Daily Economic Update

Kuwait: Government approves KD1 billion contract to build water treatment plant. The Central Authority for Public Tenders (CAPT) approved the Ministry of Public Works’ request to directly contract with the Chinese State Construction Engineering Corporation (CSCEC) for the design, construction, and maintenance of the North Kabd sewage treatment plant for a period of 10 years, according to the official gazette. The project aims to develop the sewage system and improve its operational efficiency, with the plant expected to process up to 1 million cubic meters of wastewater daily, making it the largest in the GCC once operational. The announcement highlights growing Kuwait-Chinese cooperation on critical infrastructure projects through direct contracts, including the KD1.2 billion Mubarak Al-Kabeer port awarded last December and, potentially, the Al-Abdaliyah and Al-Shagaya (phases 3 & 4) renewable energy projects. Meanwhile, KPC, MEW, and KOC signed a MoU on Sunday to develop a co-generation power and water vapor plant in Al-Ratqa, with a production capacity ranging between 1.2-1.5 GW through public-private partnership authority. The plant will supply steam for heavy oil production operations in the South Al-Ratqa field, which is needed to increase output capacity to 120 kb/d, in line with KPC’s ‘Strategy 2040’ to raise crude production to 4 mb/d by 2035. The Kabd sewage treatment plant contract is a positive start for Kuwait’s projects market in 2026, and bodes well for a continuation of last year’s strong momentum which saw the total value of project awards reach KD4.4 billion (MEED Projects), the highest since 2016.

US: Trump threatens higher tariffs on South Korea for its failure to ratify previously agreed trade deal. President Trump threatened to raise tariffs on most South Korean goods, including autos, to 25% from 15%, for the failure of the country’s legislature to ratify the previously agreed trade deal. The two sides had signed a trade deal in October, resulting in the US reducing tariffs on South Korean goods to 15% in return for South Korean investment pledges worth $350 billion. The bill to ratify the deal in the South Korean parliament has been pending since November but the authorities were reportedly seeking to delay investment commitments due to currency pressures, according to media reports last week. The Korean finance minister denied that the government is intentionally delaying these commitments. Korean equities seem to have shrugged off the latest tariff threat, with the main KOSPI index rising by almost 2% in trading this morning although auto stocks were volatile and suffered steep intra-day losses. Meanwhile, US durable goods orders in November rebounded by a more-than-expected 5.3% m/m following a drop of 2.1% in October, helped by a solid rise in aircraft bookings. Core capital goods orders (excluding defense and aircraft) also increased, by 0.7%, from a downwardly revised 0.3% gain in October, indicating an improvement in sentiment among businesses with regard to boosting capital spending. 

China: Industrial firms’ profits post first annual increase in three years. According to official government data, Chinese industry profits increased by 5.3% y/y in December, rebounding after a drop of more than 13% in November for a first rise in three months. Meanwhile, full year profits for industrial firms rose 0.6% y/y, accelerating from a 0.1% gain in the January-November period, as policies aimed at reining in price wars and excessive competition provided some relief to companies’ margins. According to the NBS release, equipment manufacturing led the recovery in profits, accounting for close to 40% of total earnings in 2025. High tech manufacturing also strengthened the sector. However, December’s improvement does not change the fact that the industrial sector remains fragile and volatility high, with stronger policy measures needed in 2026 to curb excessive competition and exit deflation.

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