Pivot to the East: ASEAN, China & GCC to Forge a New Economic Axis? Weekly Insights 30 May 2025

Pivot to the East: ASEAN, China & GCC to Forge a New Economic Axis? Weekly Insights 30 May 2025

 1. ASEAN-GCC-China Summit highlights trade opportunities amid headwinds from US tariffs

• The shift in economic geography to the East has been an observable trend through recent decades.
• Amid threat of US tariffs, the ASEAN-GCC-China Summit in Malaysia highlighted the region’s potential: a combined GDP of USD 24.9trn & 2.15bn population. But, trade between the bloc represents less than 5% of global trade.
• ASEAN member nations rely on exports to the US & have been hit by tariffs ranging from 10% for Singapore to a high 49% for Cambodia that exports garments & related to the US. The countries have agreed to avoid retaliatory measures.
• ASEAN is China’s largest trading partner, with value of total trade reaching USD 982.3bn in 2024 & USD 234bn in Q1 2025. For China, the recent plunge in US trade has been offset by a rise in trade with ASEAN, with the latter accounting for almost 20% of China’s exports in Apr, compared to a US share at 10.5%.
• Additionally, trade with ASEAN accounted for about 7.2% of GCC’s overall trade in 2024 while China’s share of GCC trade was 15%.
• Trade was a key prong of discussions & potential cooperations: (a) ASEAN has concluded negotiations on upgrading the ASEAN Trade In Goods Agreement; (b) China & ASEAN have fully completed negotiations on the China-ASEAN Free Trade Area & aim to sign in Oct; (c) ASEAN-GCC set to launch FTA negotiations
• Bottomline: Immense opportunity from US-China decoupling for GCC/Asia coupling. Need to expand beyond trade

2. Oil exports dragged down Saudi exports in Q1; UAE largest non-oil trade partner

• Saudi Arabia’s overall exports fell by 0.9% mom and 9.8% yoy to SAR 93.8bn in Mar 2025, with oil exports down by 16.1% yoy while non-oil exports rose 6.7% to SAR 18.6bn and re-exports surged 21.0% to SAR 8.4bn. Share of oil exports to overall exports slipped to 71.2% (Feb: 71.5%).
• Compared to a year ago, non-oil exports grew by 9.0% in Q1 2025 while re-exports surged by 23.7%. Overall exports however fell by 3.2%, dragged down by oil exports (-8.4% in Q1 2025).
• Imports inched up by 2.3% mom and 0.1% yoy to SAR 74.0bn in Mar 2025. This resulted in a narrower trade surplus of SAR 19.8bn – down from Feb’s SAR 22.3bn and Mar 2024’s SAR 30.1bn.
• China, Japan and India were the top destination for oil exports and the top 5 and 25 nations accounted for 54.2% and 93.7% of total oil exports.
• Chemical products was the largest segment of non-oil exports (25.7%), and UAE the largest destination of overall non-oil exports (23.8%).
• Saudi Arabia’s non-oil trade with the GCC was led by a 55.6% gain in non-oil re-exports & 31.6% in non-oil exports.
• UAE was the largest non-oil trade partner.
• Non-oil trade surplus with UAE jumped more than four-times to SAR 9.5bn in Mar. Qatar’s surplus more than doubled to SAR 1.13bn. Only Oman reported a deficit (SAR 2.5bn), though narrower.

3. Deposit growth in Saudi Arabia averaged 9.1% in Jan-Apr 2025; govt deposits fell 2.3% mom in Apr. As of Apr, credit growth has outpaced deposit growth for 15 months in a row. Net foreign assets slipped in Apr, down 3.6% mom to SAR 1.56trn. Consumer spending declined, following the Ramadan-Eid supported surge

4. Oman clocked in a fiscal deficit of OMR 136mn in Q1 2025; revenues fell by 6.8% yoy

• Oman posted a budget deficit of OMR 136mn in Q1 2025. Revenues fell by 6.8% yoy to OMR 2.64bn alongside a 4.0% increase in spending (to OMR 8.7bn). Average oil price fell by 12.1% yoy to USD 73and average daily oil production fell by 5.8% to 955k barrels per day. The IMF forecasts fiscal breakeven oil price at USD 57 this year.
• There was a sharp decline in net oil revenues (-13.0% yoy to OMR 1.47bn) and net gas revenues (-1.8% to OMR 436mn). Net O&G together accounted for 72.3% of revenues.
• Expenditure ticked up by 4.0% in Q1 2025: though current expenditure edged down slightly (-0.6% yoy to OMR 1.97bn) alongside a 27% surge in development expenditure (to OMR 254mn) while contributions & other expenses edged up by 0.8% yoy to OMR 490mn.
• Oman’s government debt stands at USD 37bn (around 35% of GDP). The government plans to borrow USD 6.4bn this year to balance the budget. Around USD 1.94bn will be raised from government development bonds & local sovereign sukuk.

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