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Daily Economic Update
19.08.2025Kuwait: Oil production recovering on OPEC-8 supply cut unwinding, positive for GDP growth. Kuwait’s crude oil production has steadily been recovering since April 2025, as part of steps by the Saudi-led OPEC-8 group to accelerate the resupply of 2.2 mb/d of crude taken off the market since 2023-2024. Kuwait’s production, having fallen last October to its lowest level in more than two years at 2.41 mb/d, according to official data, reached 2.44 mb/d as of July 2025. Actual production would have been higher but for the cuts that Kuwait has been applying to compensate for previous months of overproduction. Nevertheless, the trajectory is clear, and Kuwait’s production is on track to reach 2.55 mb/d by Q4, with all 135 kb/d of supply withheld since 2024 restored. OPEC+ in October will deliberate on speeding up the unwinding of the next tranche of supply cuts (from May 2023) due in early 2027, which for Kuwait amount to 128 kb/d. There is no word yet on whether OPEC+ will look to recover the final tranche of cuts from October 2022 (135 kb/d for Kuwait), which, given expectations of soft market conditions in the medium term, may be indefinitely delayed. Kuwait’s production may, therefore, peak at 2.68 mb/d, which is well down on 2012’s year average high of 2.98 mb/d. Still, the economic implications of higher production are positive, with state oil company Kuwait Petroleum Corporation continuing with its plan to raise crude production capacity from the current 3.0 mb/d (including the Neutral Zone) to 3.2 mb/d within the next two years (and to 4.0 mb/d by 2035). Kuwait’s headline GDP growth rate turned positive in Q1 2025 (0.9% y/y), for the first time in two years, on the back of recovering oil output. Oil GDP should post positive growth in Q2 after eight consecutive quarters of contraction and accelerate thereafter to reflect OPEC-8’s decision to quadruple the initial volume of monthly quota increases and especially after Kuwait has worked off its compensatory cuts.
Oman: Inflation steady at 0.8% in July. Consumer price inflation came in at 0.8% y/y in July, matching last month’s reading and beating expectations of 0.4%. Higher inflation was recorded for transportation (4% from 3.1%) and restaurants and hotels (2.5% from 1.4%), while there was continued deflation in food prices, which saw the steepest decline (-1.4% y/y) in more than four years, and slower inflation in misc. goods and services (6.5% from 7.5%). Despite higher import and producer costs, inflation remained broadly subdued in most other categories, capped by robust price controls, subsidies, and stable food supply. On a monthly basis, consumer prices edged up to 0.4% in July, from 0.3% the previous month. Inflation averaged 0.8% in the first seven months of the year, not far from our forecast of 1% for the full-year 2025.
China: PBoC not in a rush to cut interest rates despite weakening indicators. In a recent report, the People's Bank of China (PBoC) indicated that there is no urgency to cut interest rates, despite weakening local economic indicators. The news comes shortly after July’s retail sales disappointed with just a 3.7% y/y rise (versus 4.6% consensus) and July’s industrial production growth recorded an eight-month low of 5.7% y/y. The country is also dealing with deflationary pressures, with CPI inflation slowing to 0% y/y in July after reaching a modest five-month high of 0.1% in June. The PBoC did pledge a “moderately loose” monetary policy at the beginning of year, but so far has only cut rates by 10bps, reducing the 1-year Loan Prime Rate and 5-year Loan Prime Rate to 3.0% and 3.5%, respectively, in May. The country has instead been focusing on increasing loans to strategic sectors, with the ‘five key priority sectors’ (which include high-tech and SMEs) receiving 70% of all loans in 2025. Still, the market is looking for a 20bps rate cut later this year, with a further 50bps reduction in the reserve requirement.
Eurozone: Trade balance surplus declines in June. The surplus in merchandise trade decreased to a five-month low of €7 billion in June, much lower than consensus estimates of €13 billion. The decline was mainly due to imports, which increased 6.8% y/y to €230 billion, while exports only increased by 0.4% y/y to €237. Energy imports continue to be a big drag on the trade balance with the EU recording an energy deficit of €23.4 billion in June, though slightly lower than the €26.5 billion recorded in June of last year. That figure is expected to go higher in the future after the EU signed their latest trade deal with the US, committing them to spend $750 billion on US energy products over the next three years. Additionally, the EU’s trade surplus with the US, a source of tension for the current US administration, has fallen from €18.5 billion in June 2024 to €9.6 billion in June 2025.