Highlights: How to interpret the populist choice of Czech voters? In Algeria, monetising the budget deficit is a dangerous thing. In South Africa, the Finance Minister has admitted to Parliament that the country's deficit was set to widen. In China, Xi Jinping is almost more powerful than Mao. The Argentinian government has scored political successes but poor economic results.
- Central and Eastern Europe, Central Asia - North Africa, Middle East - Sub-Saharan Africa - Asia - Latin America - Trends to watch
Extract – Algeria: The dangerous monetisation of the budget deficit
The Algerian authorities recently launched a vast programme of monetary creation, locally dubbed "unconventional financing", inspired by US and EU post-crisis quantitative easing stimulus plans. The initiative allows the Central Bank to create around 7 trillion dinars of liquidity (about USD 56 billion, ie, a third of GDP) ex-nihilo over five years in order to finance the budget deficit and, more modestly, investment in the energy sector (Sonelgaz and Sonatrach). The budget deficit reached 17% of GDP in 2016 and is likely to exceed 10% in 2017. Algeria does not want to borrow on international markets and finds it extremely difficult to borrow on the domestic one. So-far unspecified structural reforms are meant to go hand-in-hand with the plan.
Saudi Arabia: GDP and current account
GDP shrank by 1% in Q2 2017, after a recessionary Q1 of 0.5% (y/y). According to the latest estimates, 2017 as a whole should see a slight, 0.5% recession, followed by a slightly better 2018 in terms of activity, with GDP growth possibly above 1%.