+965 2224 8361
Daily Economic Update
04.05.2025GCC: IMF cuts regional growth, but non-oil prospects still solid amid diversification push. The IMF, in its just-released Regional Economic Outlook, downgraded economic growth in the GCC over the medium term from its previous estimate last October. Citing deteriorating international trade relations and rising protectionism sparked by tit-for-tat tariffs, aggregate GCC GDP growth has been lowered in 2025 to 3.0% (from 4.2% previously) before accelerating in 2026 to 4.1% on the back of OPEC+ supply increases. (The agency also published a longer-term forecast out to 2030, projecting growth at 3.4%). Less robust non-oil activity due to a combination of negative trade spillovers, regional conflict-linked geopolitical uncertainty and slower rollout of structural reforms, was the primary downside impulse. The IMF sees aggregate non-oil growth slowing to 3.4% in 2025 (from the previous estimate of 4.0%) before picking up pace to 3.5% in 2026. The UAE is expected to lead gains, with non-oil growth averaging 4.6% over 2025-2026, followed by Oman and Saudi with 3.5% and 3.2%, respectively. Kuwait’s non-oil growth is pegged at 2.6%. It should be noted, however, that the IMF has lauded the progress so far achieved in the region, with the UAE and Saudi in particular demonstrating good progress in terms of business-enhancing structural and regulatory reforms, diversification and domestic investment. GCC Oil GDP growth, meanwhile, is expected to accelerate from -2.8% in 2024 to 1.7% and 5.4% in 2025 and 2026, respectively. Qatar’s sizeable LNG expansion is a major positive catalyst over the forecast period.
Saudi Arabia: Sustained robust non-oil growth in Q1 2025. According to official preliminary data, GDP grew by 2.7% y/y in Q1 2025, decelerating from a downwardly revised 4.4% in Q4 2024 due to a contraction (1.4%) in oil activities. Non-oil activity expanded by a solid 4.2%, the 17th consecutive quarter of growth, while government activity growth strengthened to 3.2%. Of note is the major revision to the national accounts statistics to reflect the structural changes to the Saudi economy resulting from Vision 2030 initiatives and the growth of the non-oil private sector. The changes include rebasing output to 2023 weights from the previous base year of 2018, and the upward revisions to GDP growth for 2023 and 2024 to 0.7% and 1.8% from -0.7% and 1.3%, respectively. Looking forward, despite external headwinds from trade tensions, global economic uncertainty, and adverse geopolitics, we expect Saudi economic growth to show some resilience, underpinned by continued Vision-linked investment momentum and solid consumer sentiment, in addition to a gradual recovery in oil output. Recent monthly indicators are supportive of the positive outlook, including continued double-digit private sector led credit growth which rose to 14.9% y/y in March (highest since August 2022) and a PMI of 58 in March reflecting the continued strong expansion in business activity.
US: Job market robust with no early dents due to tariffs, China willing to engage on trade talks. The US labor market remained robust in April, with non-farm payrolls rising by a decent 177K after March’s gain of 185K and above the market forecast (130K). However, the previous two months’ data was revised downward by a combined 58K. The unemployment rate remained steady at 4.2% while the participation rate inched up to 62.6% from 62.5%. Wage growth slowed to 0.2% m/m from 0.3% in March but was flat annually at 3.8%. Continuing jobless claims (w/e April 19) rose to their fresh post-pandemic high of 1.92mn from 1.83mn the previous week, suggesting difficulty in finding new jobs for people losing their work. Still, the job market has remained broadly healthy, with no clear signs of major weakening due to steep tariffs that were imposed in early April, but conditions could reverse over the coming months as businesses adjust employment levels against the evolving economic outlook. Meanwhile, China showed its willingness to engage on trade and tariff discussions with the US, with the Commerce Ministry saying it was evaluating the US administration’s outreach to initiate talks. But the ministry also cautioned that the US should correct “erroneous practices” without engaging in “coercion and extortion”. US equity markets rallied on signs of a possible breakthrough in discussions with China along with robust job data, with the S&P 500 rising 1.5% on Friday. However, UST 10Y yields moved higher, up 9 bps to close at 4.31%. The odds of Fed interest rate cuts also shifted following such developments, with around three cuts now seen in 2025 versus four on Thursday.
Eurozone: Inflation stable in April, services inflation rises. Consumer price inflation was constant at 2.2% y/y in April, higher than consensus estimates of 2.1% but remaining lower than the 2.5% y/y figure seen at the beginning of the year. The higher-than-expected figure was largely driven by increasing services inflation (a gauge for domestic price pressures), which rose back to 3.9% after easing in both February (3.7%) and March (3.5%). Core inflation also increased, rising from over a three-year low of 2.4% in March to 2.7% in April. These increasing inflation figures represent a slight challenge to the ECB and could influence the interest rate decision at the board’s next meeting, although markets are still largely expecting a rate cut in June.
Japan: Unemployment rate edges up in March. The unemployment rate rose slightly to 2.5% in March, from February’s reading of 2.4% due to a 3% m/m increase in unemployed persons by 3.0% m/m and a marginal 0.1% decline in the labor force to 69.8 million. Moreover, the number of employed persons saw a decline of 0.3% m/m, stemming mainly from the manufacturing (-3.6%), accommodation (-2.6%), and construction (-0.4%) sectors, while employment in the logistics sector rose by 5.8%. On the other hand, the jobs-to-applications ratio, a key indicator for labor demand, rose to a firm 1.26 in March, underscoring the labor shortages amid sustained population declines.