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Daily Economic Update
05.05.2025Kuwait: Solid credit growth in March led by business credit. Domestic credit increased by a solid 0.9% m/m in March, the fastest growth in more than two years, driving up YTD growth to 1.6% (4.4% y/y). Growth was mostly driven by business credit, which remained strong for the fourth straight month (1.1% m/m, highest growth since March 2024) pushing up the YTD increase to 2.6% (4.9% y/y). Growth continued to be broad-based across the different sectors with “trade” and “real estate” particularly strong in March. From a YTD basis, “trade” (+5%) and “other services” (+2.9%) are in the lead followed by “real estate” and “industry”. Household credit inched up by 0.1%, driving YTD growth to a limited 0.4% (3.1% y/y). However, we note that in both 2023 and 2024, household credit was much stronger in the second half of the year than in the first half. Credit for securities purchase and to banks and other financial institutions was solid in March, driving up headline growth. Overall, it continued to be a good start to the year for credit growth, especially in terms of business credit. Meanwhile, driven by a drop in the volatile public-institution deposits, resident deposits inched down in March. However, private-sector deposits continued to increase with YTD growth at 2% (4.3% y/y) and government deposits climbing for the first month in six. Within private-sector KD deposits, CASA increased for the third consecutive month and YTD is broadly in line with growth in time deposits.
Kuwait: Non-oil private sector PMI expands in April. The latest non-oil, private sector activity PMI gauge accelerated to a five-month high of 54.2 in April compared to 52.3 in March amid robust growth in output and new orders. Indeed, the output subindex rose at the second fastest pace on record, behind only the period covering the loosening of Covid restrictions in July 2020, with firms citing marketing activity as the main driver behind the increased demand. New orders also grew at their fastest pace this year, benefiting from advertising and price discounts. Despite the strong demand, employment expanded at a similar pace to the prior month as firms counterbalanced a sharp rise in input costs from higher purchase prices with reluctance to take on a high number of additional workers. Output prices rose for a second consecutive month, though only at a moderate pace. Firms’ optimism on future growth prospects remained robust, showing little impact from global market volatility during the month or US tariff moves.
UAE: PMI reading stable in April. The PMI was steady in April at 54.0, signaling a solid expansion in business activities. This increase came amid a rise in new orders and export orders, which saw its strongest upturn in five months. Output expansion softened for the second straight month to its weakest since September 2024, though remained robust at close to the 60 mark. Employment growth accelerated to an 11-month high as firms sought to reduce work backlogs. On the prices front, input costs logged a marginal increase compared to March’s reading on higher material costs and staffing expenses while output prices rose for the fourth consecutive month as firms passed the increase in costs to consumers. Year-ahead business expectations remained solid, easing some worries about a possible deterioration in conditions due to a weaker global economy.
Saudi Arabia: PMI fell to eight-month low in April. The non-oil private sector PMI eased for the third consecutive month to 55.6 in April from 58.1 the previous month, the lowest reading since August 2024. The softer, albeit still firm expansion in business activity was mostly due to a deceleration in new orders growth (although export orders growth increased), while output continued to grow at a solid pace. Of note is the growth of employment by a record pace (matching October 2023) as firms continued to hire amid favorable market conditions, which helped to absorb work backlogs but drove staff cost inflation to a record high, reversing the decline seen in March. Meanwhile, purchasing activity strengthened, inventories grew on a positive demand outlook, adding pressure on material input prices. Finally, business optimism rose compared to March but remained below the series average.
Saudi Arabia: Amendments to real estate tax law. The government approved an increase of the annual white lands tax to 10% of the land value from 2.5% previously, applied to all individual or combined landholdings of 5,000 sqm within specified urban areas. The scope has been widened to include all land suitable for construction, versus only residential and commercial plots previously. In addition, a new levy on vacant properties was introduced. The policies aim to address the ongoing steep increase in housing prices and rents by discouraging speculative activity while boosting real estate development and the supply of housing. More detailed regulations are expected within nine months and one year for the vacant land and property tax, respectively. In parallel, the government plans to ramp up the development of housing in partnership with private developers, aiming to help raise Saudi homeownership, currently around 65%, closer towards the Vision 2030 target of 70%. The measures will broaden the tax base and help to sustain the notable growth in non-oil public revenue seen in recent years.
Oil: Prices plunge on OPEC-8’s decision to accelerate re-supply. Brent futures dropped more than 8% w/w last week to $61.3/bbl and declined even further this morning in Asian trading to as low as $58.6/bbl on oversupply fears linked to the news that the OPEC “Group of Eight” had over the weekend moved to accelerate the unwinding of members’ supply cuts. In a meeting that had been brought forward by two days to Saturday, the eight OPEC+ members participating in the 2.2 mb/d of voluntary cuts from 2023-2024 agreed to resupply the market at a faster rate for a second month in a row. This will see the group pump another 411 kb/d in aggregate in June as they did in May, essentially trebling monthly volumes from 137 kb/d to 411 kb/d. This would bring OPEC-8’s production in June up to the level that would have been reached in October (31.374 mb/d), meaning that around 870 kb/d (39%) of the 2.2 mb/d of voluntary cuts would have been returned in just three months. The Saudi-led coalition appears unphased by the sharp drop in oil prices that was sparked by President Trump’s “Liberation Day” tariffs and the more negative sentiment that has materialized since regarding global economic and oil demand prospects. Saudi Arabia looks to have lost patience with serial quota non-compliers, chief among them Kazakhstan and Iraq, although all exporters except Algeria ‘owe’ the group compensatory cuts. While Iraq has made efforts to rein in excess production (output has been near quota levels since last November), Kazakhstan has shown no indication of complying, producing an extra 384 kb/d above target in March. The OPEC-8 decision is being interpreted as Saudi-instigated “financial” sweating for overproducing members to make them appreciate the oil price consequences of ill-discipline and non-conformity. Saturday’s announcement had been telegraphed ahead of time by news outlets citing unnamed sources, but prices, nevertheless, responded accordingly this morning, continuing to sell off. Brent is down almost 21% year-to-date.
Global: Update on US trade negotiations, Fed/BoE policy decisions key matters this week. Similar to recent weeks, further de-escalatory news flow on US tariffs or the lack of it will continue to receive strong attention, dictating market moves. In terms of other key events, in the US, the FOMC will meet on Tuesday and Wednesday, with the market expecting the bank to hold its policy rate at the 4.25-4.5% range. The markets will also be keenly assessing Chair Powell’s post-meeting remarks, focusing on Fed thinking about tariffs and resulting trade tensions and their impact on the economy and the interest rate outlook. The ISM services PMI (to be released later today) is seen weakening slightly to 50.6 in April from March’s 50.8. In the UK, the Bank of England will announce its interest rate decision on Thursday, and given a faltering economic landscape, the street forecasts a 25-bps cut in the bank rate to 4.25% in a unanimous vote. In the Eurozone, March’s retail sales (due on Wednesday) are seen contracting slightly by 0.1% m/m following February’s five-month high of 0.3%. In China, April’s trade data is due on Friday, with markets seeking to evaluate the impact of US tariff actions on its exports after they surged by an over 12% y/y in March as US buyers front-loaded their purchases. April’s inflation data is due on Saturday and China would hope to avoid a third straight deflationary reading for CPI (-0.1% y/y in March). In Japan, the Bank of Japan’s March meeting minutes will be released on Friday, giving cues on policymakers’ views about inflation trends, future interest rate hikes, and the impact of US tariffs on the country’s economic recovery.