+965 2224 8361
Daily Economic Update
07.04.2025Oil: Prices plunge on tariff and OPEC supply increase announcements. Oil prices took a hammering last week following President Trump’s ‘reciprocal’ tariff announcement and OPEC’s decision to unwind supply at a quicker pace in May. International benchmark Brent shed almost $10 (-13%) over the course of Thursday and Friday on its way to a close of $65.6/bbl (-10.9% w/w; -12.1% ytd), the lowest in three years. Weighing on the oil complex was the threat of a full-blown global trade war, which took a step closer after China’s retaliatory 34% tax on US goods, and OPEC+’s eye-opening decision to treble the volume of additional OPEC ‘Group of Eight’ supply in May to 411 kb/d from 135 kb/d. The decision took the market completely by surprise, as was the likely intention, as the consensus was moving towards the view that OPEC+ may have to pause, or at most remain on track, unwinding members’ voluntary supply cuts given the prospect of even weaker global oil demand due to trade tariffs and falling oil prices. While OPEC+ explained its decision as a response to a “positive market outlook”, insiders report that the Saudi-led group had lost patience with overproducing members and their negligible efforts to adhere to compensatory cuts, especially Kazakhstan, and wanted to illustrate to them the oil price consequences of non-compliance. The next OPEC JMMC meeting is set for 5 May but little is known about the group’s future intentions at this stage.
Global: Tariff-related news-flow, markets’ performance, and US inflation key matters this week. Tariff-related news-flow, including developments related to possible retaliation by other countries to last week’s US actions and/or progress in terms of trade negotiations as well as moves in financial markets following last week’s stock market plunges, are the key matters to monitor this week. In fact, Asian markets opened sharply lower today, with Japanese and Chinese stocks down more than 6% and Hong Kong stocks dropping more than 10% at the time of writing. The futures market indicates ongoing sharp losses for US and European stock markets. In terms of data releases, in the US, the main data point will be March’s CPI on Thursday, with consensus expectations indicating a softening in the headline and core rates to 2.6% and 3% y/y from 2.8% and 3.1% in February, respectively. The FOMC’s March meeting minutes will be released on Wednesday, providing additional details on the Fed’s thinking about tariffs and other government policy decisions. In the Eurozone, retail sales for February are due later today, with expectations of a 0.5% m/m rebound, following January’s 0.3% contraction. Meanwhile in the UK, February’s GDP print will be out on Friday with the street expecting a slight 0.1% m/m growth following a contraction of 0.1% in January. In China, inflation data for March is due on Thursday, with consensus estimates pointing to no-change on a y/y basis in the CPI compared with a 0.7% y/y decline in February, while the PPI is seen falling by 2.3% y/y (-2.2% in February) and extending its drop for the 30th straight month. Finally in Japan, the BoJ Governor will speak on Wednesday and the market will be looking for signals on the timing of the next rate hike, given the recent inflation and consumption dynamics and the developments related to the tariffs imposed by the US administration.
Saudi: Non-oil private sector economy still growing strongly in March, PMI data shows. Saudi non-oil private sector activity continued its strong run of growth in March, with the Riyad Bank/S&P Global headline PMI coming in at 58.1 on the back of robust growth in output and new orders as well as strong gains in employment. However, the headline reading has eased over the last two months since January’s more-than-ten-year high of 60.5, signaling a slight softening in the non-oil sector’s rate of expansion. Notable though is employment growth in Q1, which put in its best performance for job creation in over twelve years, as firms responded to positive consumer demand. Input cost inflation slowed to a more-than-four-year low in March, which firms were able to translate into lower selling prices amid strong competitive pressures for the first time in six months.
Qatar: Non-energy private sector PMI accelerates in March. The latest non-energy, private sector activity gauge accelerated from 51 in February to a three-month high of 52 in March, as strong growth in the new orders and employment subindices outweighed a contraction in the output subcomponent. Indeed, increased demand for goods and services in the wholesale & retail and manufacturing sectors propelled new orders to increase at the fastest pace since last November, while the output index remained in negative growth territory for the third straight month. Employment growth was robust, staying at near record levels though easing slightly from the series high set in February.
UAE: Abu Dhabi GDP rises in 2024 on rebounding oil sector growth. Preliminary estimates show that Abu Dhabi’s real GDP rose in 2024 to 3.8%, accelerating from 2.4% in 2023. The uptick came as oil sector output rebounded from its decline of 3.8% in 2023 to post growth of 1.0% in 2024, in line with the marginal increase in oil production to 2.97mb/d, according to OPEC secondary sources. On the other hand, non-oil growth remained robust at 6.2%, though easing from the historical peak of 8.6% seen in 2023. The fastest growth in the non-oil economy was recorded in the transportation & storage, construction, and financial & insurance services sectors at 16.9%, 11.3% and 6.6%, respectively. In Q4 2024, growth eased marginally to 4.4%y/y, down from 4.5% in Q3, due to a slower yearly growth in the oil sector (1.9% versus 2.2% in Q3 2024) while non-oil sector growth remained stable at 6.6% y/y. Strong non-oil activity and the expansion in oil sector output are supporting the UAE amid rising global uncertainties, though with oil prices ranging lower and global trade uncertainties rising due to President Trump’s tariffs, the economic outlook for the UAE and other GCC countries is looking more challenging.
Egypt: Net foreign assets continue to improve. Net foreign assets in Egypt’s banking sector were up by around 17.2% m/m to $10.2 billion from $8.7 billion in January. This was mainly driven by a narrowing of the commercial banking net liability position to $1.9 billion in February from $3.3 billion in January. Central Bank of Egypt (CBE) net foreign assets (NFAs), meanwhile, saw limited gains in February of around $100 million, rising to $12.1 billion. NFAs of the overall banking system have improved significantly after the heavy EM sell-off at the end of 2024.