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Daily Economic Update
22.10.2025
GCC: IMF upgrades economic growth outlook on oil sector gains and diversification momentum. The IMF, in its October Regional Economic Outlook, revised up its growth projections for the GCC countries in 2025-26. Highlighting more robust oil production after OPEC member countries completed the unwinding of their production cuts from 2023-2024 and strong domestic demand-driven non-oil activity, the IMF forecasts aggregate real GCC GDP growth to accelerate to 3.9% in 2025 (+0.9% pts higher than May’s forecast) and to 4.3% in 2026 (+0.2% pts higher). The Fund also remarked on the region’s strong economic resilience amid global trade uncertainties and regional geopolitical tensions. At the country level, the standout performer, especially in terms of non-oil sector growth is the UAE, with 4.6% projected for both this year and next. Oman (3.7% in 2026), Bahrain (3.6%) and Saudi Arabia (3.5%) follow, while Kuwait’s non-oil sector growth is expected at 2.6% in 2026. Oil prices are expected to range lower, from an estimated $68.9/bbl in 2025 to $65.8/bbl in 2026, which, in tandem with higher imports linked to diversification progress, lead to weaker fiscal and current account outcomes, though fiscal and external buffers remain substantial. The IMF also noted that rising real estate prices and rapid credit growth in some GCC economies will require monitoring. Nonetheless, the region’s medium-term outlook remains favorable, with growth expected to stabilize at robust levels as structural reforms continue to bear fruit.
Egypt: IMF upgrades growth outlook amid stabilization and reform progress. The IMF revised up its outlook for Egypt’s economy, projecting growth of 4.5% in 2026 (FY25/26), compared to its previous forecast of 4.1%, citing stronger-than-expected resilience and ongoing macroeconomic stabilization. The Fund highlighted recent policy reforms that have helped sustain economic activity and improve confidence against a challenging and uncertain international backdrop. Over the medium term, the IMF expects Egypt’s external account to strengthen gradually, supported by the recovery in exports, tourism, and remittances. Remittances from Egyptians working abroad have picked up in 2025, tourism has rebounded strongly, and agricultural production has improved, which will all help boost the current account balance. On inflation, the Fund noted that while price pressures have eased from their earlier peaks, they remain elevated due to supply shocks, past currency depreciation, and energy price adjustments. Inflation is projected to decline gradually as these effects fade, but the IMF emphasized the need for the Central Bank of Egypt to continue with its tighter policy stance until inflation firmly converges towards target levels. On the fiscal side, the report expects a continued improvement in the government’s primary balance, underpinned by tax and subsidy reforms that will help contain spending and mobilize revenues. However, the IMF cautioned that high borrowing costs could weigh on fiscal and financial stability given the large sovereign exposure of local banks. Finally, the Fund warned that climate risks, particularly droughts, remain a structural challenge for Egypt’s agriculture-dependent governorates and could affect growth and employment prospects.
UK: Public finances remain weak, raising pressure on the government ahead of November’s budget. Indicating a weak state of the public finances, government borrowing in September increased to £20bn (+8.6% y/y), taking YTD borrowing in the current fiscal year (April 2025-March 2026) to almost £100bn (+13% y/y), significantly above the official forecast of £93bn for the period. The shortfall on the Chancellor’s current spending rule (to meet current spending from public revenues by 2029-30) was even higher at £13bn for the first six months of the fiscal year versus the official projection. Public sector net debt to GDP remained elevated at 95.3% (versus 94.3% in September 2024), near the highest since the 1960s. This should exert greater pressure on the Chancellor to further consolidate the public finances and she is expected to announce some tax hikes and spending cut measures in the upcoming budget on November 26.
Japan: Takaichi becomes the country’s first female PM, orders a fiscal package to soften inflation impact. Leader of the ruling LDP party, Sanae Takaichi, became the country’s first female PM in a parliamentary vote yesterday. She is now set to unveil a fiscal package that would likely include subsidies for households to manage the rising cost of living along with some stimulus for small businesses. While she broadly supports an aggressive expansionary fiscal stance, she has recently vowed to be responsible on fiscal policies. Takaichi also previously urged the Bank of Japan to avoid raising interest rates and to maintain a loose monetary stance. Though given Japan’s very high public debt level (+230% of GDP), elevated inflation amid a weaker yen and a fragile political scene, she may still opt for a more grounded approach. Following her appointment yesterday, the Nikkei 225 index closed at another record high, climbing 24% YTD. Meanwhile, Japan’s exports rebounded to post their first annual gain in five months, rising 4.2% y/y in September, but fell short of the consensus forecast of 4.6%, as increasing shipments to the EU, China and other countries offset a 13% fall in exports to the US. Imports also rose by a much higher-than-expected 3.3%, the fastest expansion since January, which resulted in a third consecutive monthly trade deficit.