Daily Economic Update

Kuwait: KD3-6 bn in public debt to be issued this year. The minister of finance announced plans for the government to issue between KD3–6bn in combined internal and external public debt this year. The issuance will serve to develop local capital markets and to establish a reference yield curve, while also reportedly acting as a source of funding for key development projects, alongside an increased focus on public-private partnerships. The issuance comes against a backdrop of a large expected fiscal deficit this year of KD4bn or so in our view, amid lower oil prices. The debt announcement follows the approval of the new financial framework on financing and liquidity (Decree law no. 60 of 2025) in March which allows the government to issue debt up to a value of KD30 billion, equivalent to a debt ceiling of about 60% of GDP, over a fifty-year borrowing horizon. Kuwait’s current public debt on issue amounts to a very low 3% of GDP, leaving plenty of headroom for issuance alongside the government’s current program of reforms aimed at improving long-term fiscal sustainability.

UK-EU: UK and EU agree to reset post-Brexit economic and other ties. UK and EU authorities signed a bilateral deal to ‘reset’ post-Brexit economic relations, addressing issues related to fishing rights in the UK waters, access to EU defense contracts, cross-border people mobility and work rights, and food standard regulations for UK food exports. The UK government said the deal would add around £9bn (0.2%) to the country’s GDP by 2040. Although seemingly limited in economic scope, the latest UK-EU deal, along with the UK’s recent trade agreement with India, shows that countries are exploring ways to improve their ties with other major partners to mitigate the impact of the US’s chaotic tariff strategy and diversify trade and non-trade economic relations. Indeed, the UK’s acceptance of EU food standards could complicate UK ambitions for deeper trade ties with the US, whose food and agriculture exporters are keen to increase sales into the UK market.

China: Central bank lowers benchmark lending rates in May. As expected, the People’s Bank of China (PBoC) decreased key interest rates, two weeks after the country also cut the benchmark seven-day repo rate to 1.4% (from 1.5%) and lowered the reserve requirement by 0.5%. The PBOC’s decision lowers the 1-year Loan Prime Rate (which affects corporate and most household loans) to 3% (from 3.1%), while the 5-year LPR (a benchmark for mortgage rates) was lowered to 3.5% (from 3.6%). This represents China’s first cut in seven months, bringing the country’s LPRs to new record lows and showcasing the central bank’s willingness to stimulate growth in the country. The PBoC pledged an “appropriately loose” monetary policy at the beginning of the year, indicating that further cuts are expected to stimulate the economy (which grew 5.4% y/y in Q1).  

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