IMF upgrades global growth forecasts

The IMF has released its latest quarterly global forecast update, with an upgrade to a number of key forecasts as it judges that the tariff uncertainty emanating from the US has not has as great a negative impact on the global economy as it had feared back in April. The Fund now forecasts global growth at 3.0% in 2025 and 3.1% next year, up from 2.8% and 3.0% respectively in its last update. It now sees the US expanding 1.9% this year rather than 1.8%, and 2.0% in next year rather than 1.7%, while China is now expected to grow by 4.8% this year, a sizeable upgrade from 4.0% previously. The IMF noted that the effective tariff rate from the US was, while still far higher than a year ago, lower than it had been when the report was last updated. The dollar weakness seen over the past several months has also likely negated some of the impact of tariffs on economies around the world.

As a small open trading economy, an upgrade to global growth, and for its trading partners, is a positive for the UAE and for some of its key sectors including transport & logistics and tourism. Elsewhere in the GCC, Saudi Arabia’s 2025 forecast was upgraded to 3.6% this year, from 3.0% previously, as the IMF noted the faster-than-expected return of barrels to the market, and a robust non-oil performance. This brings the IMF in line with our own projection for this year. We forecast 4.1% growth in 2026, still slightly higher than the IMF’s forecast of 3.9%. As noted by the IMF, conditions in Saudi Arabia remain conducive to robust non-oil growth with falling unemployment and moderate inflation, while timely indicators such as the PMI surveys continue to come in strong.

US President Donald Trump has warned that India could face tariffs of 20-25%, though he cautioned that the final rate was still not set. The 1 August deadline set previously by which so-called reciprocal tariffs would be implemented comes at the close of the week. Trade negotiations between the US and China are ongoing in Sweden.

Household inflation expectations in Turkey over the next 12 months ticked up to 54.5% in July, compared with 53.0% in June, while companies see inflation at 39.0% in 12 months’ time – both markedly higher than the TCMB’s own projections, which sees headline CPI at 24% in December.

The JOLTS job openings report from the US was released yesterday, the first in a run of major labour market data due this week and just ahead of the Fed’s FOMC decision today. In June there were 7.437mn jobs available in the US, down from 7.712mn the previous month and moderately below the projected 7.500mn. May’s report was also revised down from the initial 7.769mn. The report suggests that the labour market could be starting to see a bit more slack than has been the case to now, though the measure has been volatile and we will be watching for the ADP and NFP reports through the rest of the week for greater clarity. In other US data, the Conference Board consumer confidence index came in stronger than expected at 97.2, beating the predicted 96.0 and up from 95.2 the previous month – itself revised up from the initial 93.0.

Today’s Economic Data and Events

13:00 Eurozone GDP, Q2, q/q%. Forecast: 0.0%

16:15 US ADP employment change, July. Forecast: 76,000

17:45 Bank of Canada rate decision. Forecast: 2.75%

22:00 US FOMC rate decision. Forecast: 4.50%

Fixed Income

• A weaker JOLTS print and a strong 7-yr auction saw USTs rally across the curve yesterday. Yields on the 2yr fell 6bps to close at 3.8689% while the 10yr dropped 9bps to 4.3204%.
• The FOMC is almost certain to remain on hold today but the September meeting remains live and market pricing shows a nearly 65% chance of a cut.

FX

• The dollar index logged its fourth straight day of gains against its basket of peers yesterday, rising 0.3% on the day.
• Its gains came largely against the Euro which fell another 0.4% against the greenback as fallout from the trade deal with the US agreed over the weekend continued. It closed at 1.1547. GBP and JPY both closed almost flat against USD, at 1.3351 and 148.46 respectively.

Equity Markets

• US equity markets broke their recent rally yesterday, as the S&P 500 closed down for the first time in seven sessions. It closed 0.3% lower, while the NASDAQ fell 0.4% and the Dow Jones 0.5%.
• Locally, the DFM closed up 0.2% while the ADX fell 0.2%. Saudi Arabia’s Tadawul closed down 0.6%. An IPO for Saudi real estate developer Dar al-Majed Real Estate Co saw demand for all shares within minutes of opening. The IPO will see a 30% stake listed.

Commodities

• Oil prices saw another day of sharp gains after President Trump reiterated that greater sanctions could be imposed on Russia. Brent crude closed up 3.5% to USD 72.5/b, while WTI was up 3.8% at USD 69.2/b.
• API reported that US crude inventories rose by 1.5mn bbl last week.