BEIJING: China’s producer price inflation accelerated more than expected to a four-month high in August, fueled by strong gains in raw materials prices and pointing to strong, sustained growth for both factory profits and the economy.
Consumer inflation also quickened more than forecast to a seven-month high, amid signs that upstream price gains are trickling through, but analysts said price gains remain modest and there is little pressure on the central bank to tighten policy further.
“The unexpected rise in both CPI and PPI suggests that there is little hope China’s monetary policy could see some relaxation before the end of this year,” Zhou Hao, a Singapore-based analyst at Commerzbank.
“We believe that the market has underestimated the inflationary pressure facing China’s economy, although inflation is unlikely to surge in the foreseeable future. That said, onshore rates are still on the rise,” he said, referring to higher financing costs.
China’s producer price index (PPI) rose 6.3 percent in August from a year earlier, from 5.5 percent in July, the National Bureau of Statistics said on Saturday.
The price data added to a long list of upside surprises for the world’s second-largest economy this year, which has so far defied analysts’ expectations of a slowdown.
A year-long, government-led construction boom, a resilient property market and a recovery in exports have offset the expected drag from a regulatory crackdown on riskier types of financing, which is slowly driving up borrowing costs.
“The pickup in PPI shows that demand remains steady, and we expect third-quarter economic growth to remain steady from the first half,” said Zhang Yiping, an economist at Merchants Securities in Shenzhen.
With the industrial sector in high gear, the economy grew by a faster-than-expected 6.9 percent in the first six months of the year.
If activity remains relatively solid in coming months, China’s economic growth could accelerate for the first time in seven years in 2017. Last year’s pace of 6.7 percent was the slowest in 26 years.
China’s industrial firms have been posting their strongest profits in years as the building boom fuels demand and prices for everything from cement and steel to glass and copper wiring.
Its commodities futures markets have rallied hard and continued to surge through August, boosted by strong restocking demand and government pledges to shut inefficient and highly polluting mines and plants, which has underscored concerns over tight supply heading into winter.
Activity in China’s steel industry expanded in August at the fastest pace since April 2016, reflecting high levels of production and low inventory.
Prices of ferrous metal smelting and rolling processing industries jumped 29.1 percent in August on-year while prices of non-ferrous metal sectors grew 16.3 percent, and prices of the oil processing sector rose 16.8 percent, the latest data showed.
However, some analysts say rising prices have mainly benefited state firms which dominate upstream industries, while smaller companies further along the supply chain have been burdened by sharply higher raw materials costs.
Likewise, some economists say sharply higher commodity prices are also flattering China’s import data, possibly exaggerating the strength of domestic demand. Imports rose 13.3 percent in August, more than expected, data showed on Friday.
And, it still seems too early to tell if suddenly cash-rich “smokestack” industries are putting the money to use by paying down massive levels of debt, an issue that Beijing has made a top priority this year as it looks to contain financial risks.
China’s strong appetite for resources such as iron ore has helped fuel a reflationary pulse in the manufacturing sector worldwide, producing synchronized growth in many developed and developing economies alike.
China inflation jumps to four-month high as economy races along
China inflation jumps to four-month high as economy races along
Saudi Arabia, Pakistan in talks on refinery upgrades, greenfield project: official says
RIYADH: Saudi Arabia is set to deepen its strategic partnership with Pakistan through talks on refinery upgrades and a greenfield project for petroleum products, according to an official.
Speaking to Arab News on the sidelines of the World Investment Conference held in Riyadh, Musadik Malik, senator and minister of state for petroleum of Pakistan, noted that the collaboration extends beyond energy projects and includes an agreement to connect power grids between the two nations.
“We are working very closely with the Kingdom to figure out how, what are the future energy needs, particularly in the area of renewables, and jointly, we’re going to identify and scope the opportunity, and jointly we’re going to build a program to fulfill those needs,” Malik said.
He continued: “We have two different projects which are right now under, to say, research.
One is the upgradation of quantifier refineries, and the other is a large greenfield refinery which would not only produce petroleum products but also hydrocarbons. These are under research and negotiation, so these are not finalized.”
Malik highlighted that the partnership goes beyond just securing investments or transferring advanced technology. Instead, it involves a joint effort to carefully analyze Pakistan’s future energy needs and map out potential scenarios for how these demands might evolve over time.
This forward-looking approach ensures that both nations are not just reacting to immediate energy challenges but are proactively planning for the long term.
By working together to address these evolving requirements, Saudi Arabia and Pakistan aim to guarantee Pakistan’s energy security, creating a sustainable and reliable framework that supports the country’s growth and development.
Saudi Arabia and Pakistan are making significant strides in strengthening private-sector collaborations, with multiple agreements already yielding tangible results.
Malik highlighted the proactive approach both nations are taking to foster business-to-business partnerships.
“Our prime minister believes that the government should not be in the business of doing business but should facilitate it,” he said, emphasizing the central theme of the collaboration.
“A very large part of the concept we are jointly building on is the private sector of the Kingdom working with the private sector of Pakistan.”
The minister added that around $2.8 billion worth of memorandums of understanding have been signed between the two countries in October.
“Out of these 28 to 30 MOUs, seven or eight have already been converted into contracts and executed within just three to four months,” Malik said.
He continued, explaining the momentum of the partnership: “We have transacted significant deals, and contracts are in motion. Yesterday (Nov. 25), during a roadshow with the Kingdom’s private sector, we secured a non-disclosure agreement that could pave the way for a $1.8 billion investment.”
Malik emphasized the multifaceted nature of Saudi Arabia’s involvement in Pakistan, describing it as a “360-degree view” encompassing both public and private sectors.
“We are not only receiving investments and technology but also collaborating on long-term strategies to meet Pakistan’s growing energy demands,” he said. “The Kingdom’s Public Investment Fund and subsidiaries are actively identifying opportunities for mutual growth.”
Pakistan is tackling the challenge of energy demand fluctuations, a longstanding issue where consumption peaks in summer and drops to a third during winter.
This cyclicality forces the country to make capacity payments to investors, covering equity returns and debt servicing even when energy is underutilized, Malik explained.
To address this inefficiency, Pakistan signed an MoU with Saudi Arabia to connect their power grids.
“This grid connection will allow energy produced in the Kingdom and Pakistan to be transacted seamlessly,” Malik said. “When we connect with Saudi Arabia, it effectively means connecting with the GCC as well.”
The initiative also aligns with regional energy strategies, as Pakistan seeks similar arrangements with Central Asian states.
“In Central Asia, energy demand is high in winter and negligible in summer. With this connectivity, deficits will no longer remain deficits, and surpluses will clear in real-time,” he added, highlighting plans for a unified energy market facilitated by a shared grid.
Malik concluded the interview by praising Saudi Arabia’s unwavering support for Pakistan, describing the Kingdom as a true and steadfast ally.
“In good times and bad, we have always found the Kingdom by our side. This is the hallmark of true friendship,” he said.
Saudi Arabia unveils 38% spending increase in 2025 budget to drive Vision 2030 progress
RIYADH: Saudi Arabia has increased government spending by 38 percent in its 2025 budget, reflecting the Kingdom’s commitment to achieving the objectives of Vision 2030.
The announcement was made by Finance Minister Mohammed Al-Jadaan following the budget’s approval.
Al-Jadaan explained that the 2025 budget is designed to continue strategic investments in developmental projects, aligning with sectoral strategies and programs under Saudi Vision 2030.
On Tuesday, Saudi Arabia approved its state budget for the fiscal year 2025, with projected revenues of SR1.18 trillion ($315.73 billion) and expenditures of SR1.28 trillion, resulting in a deficit of SR101 billion.
The minister emphasized that the government remains dedicated to projects that promote sustainable economic, social, and environmental benefits. These include improving the business environment, boosting the trade balance, and increasing both local and foreign investments.
“We identified that the nominal GDP has achieved greater growth from 2015 to 2023,” Al-Jadaan said during a press conference on the budget.
He also highlighted the growing contribution of non-oil sectors to the country’s GDP. “The contribution of non-oil activities to the gross domestic product increased from approximately 47 percent in 2016 to around 52 percent by the end of the first half of 2024,” Al-Jadaan noted, adding that such a shift was “extremely challenging to achieve within six years, as structural economic transformation does not occur in one or two years.”
The finance minister reaffirmed that the government continues to prioritize citizens' basic needs, with a focus on education, health, and social services. “There is a continued approach of planned expansion by the government to improve services provided to citizens and enhance the quality of these services. This expansion focuses on accelerating strategies with significant economic impact on jobs, business opportunities, and the sustainability of the Saudi economy,” he said.
He also reiterated the government’s commitment to completing ongoing projects, integrating technology and infrastructure into the broader economic system.
Al-Jadaan expressed optimism regarding the Kingdom’s economic indicators. “Economic indicators call for optimism, and non-oil GDP helped (overall) GDP continue to grow,” he remarked.
The minister clarified that the projected deficit in the 2025 budget aligns with the government’s financial planning framework, stating that Saudi Arabia plans to continue both local and international financing operations to cover the deficit and meet its debt obligations.
He also noted that the Kingdom is focusing on alternative financing methods to bolster economic growth, particularly through strategic spending on Vision 2030 programs. “The 2025 budget aims to maintain the Kingdom’s financial position and achieve fiscal sustainability by preserving manageable public debt levels and substantial government reserves,” Al-Jadaan explained.
“Debt levels in Saudi Arabia remain lower than those of most countries in the G20,” he added.
Al-Jadaan confirmed that government reserves are expected to remain stable at around SR390 billion by the end of 2025.
The finance minister also discussed the role of various sectors in driving economic growth. “The industrial sector is extremely important for several reasons, the foremost being national security. Having a robust industrial base means reducing exposure to external risks,” he said.
He further emphasized that exports and job creation within the industrial sector enhance the country’s balance of payments and support the broader economy.
Al-Jadaan highlighted tourism as another key sector contributing to job creation and economic stability. “Tourism, both in Saudi Arabia and globally, is one of the largest sectors contributing to job creation in the economy. It is also among the key sectors that significantly support the balance of payments,” he said. He noted that investments are being directed towards tourism projects and services across the Kingdom.
The transportation and logistics sectors were also emphasized as essential to the Kingdom's economic future. Al-Jadaan pointed out that a robust logistics infrastructure is crucial for the success of the industrial sector. “The transportation and logistics sector also has direct benefits, including the creation of logistics hubs that capitalize on Saudi Arabia’s central location, connecting three continents and serving as a strategic global crossroads,” he stated.
Turning to the energy sector, Al-Jadaan clarified that Saudi Arabia’s energy strategy encompasses much more than oil. “When discussing the energy sector, I am not referring solely to oil. I am speaking about the broader concept of energy, including renewable energy, gas, gas networks, and their delivery to industrial zones across the Kingdom,” he said.
He also discussed progress in the military sector, noting that the Ministry of Defense has completed its 10-year plan, with implementation already underway.
“The military sector has seen significant progress, with the Ministry of Defense completing its 10-year plan and the military sector now moving forward with its implementation,” Al-Jadaan explained.
Addressing the broader global economic landscape, Al-Jadaan assured that the Kingdom is maintaining stability despite external challenges. “Inflation in the Kingdom is under control despite its rise globally,” he said.
On public finances, the finance minister highlighted the role of Saudi Aramco in supporting government revenue. “Public finances in Saudi Arabia receive main sources of revenue, one of which comes from oil through the Aramco company. The first source is called the ‘royalty,’ which is a well-established concept with international standards. In Saudi Arabia, the royalty rate is set at 15 percent of Aramco’s oil sales,” he said. He also pointed out that Aramco is required to remit 50 percent of its profits to the government.
Al-Jadaan also touched on government efforts to control fuel prices, stating that billions are being spent to prevent price hikes. “When the Saudi government listed Aramco shares on the financial market, it had several objectives, all of which have been achieved. These included enhancing transparency, monetizing some of these assets, and utilizing the proceeds to support ongoing economic initiatives,” he said.
Finally, when discussing major infrastructure projects such as NEOM, Qiddiya, Diriyah Gate, and the Red Sea Project, Al-Jadaan emphasized that these initiatives have dedicated companies with their own budgets. “These companies have budgets allocated from the sovereign fund, not from the public treasury. They spend based on these budgets and they’re held accountable accordingly,” he stated.
Addressing inflation, Al-Jadaan clarified: “There is no officially targeted inflation rate in Saudi Arabia. However, globally, an inflation rate of 2 percent or 3 percent is considered acceptable.”
In conclusion, Al-Jadaan reaffirmed that the Saudi economy remains on a positive trajectory thanks to the government’s proactive policies and long-term planning, positioning the Kingdom to navigate both local and global challenges effectively.
Saudi Arabia’s Diriyah Co. set to attract new wave of investors with $500m ticket sizes
RIYADH: Saudi Arabia’s Diriyah Co. is attracting a new wave of global investors with potential ticket sizes of $500 million or more, according to the company’s investment head.
Speaking to Arab News during the World Investment Conference in Riyadh, Chief Investment Officer Jonathan Robinson revealed ongoing discussions with international investors spanning Asia, Europe, the Americas, and the Middle East, signaling an unprecedented level of global interest in the company’s projects.
“How many investors? We have dozens of live conversations, dozens, so we’re not talking one or two and we’re not talking one or two in any particular jurisdiction. We have conversations going across all these jurisdictions,” Robinson revealed.
“What’s the size? I think look, you know, we’re probably talking about investments, certainly in the $500 million and up. So it’s a good size, with international investors across multiple continents to come in, in a way, as a co-investor that I don’t think we’ve really seen in terms of breadth and depth or scale so far in the giga-project. So this is an exciting time. It is very real. And I think you will see those kinds of announcements coming out of Diriyah in the coming months,” he added.
“We have live conversations today, with investors in Asia, with investors in Europe, with investors in the Americas, as well as the many conversations that are ongoing across the region and including, of course, in Saudi Arabia,” Robinson said.
“I think in the coming months, you will see us make some pretty exciting announcements about partnerships with that global investor space. And that’s going to be groundbreaking in some respects. Not just for Diriyah, but potentially even for the Kingdom of Saudi Arabia, where you’re going to see a real level of participation joining us as partners and joint ventures in funds, through sole developer, co-developer models, where you’re going to see us partnering with some pretty new names,” Robinson said.
He elaborated on the breadth of investor engagement, highlighting that these partnerships will involve new and established players in Saudi Arabia.
“Some of them will be new names to the Kingdom. Some of them will be existing investors in the Kingdom but looking to step up that game. We’re moving our execution model now to one that’s really engaging with the private sector on this global scale, and those are very live conversations today,” Robinson explained.
“I think you will see coming out of Diriyah in the coming months, certainly into the first quarter of next year, we’ll be in a position to make some pretty big announcements. And those will include investors coming from all three continents,” he added.
Robinson described the initiative as a groundbreaking development for Saudi Arabia’s giga-projects. “I think it’s groundbreaking, first and foremost, that we’re bringing foreign investors in to co-invest in some of our giga-projects. That is groundbreaking. It’s been done at some level through operating companies and what have you, but as investors to co-invest in the development, ownership, operation, that will be groundbreaking,” he said.
Saudi Arabia, Iraq, and Russia reaffirm OPEC+ production cuts commitment
RIYADH: Saudi Arabia, Iraq and Russia on Tuesday emphasized the importance of fully committing to the OPEC+ oil supply agreement, including voluntary production cuts agreed by eight member states and measures to compensate for any increases in production, the Saudi Press Agency reported.
According to SPA, a trilateral meeting was held this morning in Baghdad, Iraq’s capital, which was attended by Saudi Energy Minister Prince Abdulaziz bin Salman, Russian Deputy Prime Minister Alexander Novak and Ali Maarij Al-Bahadli, Iraq’s director of distribution affairs at the Ministry of Oil.
The participants reaffirmed the significance of continued cooperation among OPEC+ countries and their full commitment to the voluntary agreements and production cuts, including those agreed upon by the eight countries, as well as compensating for any production increases.
Al-Bahadli reiterated Iraq’s determination to fully adhere to the agreement, voluntary cuts, and compensation for any production increase, in line with the updated schedule submitted by Iraq to the OPEC Secretariat.
Oil prices rose on Tuesday, steadying after falling more than $2 a barrel in the previous session on reports of a potential ceasefire between Israel and Lebanon’s Hezbollah.
Brent crude futures were up 53 cents, or 0.7 percent, at $73.54 a barrel as of 1231 GMT. US West Texas Intermediate crude futures were at $69.46 a barrel, up 52 cents, or 0.75 percent.
Prices fell sharply on Monday after multiple reports that Israel and Lebanon had agreed to the terms of a ceasefire in the Israel-Hezbollah conflict. A senior Israeli official said Israel looks set to approve a US plan for a ceasefire on Tuesday.
Saudi Arabia approves FY2025 budget, forecasts $27bn deficit amid expansionary spending
RIYADH: Saudi Arabia on Tuesday approved the state budget for fiscal year 2025 with revenues projected at SR1.18 trillion ($315.73 billion) and expenditure at SR1.28 trillion, leading to a deficit of SR101 billion.
The Finance Ministry forecasted Saudi Arabia’s Real GDP growth at 4.6 percent in 2025, up from the 0.8 percent estimate for 2024. This growth will be driven by a rise in non-oil sector activities, according to the statement.
The figures align with projections from the ministry’s pre-budget statement in September, showing a 4 percent decline in revenues, a 4 percent decline in expenditures, and a 12 percent lower deficit compared to the latest FY 2024 estimates.
The FY2025 forecast are based on a baseline scenario, which represents a middle ground between higher and lower revenue projections, taking into account potential changes in economic activity and global petroleum market conditions.
The ministry projects the deficit to remain at similar levels in the medium term, with SR130 billion in 2026 and SR140 billion in 2027, driven by the government’s strategic expansionary spending policies aimed at fostering economic diversification and sustainable growth. Revenues are expected to rise over the next two years, reaching around SR1.3 trillion by 2027.
The Kingdom’s total debt is projected to reach SR1.3 trillion in 2025, equivalent to 29.9 percent of GDP, reflecting a sustainable level to meet financing needs.
Revised projections for Saudi Arabia’s 2024 budget indicate a deficit of SR115 billion, with total debt expected to reach SR1.2 trillion, or 29.3 percent of GDP.
The fiscal year 2025 budget prioritizes maintaining essential services for citizens and residents, while accelerating spending on key projects and sectors.
It focuses on preserving fiscal stability and achieving long-term sustainability by managing government reserves and maintaining sustainable public debt levels, ensuring the Kingdom’s resilience against unforeseen economic shocks.
In a statement following the weekly Cabinet session, Crown Prince Mohammed bin Salman emphasized the government’s ongoing efforts to strengthen the Kingdom’s economic base. “We will continue to work on expanding the economic base and enhancing the Kingdom’s financial position,” he stated.
He also highlighted the pivotal role of Saudi Arabia’s sovereign wealth funds—the Public Investment Fund and the National Development Fund—in driving economic stability and achieving Vision 2030 objectives. “These funds are essential to diversifying the economy and supporting long-term investments,” he said.
Saudi Arabia’s economy is advancing through strategic reforms and robust investment initiatives under Vision 2030, emphasizing diversification and fiscal sustainability.
Key objectives include increasing the private sector’s contribution to GDP, growing the share of foreign investment, and boosting non-oil exports.
The strategy also prioritizes reducing unemployment and accelerating investment growth by enhancing the business environment, providing innovative financing solutions, and attracting regional headquarters of multinational companies to establish a strong presence in the Kingdom.
Key enablers, including the PIF, are driving private sector growth, launching transformative projects, and fostering new industries.
These efforts, outlined in the 2025 budget statement, aim to boost social and economic outcomes while ensuring resilience against global challenges and long-term prosperity.
Breakdown of projected government revenues and expenditures
The ministry projects tax income at SR379 billion in 2025, making up around 32 percent of total revenues. This represents a 4 percent increase compared to the 2024 estimates. The majority of these levies, accounting for 77 percent, come from taxes on goods and services.
According to the ministry, this growth is driven by sustained improvements in economic activity, the ongoing development of tax administration, and enhanced collection processes, all of which have contributed to a boost in total tax revenues.
In terms of sector-specific expenditures, the military sector received the largest allocation at SR272 billion, marking a 5 percent increase compared to the 2024 estimates.
The health and social development sector followed with a 20.25 percent share amounting to SR260 billion.
General items with 14.95 percent share of 2025 budgeted expenditures will be allocated SR192 billion.
Financing the deficit
The Ministry of Finance, in collaboration with the National Debt Management Center develops an annual borrowing plan aligned with the Kingdom’s medium-term debt strategy, ensuring long-term debt sustainability.
This strategy not only diversifies financing sources, encompassing both domestic and external markets, but also enhances the Kingdom’s standing in global debt markets.
Additionally, the government is expanding its financing channels by tapping into bond and sukuk issuance, loans, and alternative funding models like project and infrastructure financing, as well as collaborating with export credit agencies.
According to the Ministry of Finance, the Kingdom maintains a robust fiscal position, underpinned by substantial financial reserves and manageable public debt levels.
This fiscal strength provides the government with the ability to manage potential economic shocks and meet its financing needs across short, medium, and long-term horizons, while securing favorable borrowing terms from both domestic and international markets.
The crown prince also reaffirmed the government’s commitment to fiscal reforms that have already improved Saudi Arabia’s credit ratings. While the projected deficit for 2025 signals short-term fiscal challenges, the government is focused on ensuring long-term economic sustainability.
He noted that this year’s budget will continue to prioritize economic diversification, with significant emphasis on empowering the private sector and fostering growth in small and medium-sized enterprises.
The crown prince stressed that, despite global economic uncertainties, Saudi Arabia is well-positioned to navigate external challenges and play an increasingly central role in regional and global economic stability.
“Our economy is well-prepared to overcome challenges,” he said.
He also emphasized the importance of long-term financial planning to maintain momentum on Vision 2030 initiatives, underscoring the government's focus on spending efficiency and transparent execution of the budget to meet its strategic goals.
Moody’s upgraded Saudi Arabia’s credit rating to “Aa3” from “A1” on Friday, highlighting the country’s progress in diversifying its economy beyond oil.
The Kingdom is investing heavily in Vision 2030 initiatives, focusing on sectors like tourism, sports, and manufacturing, while also attracting foreign investment.
Despite lower oil prices and reduced production, Saudi Arabia continues to adjust its spending, delaying or scaling back some Vision 2030 projects while prioritizing others.
Moody’s revised the country’s outlook to stable, reflecting uncertainties in global economic conditions and the oil market. In September, S&P also upgraded Saudi Arabia’s outlook to positive due to strong non-oil growth.
