- Trump’s 25% tariff on aluminum will hurt Gulf exporters. They are already subject to 25% on steel.
- The GCC states are unlikely to be priority targets for Trump’s mooted “reciprocal” tariffs.
- As Trump engages with Russia, Gulf states are offering support in mediation on Ukraine.
- The Saudi deficit of -2.8% of GDP matched expectations, and debt rose 16% y/y to 30% of GDP. [see graph and (1) below]
- Major investments in Saudi AI, including a Neom data center, were announced at LEAP25.
- PIF provided new capital to Masdar Building Materials, taking a 30% stake.
- Dubai’s tourist arrivals rose by 9.4% y/y to 18.7m, and Musk may build an underground Dubai Loop.
- Kuwait’s finance minister said bond issuance (and hence a debt law) is coming soon.
- An agreement was signed to connect Oman to the GCCIA electrical grid by 2027.
- Bahrain Steel signed a $1.3bn five-year supply agreement with Qatar.
- The Gaza ceasefire looked shaky, and Trump reiterated his expulsion and takeover plan.
- Arab states criticized a comment by Netanyahu about forming a Palestinian State in KSA.
- Lebanon's bonds rallied on its new cabinet, including ministers from BlackRock and Strategy&. [see (2) below]
These headlines are taken from a 3,700-word report from my economic research service with GlobalSource Partners, a leading source of independent emerging market intelligence. Click on any report to get guest access and contact me or GlobalSource’s sales team for more information about the service, which also includes the most extensive comparative Databank of GCC economic data available (updated weekly) and direct analytical support. Clients include banks, asset managers and governments spanning the GCC, Asia, Europe and the Americas.
Here are two brief samples from the report:
(1) Saudi non-oil revenue grows strongly but spending is 10% over budget
- The 2024 deficit was -2.8% of GDP, wider than the -2.0% recorded in 2023 but close to official estimates from as far back as September (MoF).
- Revenue was up 3.9% y/y and expenditure grew by 6.3%, a slowdown from an average of 11.6% in 2022-23 but 10% above the budgeted level.
- Oil revenue was flat because the Aramco performance dividend—which was received in all quarters in 2024 but just H2 in 2023—offset the impact of lower crude production (down -6.9%) and prices (Brent was -2.4% lower on average). Without the performance dividend, the deficit would have been -6.0% of GDP. It is unlikely to continue this year (Aramco announces results on 4 March) which means that the deficit could be quite a bit wider than the budget target of -2.3% of GDP.
- Tax revenue was encouraging, up by 7% and 5% above budget. This was driven by the main component, taxes on goods and services, which increased by 10% and is largely comprised of VAT.
- Non-tax revenue, which includes dividends from SAMA and various fees and fines, is difficult to predict and is aggregated in the budget with oil revenue. It surged by 21% y/y to the highest since 2020.
- Over-budget spending was driven by social benefits (nearly a third of the overspending), as the Citizens Account cash transfers program was extended, goods & services and the catchall “other expenses” (up by 20% y/y). Salaries, the largest component of expenditure, grew by 4.6%, similar to in 2023, although the budget had targeted only a 1.2% increase.
- At the sectoral level, the strongest growth was in municipal services, up 51% y/y and contributing nearly a third of overall over-budget spending. The largest sector, health and social development (which includes social benefits) contributed nearly half of the overspending because it increased by 7% y/y whereas (somewhat surprisingly) a -16% decline had been budgeted. More positively, military spending declined by -7% and was -12% below budget.
(2) Lebanese bonds rally on cabinet formation, but Israeli troops remain
- A new cabinet was formed after a nearly three-year hiatus, along the usual sectarian/party allocation system, although significantly, Hezbollah and its allies do not have sufficient positions to block votes requiring a two-thirds majority (Wiki, FT, Rt, Jaz).
- Finance minister: Yassine Jaber, a former economy minister and MP. He was nominated by Amal, although he is no longer formally a member of the Shia party.
- Economy minister: Amer Bisat, previously the US-based head of BlackRock’s EM Fixed Income business, was appointed by the prime minister.
- Energy minister: Joe Saddi, a former Middle East chairman of PwC’s Strategy& consultancy, based in the UAE, and a member of the firm (previously Booz) since 1993; appointed by the Lebanese Forces.
- Foreign minister: Youssef Rajji, a longtime diplomat who was most recently ambassador to Jordan with previous postings in Morocco, the US, the EU and the UN, was appointed by the Lebanese Forces.
- The hope is that this government can implement long overdue reforms that enable debt restructuring and new financing inflows, including from the GCC. Markets have responded positively, with bonds rallying further to a 5-year high of about 18% face value; JP Morgan expects a 70% haircut and a 10-year maturity extension (BB, AA, Nat).
- The government also needs to urgently stabilize the southern border at a time when Israel says it has US backing to stay in Lebanon beyond the extended deadline of 18 February. However, France has made a counter-proposal to deploy UN peacekeepers in place of the Israeli troops (Rt).
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