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Daily Economic Update
03.11.2025
Kuwait: Weak headline but strong underlying credit growth in September. Driven by a plunge in lending to banks and financial institutions, domestic credit decreased by 0.2% in September, resulting in YTD growth of 6% (7.2% y/y) while, more importantly, underlying credit growth in September remained solid. Business credit increased by a strong 0.6% in September, driving up YTD growth to 5.5% (6.1% y/y). Growth in September was very much concentrated in the two largest sectors, ‘real estate’ and ‘other services’ which increased by 1.6% and 0.5%, respectively. On a YTD basis, these two categories are also the fastest growing at 6.2% and 8.3%, respectively, accounting for more than 70% of the increase in business credit. After solid growth in July/August, household credit remained resilient in September (+0.4%), pushing the YTD increase to 2.9% (4% y/y, highest since mid-2023). As we have written before, in both 2023 and 2024, household credit growth was much stronger in the second half of the year than in the first half, and the expansion in Q3 indicates that this is looking to be the case in 2025 as well. Meanwhile, resident deposit growth was weak in September as the volatile public-sector deposits plunged, private-sector deposits inched down, and government deposits were broadly flat. On a YTD basis, resident deposits are up by a limited 2.8%, dragged down by a 12% fall in government deposits while private-sector and public-sector deposits increased by 3.9% and 7.5%, respectively.
Saudi Arabia: Third quarter fiscal deficit the largest since 2020. According to the official quarterly budget performance report, the fiscal deficit widened to SR89bn (7.3% of GDP) in Q3, versus a full-year projection of SR101bn in the official budget and the largest since Q4 2020. Expenditures rose by 5.6% y/y, coming in at 112% of the pro-rated budget allocation mostly from a broad increase in current spending, with higher outlays for employee compensation (3.6% y/y), other expenses (22% y/y), and subsidies (85% y/y). The latter is linked to the increase in wage support (since May) for citizens working in the tourism sector to 50% from 30% previously, an effort to boost the rate of Saudi workers in the sector. Moreover, we note a sizeable jump in financing expenses (27% y/y) to a record high, attributed to a higher debt service cost consistent with the rapid growth in debt issuances, the primary mode of deficit financing. A total of SR333 billion in combined domestic and external debt (bonds and sukuk) was issued in 9M 2025, raising total outstanding debt by 21% to SR1.47 trillion (around 31% of GDP). CAPEX grew by 3.7% y/y and came in 9% above budget after the underspending seen in the last two quarters. Meanwhile, oil revenues fell by 21% y/y (25% below budget pro-rata) while non-oil revenues increased slightly (0.6% y/y) but continued to outperform versus the budget estimate. With the latest fiscal data, the deficit is on track to widen to a projected 5% of GDP in 2025, increasing from 2.8% in 2024 largely on much lower oil revenues so far this year (-23% y/y in Jan-Sep), outweighing the modest growth in non- oil revenues (3%) and the negligible expenditure growth (0.3%).
Egypt: Foreign portfolio inflows lift the EGP to a YTD high by the end of October. Foreign portfolio inflows into Egyptian treasuries continued to strengthen, with net purchases of $1.3 billion in the secondary market during October, marking the sixth consecutive month of positive foreign investors’ activity, according to EGX data. This sustained demand reflects an improving investor confidence and a more constructive risk outlook towards Egypt. Reinforcing this optimism, Egypt’s five-year credit default swap spread declined by 17% m/m to 324 bps, its lowest level in four years, indicating reduced sovereign risk perception among global investors. The strong appetite from foreign institutions has boosted liquidity and trading activity in the local debt market. Supported by these inflows, the Egyptian pound appreciated 1.4% m/m, hitting a YTD high of EGP47.2/$1 at the end of October. If momentum persists through year-end, the EGP could test the 47 level, a key threshold, and its strongest level since the March 2024 devaluation.
Egypt: Net foreign assets at Egyptian banks hit the highest level in 11 years. Net foreign assets (NFAs) at Egyptian banks increased sharply in September, rising by $2.5 billion to $9.7 billion — the highest level in 11 years, according to Central Bank of Egypt data. This recovery follows a decline to $7.3 billion in August. In parallel, the Central Bank of Egypt’s NFAs climbed to $11 billion, bringing total NFAs across the banking system to $20.8 billion — the strongest level since before the COVID-19 shock in early 2020. The continued improvement in NFAs reflects stronger foreign currency inflows and reinforces confidence in Egypt’s external position. It also provides additional support to the pound, which has appreciated by around 7% YTD, benefiting from increased liquidity and improved market sentiment.
Oil: Prices eased ahead of OPEC meeting which signed off on further supply gains for December. Brent futures closed lower on Friday at $65.1/bbl (-1.3% w/w), partly reversing the previous week’s gains, as markets looked ahead to OPEC-8 rubber-stamping another 137 kb/d monthly increase in supply this weekend, which they did on Sunday, and after President Trump denied that he was planning a military strike on oil producing Venezuela. That and anticipation about Trump’s meeting with China’s President Xi in South Korea, which in the end yielded very little in the way of trade commitments to purchase additional supplies of US crude or LNG for that matter, had helped Brent string a run of 3 consecutive days of modest gains. At Sunday’s virtual OPEC meeting, the eight members participating in the second tranche of production cuts worth 1.65 mb/d (from April 2023), which include Saudi Arabia, the UAE, Kuwait and Oman from the GCC, confirmed that they would raise aggregate OPEC-8 output for December at the same pace as in November and October (+137 kb/d). However, the group also announced that production increases would be paused for the first quarter of 2026, traditionally the softest months of the year for oil demand, which must be seen as part-acknowledgement of markets’ concerns about a developing supply glut as well as the uncertainty surrounding newly imposed sanctions on Russia’s largest oil producers by the US. Brent futures were initially up this morning in Asian markets on news of the pause but look to be drifting lower at the time of writing.
Global: The US Supreme Court’s hearings on tariffs and the BoE meeting key events this week. In the US, on Wednesday the Supreme Court will start hearing arguments about the legality of Trump’s reciprocal tariffs. With the government shutdown ongoing since 1 October, the pressure is mounting on both parties to resolve the gridlock and reopen the government. Monitoring Fed speak, with several FOMC members due to speak this week, takes on even additional importance given both the divide on the interest rate path ahead and the dearth of official economic data releases. The ISM manufacturing PMI is due later today, with the consensus forecast indicating a very slight tick up to 49.2 in October from 49.1 in September. The equivalent services measure is due on Wednesday and is expected to improve to 51 from 50. In the Eurozone, retail sales for September is due on Thursday with consensus expectations at +0.2% m/m following 0.1% in August. In the UK, the Bank of England’s MPC decision and an updated set of economic projections are due on Thursday; a hold on the bank rate at 4% is expected. Finally in Japan, September’s cash earnings are due on Thursday with wages expected to increase 2% y/y, improving from the previous month’s 1.5% increase. Similarly, household spending growth is due on Friday and is seen improving to 2.5% y/y in September from 2.3% in August.
UK: House prices tick up slightly in October. The Nationwide House Price Index for October posted a second consecutive month of higher price increases, with residential property prices rising 2.4% y/y (0.3% m/m) following September’s 2.2% (0.5% m/m). For the past five months, the increases have been in a modest 2.1%-2.4% range following the stamp duty changes that took effect in April, down from 3.4%-4.7% between November 2024 and May 2025. The outlook continues to be cautious given generally softening wage growth, elevated mortgage rates, slower, if any, monetary easing by the Bank of England over the coming months, and uncertainty surrounding the government’s fiscal consolidation measures, which are expected to be unveiled later in the month.