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Daily Economic Update
03.03.2025Oil: Prices decline on oversupply concerns, trade tensions as OPEC+ decision looms. Brent futures settled at $73.2/bbl on Friday, falling 1.7% w/w and extending year-to-date losses to 2% amid prospects of increased supply from a potential restart of crude pipeline exports from the semi-autonomous Kurdistan region and softer oil demand. In the latter, concerns are growing that President Trump’s nod to tariffs on Canada and Mexico, and hiking them further on China, might presage a wider tariff war that imperils global economic growth. On the supply side, markets are interpreting last Friday’s fractious Trump-Zelensky meeting as relatively bearish for oil, handing the advantage to Russia in ceasefire negotiations that could deliver a speedier restoration of Russian oil supplies. Furthermore, media sources have reported that the US is actively pressuring Iraq to allow 300 kb/d of Kurdish oil exports to restart, which the administration sees as helpful in potentially offsetting a drop in Iranian crude flows should Trump’s “maximum pressure” strategy be implemented in full: the US has announced fresh sanctions on Iran’s shadow fleet, targeting brokers, tank operators, and shipping companies that are involved in the selling and transporting of Iranian crude. This complicates the OPEC+ compliance framework for Iraq, which has continuously produced above its mandated quota; the country’s oil ministry has since announced that it intends to provide an updated production schedule. Continued uncertainty in the oil market and Brent’s fall to a year-low of $72.5/bbl last week could again sway OPEC+ to delay its resupply plan scheduled for April when it meets this week.
Saudi Arabia: Bank credit in January expands at fastest pace since October 2022. Total bank credit grew by a robust 14.7% y/y in January (1.7% m/m), the fastest pace since October 2022. Private sector credit growth was 13.2% y/y (1.4% m/m), also at a more-than-two-year high, while lending to public sector enterprises, which constitutes a smaller (7.1%) share of total credit, was also robust at 37% y/y (5.4% m/m). Total deposits grew by 8.9% y/y (1.5% m/m), below credit growth, with demand and time deposits up by 9.8% y/y (0.4% m/m) and 14% y/y (3.7% m/m), respectively. Saudi Central Bank reserve assets stood at $434 billion (40% of GDP) in January. Credit growth is set to remain elevated in 2025 as the non-oil private sector continues to expand at a solid pace amid government-led investment in vast economic diversification projects.
Egypt: Wage and pension hikes and economic support in new social protection package. Egypt’s Finance Minister Ahmed Kouchouk announced a new social protection package that includes wage and pension hikes, cost-of-living support, and economic empowerment initiatives, to be rolled out from the current and third quarter of 2025. Public sector employees and state-owned enterprise workers will receive salary increases of at least EGP 1.1k, while the minimum wage for civil servants and SOE workers will rise by EGP 1k to EGP 7k, matching the private sector’s recent increase. Pensions will go up by 15% starting in July, which will benefit 13 million pension-receiving families. The total cost of these hikes is estimated to be about EGP85 billion. The government will also raise the exceptional cost-of-living allowance to EGP 1k and launch a EGP10 billion economic empowerment fund to support youth employment and entrepreneurship. Short-term relief measures will provide additional funding for 10 million low-income families with ration cards (EGP 125-250 per household), while 5.2 million families in the Takaful and Karama program will receive a lump sum of EGP300 for Ramadan and a permanent 25% stipend increase from April. Additionally, irregular workers will receive a stipend of EGP1.5k six times per year through the Labor Ministry.
China: February PMI shows signs of economic recovery. China’s official NBS General PMI rose to 51.1 in February from January's 50.1, the fastest expansion in three months, and despite rising tariff-linked tensions between China and the US. The uptick was likely related to the Lunar New Year holiday. Manufacturing hit a three-month high of 50.2 in February from 49.1 in the previous month, the highest reading since November 2024, and likely the result of a combination of resumed activities after the Lunar New Year festivities and stimulus measures rolled out late last year, which helped to support the tentative economic recovery. Also, the non-manufacturing PMI rose to 50.4 in February, up from 50.2 in January and a touch above market expectations of 50.3. Whether this upturn can be sustained is uncertain, especially amid escalating trade tensions. Meanwhile, it is widely expected that officials are going to announce fresh policy support at this week’s National People’s Congress to bolster domestic demand, as well as measures to shore up the ailing property sector and defuse deflationary pressures.
Global: US tariff deployment, Trump’s address to Congress, and the ECB meeting key matters this week. In the US, markets will keenly await whether Trump follows through on his pledge to impose 25% duties on imported goods from Canada and Mexico and an additional 10% on Chinese products from March 4, and if/how its affected trading partners will retaliate. He will also address a joint session of Congress on Tuesday, likely outlining his agenda for the second term. On the data front, the February non-farm payrolls report will be released on Friday, with consensus expectations pointing to a further slowdown in job gains to 133K after a lower-than-expected 143K increase in January. The unemployment and annual wage growth rates are seen steady at 4.0% and 4.1%, respectively. In the Eurozone, it is widely expected that the ECB will cut rates by another 25 bps at its policy meeting on Thursday, and the market will be looking for clues on the rate trajectory for the remainder of the year and for a new set of GDP and inflation projections. On the data front, February inflation is due out later today and both the headline and core rates are seen softening to 2.3% and 2.6%, respectively, from 2.5% and 2.7% in January. In the UK, the Halifax house price index for February is due on Friday, with markets expecting a slower monthly increase of 0.5% from 0.7% in January. Finally, in China, the annual National People’s Congress will kick-off on Wednesday with senior officials expected to discuss the overall economic strategy for the year and China’s likely response to the US-imposed tariffs. An economic growth target for 2025, of possibly around 5%, is expected to be unveiled.