline by 2.9% to SAR868.3bn, or 28.8% of GDP, in 2019. Further, it pointed out that the Kingdom plans to raise spending by 7.4% to SAR1,106bn, or about 37% of GDP, in 2019, due to the extension of the 'cost of living' allowance that was introduced to compensate vulnerable Saudis for the rising energy prices and tax burden. It expected the fiscal deficit to further widen to SAR258.3bn, or 8.4% of GDP, by 2021 in case fiscal consolidation measures are delayed.

In parallel, Goldman Sachs considered that risks of further external debt issuance, domestic borrowing from local banks and a drawdown in reserves are significant and could adversely affect domestic liquidity. As such, it anticipated Saudi Arabia's public debt level to rise from an estimated 19.7% of GDP at the end of 2018 to 27.1% of GDP at end-2019 and 43.3% of GDP by the end of 2021, based on fiscal breakeven oil prices of about $90 p/b. It also forecast Saudi Arabia's fiscal reserves to decline from 21.4% of GDP at the end of 2018 to 20% of GDP at end-2019 and 18% of GDP by the end of 2021. In turn, it projected the Kingdom's net public debt position at 7.1% of GDP at the end of 2019 and 25.3% of GDP by the end of 2021, compared to a net asset position of 1.7% of GDP at the end of 2018.  
Source: Goldman Sachs

Fitch Ratings indicated that it has a 'negative' outlook on 26 out of the 28 Turkish banks that it rates. It said that the 'negative' outlook reflects significant risks to the banks' credit profiles due to weaker growth prospects, the depreciation of the Turkish lira and the higher interest rates, which have weighed on the banks' asset quality, margins and capitalization metrics. It added that the 'negative' outlook points to refinancing and liquidity pressures, given the banking sector's reliance on foreign markets for funding, as well as to the risk of a reduction in market access amid the volatility of the Turkish operating environment and tightening global financing conditions. Fitch expected credit growth to be subdued in 2019, given the banks' low risk appetite and high pressure on asset quality. Also, it noted that the sector's non-performing loans (NPLs) ratio was at about 3% at end-September 2018. But it said that asset-quality risks have increased due to weaker growth prospects and high lending in foreign currency, as a weaker lira has weighed on borrowers' capacity to service their debt in foreign currency. It anticipated the NPLs ratio to rise to between 4% and 5% by end-2019, in the absence of significant shocks. Also, it noted that the banks' total regulatory capital ratio rose from 17% at end-2017 to 18.1% at end-September 2018, which mainly reflects regulatory forbearance and internal capital generation. But it said that the banks' real capital position has come under pressure from the depreciation of the lira and rising interest rates. 
Source: Fitch Ratings