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Daily Economic Update
16.03.2025Saudi: Sovereign rating upgraded by S&P to A+ on diversification progress. Rating agency S&P Global has raised Saudi Arabia’s credit rating from ‘A’ to ‘A+’ with a stable outlook, the first upgrade for the kingdom by S&P in two years. The rating is now on par with G-20 members Japan and China and, in the GCC, Kuwait, though it remains one notch below both Qatar and the UAE and Saudi’s own credit rating assessment by Moody’s. S&P Global noted the progress the authorities have made in implementing Vision 2030-linked socio-economic reforms, underpinned by a stronger institutional and governance framework including deeper domestic capital markets. The stable outlook reflects the view that stronger non-oil economic growth and the kingdom’s ongoing efforts to develop its capital markets will counterbalance any stresses linked to rising government debt and debt servicing costs. The Saudi non-oil economy expanded by 4.3% in 2024 (4.7% y/y in Q4 2024) and this solid momentum is expected to be sustained this year.
Kuwait: Cabinet approves draft liquidity law. According to press reports, a draft of the long-awaited debt law has been approved by the Council of Ministers and is now pending sign-off by HRH Emir Sheikh Mishaal Al-Ahmad Al-Jaber Al-Sabah. The draft law on “financing and liquidity”, submitted by Finance Minister Noura Al-Fassam, was approved on Thursday. Details of the law have not been published yet, but an earlier, preliminary draft proposed a limit of KD20-30 billion in debt issuance over a period of up to fifty years. Kuwait’s last foray in the bond markets, before the expiry of the previous debt law, was in 2017 when it raised about KD2.5 billion ($8 billion) in five and 10-year Eurobonds.
Eurozone: Lagarde warns of trade war’s severe consequences and that all countries will suffer. European Central Bank President Christine Lagarde, in an interview, warned that an escalation of trade levies may have a detrimental effect on the world economy, mentioning that a real trade war would have severe consequences for global growth and global inflation, “particularly in the United States”. She added that President Trump’s decisions are a cause to be extremely vigilant and are resulting in a “level of uncertainty that we haven’t seen in a long time.” Importantly, she mentioned that all parties of a trade war will undoubtedly suffer and that Brussels “had no choice” but to retaliate against the US, noting that there is still room for negotiations.
US: Congress passes spending bill, averting government shutdown. The Senate cleared the Republicans’ “continuing resolution” (which was previously passed by the House), which would maintain federal spending until September (end of the current fiscal year) at around current levels. Republicans, who have a thin majority in the Senate (as well as in the House), received the required support from some Democrats after Senate Minority Leader Chuck Schumer changed stance to help avoid the impending government shutdown. Absent that, a federal government shutdown would have been effective over the weekend. Meanwhile, in terms of data releases, wholesale inflation (PPI) moderated to 3.2% y/y (no change m/m) in February from 3.7% (0.6% m/m) in January. While prices for trade services fell by 1% m/m, other components which feed into PCE inflation (the Fed’s preferred inflation gauge, due to be released later this month), such as healthcare and portfolio management fees, rose sharply, indicating a rather mixed impact on PCE inflation. Finally, the University of Michigan consumer sentiment index fell to its lowest level since November 2022 at 57.9 in March from February’s 64.7 on uncertainties about the government’s tariff and other policies, with sentiment weakening across political affiliations but more pronounced for Democrats. Consumer inflation expectations also increased sharply, with the one-year inflation outlook rising to 4.9% from 4.3% and for the five-year period jumping to 3.9%, its highest level since the early 1990s.
UK: GDP in January unexpectedly falls, exerting further pressure on government finances. UK GDP in January surprisingly fell by 0.1% m/m (+1% y/y) from December’s increase of 0.4% (1.5% y/y) and versus the consensus forecast of a rise of 0.1%. Production output fell by 0.9% m/m, with construction activities dropping 0.2% but partially offset by a 0.1% increase in services. A worsening economic landscape amid weak business and consumer sentiment over recent months along with ongoing global trade uncertainty could result in downward revisions to official growth forecasts for 2025 by the Office for Budget Responsibility in its upcoming outlook due later this month. This would put extra pressure on the government’s revenue target, and Chancellor Reeves may scale back some of her public spending plans in the Spring budget statement, causing additional growth headwinds.
