FDI in to Saudi Arabia rises in Q1

Foreign direct investment into Saudi Arabia rose to SAR 24bn in Q1 2025, an increase of 24% compared with the same period a year earlier while a drop of 6% on Q4 2024. Outbound flows of FDI from Saudi Arabia were substantially lower in Q1 2025 at SAR 1.8bn, down from SAR 3.9bn in Q1 2024. Overall net FDI into Saudi Arabia was SAR 22bn in Q1, up 44% y/y and lower on a q/q basis by 7%. FDI into Saudi Arabia has declined in the last several years to USD 23bn in 2024, down from USD 33bn in 2021. Major sectors that have received foreign investment in Saudi Arabia include communications, renewables, metals as well as electrical components.

The overall unemployment rate in Saudi Arabia dropped to 2.8% in Q1 2025, down from 3.5% a year earlier and also lower from 3.5% in Q4 2024. The total population participation rate increased to 68.2% in Q1, up from 66% a year earlier. National levels of employment also improved with the Saudi national unemployment rate dropping in Q1 2025 across both male and female workers.

The IMF released their concluding statements after an Article IV visit to Saudi Arabia, noting that the economy has been “resilient to shocks” and moderate inflation. The fund projected Saudi real GDP growth in 2025 at 3.5% thanks to a boost from higher oil production while non-oil growth is estimated at 3.4% this year. We expect headline real GDP growth of 3.6% with a stronger non-oil projection than the IMF.

Abu Dhabi Investment Office and the Abu Dhabi Projects and Infrastructure Centre have signed an agreement to streamline planning and procurement of public-private partnerships for infrastructure investment. PPP investments have been used in Abu Dhabi to build out road lighting systems and schools.

The government of Türkiye is reportedly planning to skip a mid-year hike to minimum wage levels though the decision needs endorsement by the president. Currently the monthly minimum wage level is TRY 22,104/month or close to USD 560/month at current exchange rate levels. Elsewhere, the Turkish Statistical Institute reported an improvement in economic confidence in the country to 96.712 in June from 96.652 a month earlier.

The PCE deflator in the US ticked up in May to 2.3% y/y from 2.1% a month earlier. Core price inflation also accelerated to 2.7% y/y, up from 2.5%. Personal spending in real terms dropped by 0.3% m/m while disposable income adjusted for inflation dropped by 0.7% m/m, its largest monthly decline since the start of 2022. The final estimate of the University of Michigan consumer sentiment survey improved to 60.7 for June from 52.2 a month earlier while inflation expectations remained at 5% for the year ahead.

Today’s Economic Data and Events

10:00 UK GDP q/q Q1 f: estimate 0.7%

11:00 TU trade balance May: forecast USD -6.5bn

14:30 IN industrial production May: forecast 2.3% y/y

16:00 GE CPI y/y June: forecast 2.2% y/y

Fixed Income

US Treasuries ended the session on Friday with a weaker tone on new trade dispute fears between the US and Canada. Yields on the 2yr UST added about 3bps to close at 3.748% while the 10yr UST yield pulled higher by slightly less than 4bps at 4.2769%.

Fitch affirmed their ‘BBB’ rating on Emaar Properties with a stable outlook. The rating agency cited Emaar’s “notable revenue and EBITDA expansion” and a solid order book.

GCC bonds ended the week on a positive footing with gains across all major sectors and geographies. A regional index of GCC bonds was a touch higher on Friday with spreads coming in by about 4bps. Turkish and Egyptian bonds also pulled higher.

FX

The US dollar managed a mixed performance at the end of last week though it was still substantially lower week/week. The broad DXY index rose by 0.3% on Friday though that wasn’t enough to reverse an overall 1.3% drop for the week as markets grow anxious over governance of the Federal Reserve and pressure from US President Donald Trump. EURUSD closed Friday up by 0.2% at 1.1718, taking its weekly gain to 1.7% while USDJPY dipped on Friday by 0.2% to 144.65 with a weekly strengthening in the yen of 1%. GBPUSD was near unchanged on the close on Friday at 1.3716 with a weekly gain of almost 2%.

Turkish lira shed some ground over the week with a rise in USDTRY of 0.6% to 39.9005 over the five days while Indian rupee pulled stronger with USDTRY lower by 1.3% last week to 85.4875.

Equities

Global equity markets rallied at the end of last week with a 1% gain in the Dow Jones and a rise of 0.5% in both the S&P 500 and NASDAQ. European equities also pushed higher.

In the UAE the DFM gained almost 1.3% with DIB, Salik, Dubai Investments and Emirates NBD helping to lift the index. The ADX 15 also gained with a near 1% rise.

The Tadawul started the week on a strong footing with a 1.2% gain overnight.

Commodities

Oil markets had a quiet few days after focus shifted away from geopolitical risks and back to fundamentals. Brent futures were essentially unchanged for the final two days of the week, closing at USD 67.77/b while WTI added 0.4% on Friday to settle at USD 65.52/b.

Eight OPEC+ countries will meet later this week to assess production levels for August with another 411k b/d increase likely. That would represent four months in a row of larger than originally planned production increases.