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Daily Economic Update
25.08.2025Kuwait: Closing fiscal account for 2024/25 reveals a narrower deficit of KD 1.05bn. Media sources report that the closing account for the 2024-2025 fiscal year (FY24/25) showed a deficit of KD1.05 billion (2.2% of GDP), an improvement over the KD1.56 billion deficit recorded in the previous fiscal year and well down on the KD5.6 billion that the authorities had in their budget. This is thanks to a decline in expenditure and an increase in non-oil revenues. Total expenditure fell by 8.3% y/y to KD 23.1 billion as a result of ongoing efforts to rationalize spending, with notably lower outlays for goods and services (-30% y/y) and grants (-11% y/y), the latter a sign of increased spending control in non-core government units (e.g. the authorities), while capital expenditure fell by 14% y/y to a historically low KD1.13 billion. On the revenue side, total revenues fell by 6.7% y/y to KD22.05 billion due to a significant decline (-10.8% y/y) in oil revenues to KD19.3 billion compared to the KD21.5 billion recorded in the previous fiscal year. In contrast, non-oil revenues surged by 28% (over KD500mn) to reach a record KD2.7 billion from KD2.1 billion the previous fiscal year, driven by a notable rise in taxes and fees (10% to KD 606mn) coupled with a jump (37% to KD1.9bn) in revenue from the provision of goods and services. The latest closing account is a promising sign of a potential shift away from historical spending patterns towards more sustainable fiscal practices.
Oil: Prices rise on US interest rate cut expectations, dimming Russia-Ukraine ceasefire prospects. Brent futures settled on Friday at $67.7/bbl (2.9% w/w; -9.3% ytd), logging a first weekly gain in three weeks on expectations of US interest rate cuts next month following Fed Chair Powell’s comments at Jackson Hole and on the negligible progress made in bringing the Russia-Ukraine conflict to a ceasefire. A larger than expected decline in US commercial crude inventories (-6 mb in the w/e 15 August), as reported by the US Energy Information Administration (EIA), was also supportive. Hopes that an earlier held Trump-Putin Alaska summit would bring a cessation of hostilities in Ukraine are receding quickly as Russia’s Foreign Minister Sergei Lavrov indicated that no meeting was planned between Putin and Zelensky. The two countries also escalated attacks on one another – the latest Ukrainian barrage targeted a Russian oil refinery and the Druzhba pipeline supplying Hungary and Slovakia while the Russians struck near the European border. With no ceasefire likely, secondary tariffs imposed by the US on India for buying Russian crude are expected to come into effect this week (August 27) unless US President Trump opts to extend the deadline. The higher penalties on India are intended to pressure the country to stop purchasing Russian oil, though there appears to be little sign so far that Prime Minister Modi intends to bend on this. Loss of purchases from India would leave Russia having to find other takers for its crude, something the market is viewing as bullish for oil prices.
Japan: Central bank governor expects rising wages to support further rate hikes. The Bank of Japan (BoJ) governor, Kazuo Ueda, said at the annual conference in Jackson Hole that the tight labor market would help in increasing nominal wages beyond large firms, setting up conditions for another interest rate hike. The governor also pointed that Japan’s declining working age population has increased labor shortages and put upward pressures on wages while driving a shift in the supply side through higher participation rates and mobility. Meanwhile, headline and core inflation rates (excl. fresh food) continued to slow in July, with both coming at 3.1% y/y from 3.3% in June while the core-core measure, which excludes fresh food & energy, remained stable at 3.4% y/y. The expected decline came on a higher base of last year following the end of the government subsidy program a year ago. Moreover, the increase in rice prices moderated slightly in July to 91% y/y from June’s 100%. The persistent increase in food prices and the prospects of further growth in nominal wages have led some BoJ board members to support another rate hike by this year-end given that the current interest rate is below the neutral rate and if the overseas markets, particularly the US economy, could withstand the impact of the new tariff policy better than initially expected. According to a recent Reuters poll, about two-thirds of economists expect the BoJ to raise its short-term rate by 25 bps this year.
Global: US PCE inflation and Q2 GDP 2nd estimate key economic data releases this week. Markets’ focus would shift back to growth and inflation prints after they were sharply lifted by Powell’s surprising dovish remarks on Friday. In the US, July’s PCE inflation will be released on Friday, and the consensus forecast points to steady headline and core rates of 0.3% m/m each. A second estimate for Q2 GDP data is due on Thursday, with the preliminary figure indicating a sharp rebound in growth to 3% (annualized) after a contraction of 0.5% in Q1. Also on Thursday, markets could pay attention to initial weekly jobless claims (w/e August 23), with estimates signaling some further pick up in claims to 236K after they rose to an eight-week high of 235K in the previous week. Durable goods orders for July (due on Tuesday) are seen shrinking for the second straight month, by 4% m/m following June’s drop of 9.3%. An S&P/Case Shiller housing price index (due on Tuesday) is expected to show a slight uptick in headline price growth to 2.9% y/y in June from 2.8% in May. Finally, the street expects new home sales (due later today) to stay unchanged at 0.63mn in July. In the UK, the Nationwide housing prices index for August is due on Friday, which, in July, showed a quick recovery in prices (+0.6% m/m) after an outsized drop of 0.9% in June. In Japan, retail sales growth for July (due on Friday) is seen slowing to 1.8% y/y from June’s 2%. Finally, the consensus expects Tokyo core inflation in August (also on Friday) to ease to 2.5% y/y from 2.9% in July.