EmergingMarketWatch
Morning Review | Oct 2, 2025
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Large EMs
Czech Republic
President Pavel to launch government formation talks on Oct 5
Oct 02, 11:38
Finance ministry does no top-ups to Oct 1 bond auction
Oct 02, 11:28
No payments from EU cohesion funds reported in August
Oct 02, 10:26
SPECIAL
2026 budget comes in as mostly a placeholder, no shift in policy
Oct 02, 10:17
Opposition leader Babis would like a single-party ANO government
Oct 02, 06:26
PM Fiala comes out as clear winner from debate with Babis
Oct 02, 06:13
PRESS
Press Mood of the Day
Oct 02, 05:52
Q&A
Stacilo! polling numbers
Oct 01, 18:26
Q&A
Election results and government formation
Oct 01, 15:27
KEY STAT
State government budget reports a deficit of CZK 153.9bn in January-September
Oct 01, 13:38
ELECTION WATCH
ANO likely to lead the next government, but path to power may be thorny
Oct 01, 12:49
Hungary
NBH posts HUF 248bn loss in H1
Oct 02, 11:18
State-owned energy group MVM secures long-term LNG contract with Engie
Oct 02, 10:32
Social partners aim for minimum wage agreement by mid-November
Oct 02, 06:25
PRESS
Press Mood of the Day
Oct 02, 06:24
AKK puts net financing coverage at 115% at end-September
Oct 01, 19:26
Lending to private sector rises 7.2% y/y to end-Aug
Oct 01, 15:41
General govt posts HUF 480mn surplus in Q2, gg deficit revised up 5.0% for 2024
Oct 01, 14:26
PMI rises by 2.4pts m/m to 51.5pts in September
Oct 01, 12:47
Poland
PRESS
Press Mood of the Day
Oct 02, 03:36
Q&A
Debt mgmt strategy
Oct 01, 22:12
Q&A
Funding in 2026
Oct 01, 22:11
Q&A
Electricity price cap removal?
Oct 01, 22:10
FinMin Domanski says goal is to cross 55% of GDP mark as late as possible
Oct 01, 17:41
Polska 2050 said to be in shock as Holownia plots Polish political exit
Oct 01, 17:14
CBW
MPC still likely to pause in Oct
Oct 01, 15:54
PMI jumps 1.4pts m/m to 48.0 in Sep, topping 47.0 consensus
Oct 01, 12:17
Turkey
External trade deficit widens by 33.4% y/y in September - preliminary data
Oct 02, 10:17
NTV fires Washington chief after leaked Erdogan-Trump meeting criticism
Oct 02, 10:15
New vehicle sales are up by 25.7% y/y in September – ODMD
Oct 02, 08:08
PRESS
Press Mood of the Day
Oct 02, 06:23
Argentina
PRESS
Press Mood of the Day
Oct 02, 03:38
Treasury believed to have sold nearly USD 500mn on spot FX market, fuels concern
Oct 01, 21:52
Brazil
PRESS
Press Mood of the Day
Oct 02, 02:46
Manufacturing PMI falls 1.2pts m/m to 46.5pts in September
Oct 01, 15:08
Mexico
PRESS
Press Mood of the Day
Oct 02, 08:21
INEGI’s PMI falls 1.16% m/m sa in September
Oct 01, 20:07
Remittances’ inflow plunges 8.3% y/y in August
Oct 01, 17:48
Analysts cut their 2025-end CPI inflation forecast
Oct 01, 16:44
CBW
CB governor insists on dovish discourse, further easing fully expected ahead
Oct 01, 15:21
Manufacturing output expectations plummet in Q3
Oct 01, 14:55
Business confidence continues to fall, but slows its decline in September
Oct 01, 14:42
Egypt
Deposit dollarization rate moderates to 25.6% as of end-August
Oct 02, 11:43
KEY STAT
Private business sector credit expands 22.6% y/y in August
Oct 02, 11:30
No electricity tariff before January 2026 – minister
Oct 02, 08:18
PRESS
Press Mood of the Day
Oct 02, 06:53
Surplus in banking system’s NFAs drops 3.4% m/m to USD 18.2bn as of end-August
Oct 02, 06:48
Qatari Dair and St. Regis plan USD 3.5bn Red Sea project
Oct 02, 06:30
Foreign funds buy USD 1.8bn worth of bonds/T-bills on EGX in September (net)
Oct 02, 05:45
CBW
MPC likely to cut rates by 100-200bps on Oct 2 as pound firms, inflation eases
Oct 01, 12:30
Nigeria
HIGH
Stanbic Bank PMI falls to 53.4 in September
Oct 02, 10:53
NNPC reports heavy losses during PENGASSAN strike
Oct 02, 08:42
PRESS
Press Mood of the Day
Oct 02, 07:43
Net portfolio flows into equity turn positive in August
Oct 02, 06:47
Q&A
Domestic borrowing plan 2025
Oct 01, 20:00
Q&A
Consequences of failing to meet recapitalisation deadline
Oct 01, 19:59
India
Cabinet approves INR 11.4tn pulses scheme to boost output
Oct 01, 15:06
Gross GST collections increase 9.1% y/y in September
Oct 01, 14:34
Indonesia
PRESS
Press Mood of the Day
Oct 02, 06:14
KEY STAT
General govt debt rises by 0.3% q/q to IDR 9,219.6tn at end-Q2
Oct 01, 17:57
Foreign tourist visits rise by 12.3% y/y in August
Oct 01, 17:22
KEY STAT
External trade surplus nearly doubles y/y to USD 5.5bn in August
Oct 01, 15:03
Pakistan
FinMin rules out new taxes to meet revenue target
Oct 02, 06:59
PRESS
Press Mood of the Day
Oct 02, 06:23
Yields rise at T-bills auction amid fading rate cut bets
Oct 01, 17:10
KEY STAT
CPI inflation rises to 11-month high of 5.6% y/y in September
Oct 01, 15:11
Manufacturing PMI falls to record low of 48.0 in September
Oct 01, 13:39
Philippines
PRESS
Press Mood of the Day
Oct 02, 04:28
CEE & CIS
Albania
KEY STAT
Bank of Albania holds policy rate at 2.5% amid stable inflation forecasts
Oct 02, 09:36
Foreign investment in Albanian government debt reaches ALL 20.0bn by H1 2025
Oct 01, 14:32
Economic sentiment indicator contracts by 1.3pts m/m in September
Oct 01, 14:28
Albania, Italy, and UAE establish partnership for submarine power cable project
Oct 01, 14:25
BoA boosts foreign exchange purchases to EUR 194.8mn in H1
Oct 01, 14:23
Armenia
Speaker blocks release of inquiry into 2020 war
Oct 02, 08:42
Armenia discusses construction of small modular reactor with several countries
Oct 02, 08:33
KEY STAT
CA deficit amounts to USD 479mn in 2Q25
Oct 02, 08:29
Azerbaijan
KEY STAT
FX Reserves increase to USD 11.31bn in Sep
Oct 02, 08:40
Belarus
Russia may raise imports of gasoline from Belarus
Oct 01, 15:41
Bosnia-Herzegovina
EC President Ursula von der Leyen expected to visit BiH
Oct 02, 07:40
PRESS
Press Mood of the Day
Oct 02, 06:43
Gross indirect tax revenues rise by 6.0% y/y to KM 9bn in January-September
Oct 01, 15:40
BiH Council of Ministers approves EUR 136.7mn grant agreement with EIB
Oct 01, 15:30
RS to pay KM 240mn for purchase of Comsar Energy RS
Oct 01, 12:58
Bulgaria
PRESS
Press Mood of the Day
Oct 02, 06:57
KEY STAT
Government budget deficit soars y/y to BGN 5.2bn in Jan-Aug
Oct 02, 06:57
KEY STAT
Central government debt rises by 0.4% m/m to EUR 31.3bn at end-August
Oct 01, 22:35
Croatia
Faster energy prices increase in September drive inflation acceleration – HNB
Oct 02, 09:35
Croatia capable of producing over a million FPV drones – defence minister Anusic
Oct 02, 05:52
PM Plenkovic again refutes Hungarian accusations of war profiteering
Oct 02, 05:37
PRESS
Press Mood of the Day
Oct 02, 05:24
Govt offers pensioners EUR 6 per service year as 13th pension – Minister Piletic
Oct 01, 14:36
Georgia
29 international observation missions have signed up to monitor local vote
Oct 02, 08:48
Kazakhstan
Kazakhstan’s oil output estimated at 1.88mn bpd in September - sources
Oct 02, 11:40
PRESS
Press Mood of the Day
Oct 02, 06:54
KMG and CNOOC set up joint venture to develop Zhylyoi deposit
Oct 01, 15:55
Q&A
Details on gold purchase mirroring scheme
Oct 01, 15:10
KEY STAT
CPI inflation increases to 12.9% y/y in September
Oct 01, 15:00
Montenegro
Net FDI inflows increase by 0.4% y/y to EUR 296.2mn in Jan-July
Oct 02, 07:19
North Macedonia
PRESS
Press Mood of the Day
Oct 02, 06:55
Romania
Hidroelectrica’s net profit falls 41% y/y to RON 1.6bn in H1
Oct 02, 11:04
Fiscal Council considers government budget revision realistic
Oct 02, 10:31
Insurance market rises by 8% y/y in H1, mostly driven by general insurances
Oct 02, 10:02
Producer prices accelerate growth to 3.2% y/y in August
Oct 02, 07:36
KEY STAT
ILO unemployment rate edges up m/m to 5.9% in August
Oct 02, 07:22
New car registrations jump 39% y/y in September, used ones pick up rise
Oct 02, 06:51
Treasury plans to raise nearly RON 8bn with local bond issues in October
Oct 02, 06:14
PRESS
Press Mood of the Day
Oct 02, 05:43
Hidroelectrica cuts by 15% net profit estimation in 2025 due to drought
Oct 01, 15:42
NBR’s reserves rise by 1.2% m/m in September, driven by rising gold prices
Oct 01, 14:55
Russia
PRESS
Press Mood of the Day
Oct 02, 06:25
KEY STAT
Household consumption and investment offset weak net exports in Q2
Oct 02, 06:21
KEY STAT
GDP grows modest 0.4% y/y in August, unchanged from July
Oct 02, 05:10
Consumer price growth accelerates to 0.13% during week of Sept 23-29
Oct 02, 04:49
Manufacturing PMI stays around 48 mark in September
Oct 02, 04:30
First Russia-EU parliamentary meeting in 11 years was held
Oct 01, 17:17
FinMin borrows RUB 231.7bn at OFZ auction, three times more than last week
Oct 01, 16:24
Aeroflot bought eight Boeing cargo jets for spare parts
Oct 01, 15:19
Serbia
Flystar Flight Support gets licences for oil trade and storage
Oct 02, 07:37
PRESS
Press Mood of the Day
Oct 02, 06:42
Oil company NIS confirms delay of US sanctions until Oct 8
Oct 01, 12:55
FinMin Mali expects govt to adopt draft 2026 budget in first week of November
Oct 01, 12:54
Ukraine
Government starts to prepare two banks for privatisation
Oct 02, 11:24
HIGH
Russian strikes temporarily black out Chernobyl
Oct 02, 05:53
PRESS
Press Mood of the Day
Oct 02, 04:54
New car registrations up 21% y/y in September
Oct 01, 16:38
NBU business expectations index further up to 50.4 in September
Oct 01, 13:34
Naftogaz borrows EUR 300mn from EIB
Oct 01, 12:54
EU issues EUR 4bn ERA tranche
Oct 01, 12:07
Uzbekistan
KEY STAT
Gas production declines by 4.0% y/y over Jan-Aug
Oct 02, 09:07
Total assets of Uzbek banks reach UZS 863trn, capital Grows by 21%
Oct 02, 08:57
Euro Area
Estonia
Three opposition parties with strong lead ahead of ruling parties - poll
Oct 02, 07:17
Greece
Greek industry divided over possible adoption of “Italian model” in energy
Oct 02, 06:36
PRESS
Press Mood of the Day
Oct 02, 06:36
Italy
KEY STAT
Unemployment rate edges up to 6.0% in August
Oct 02, 09:25
New car sales return to growth in September
Oct 02, 06:56
PRESS
Press Mood of the Day
Oct 02, 06:28
KEY STAT
Central govt cash budget deficit narrows 0.4% y/y to EUR 110.3bn in Jan-Sep
Oct 01, 18:26
Urso downplays chances of ex-Ilva nationalisation
Oct 01, 16:51
Latvia
Latvia will need to borrow EUR 3.8bn on international markets in 2026
Oct 01, 16:39
Lithuania
Stats office raises its 2024 annual GDP growth estimate from 2.8% to 3.0%
Oct 02, 06:34
PM Ruginiene rules out Culture Ministry leadership change
Oct 01, 15:15
Portugal
HIGH
Local elections on 12 October are shaping up to be a very close contest
Oct 02, 09:19
PRESS
Press Mood of the Day
Oct 02, 06:41
Average interest rate on corporate loans falls by 11bps to 3.54% in August
Oct 01, 15:23
KEY STAT
General government debt rises by 0.1% m/m to EUR 288.4bn in August
Oct 01, 14:39
Slovakia
KDH head calls on PM Fico to reimburse self-employed for transaction tax paid
Oct 02, 11:05
Opposition slams absence of targeted energy assistance
Oct 02, 05:42
PRESS
Press Mood of the Day
Oct 02, 05:37
Another lawmaker leaves Slovakia, For the People, KU caucus
Oct 01, 14:43
President's Office rejects Migal's claims about formation of caretaker cabinet
Oct 01, 14:18
State debt manager ARDAL to hold regular government bond auction on Oct 20
Oct 01, 14:07
Spain
Treasury places EUR 5.93bn in medium-long-term bonds
Oct 02, 11:58
KEY STAT
Registered unemployment rate edges down to 10.0% in September
Oct 02, 10:59
Foreign tourist arrivals rise by 2.9% y/y to 11.2mn in August
Oct 02, 09:26
PRESS
Press Mood of the Day
Oct 02, 06:23
New passenger car sales rise by 16.4% y/y to 85.2k in September
Oct 01, 13:07
Latin America
Chile
PRESS
Press Mood of the Day
Oct 02, 03:57
KEY STAT
Unemployment with seasonal adjustment falls to 14-month low 8.4% in August
Oct 01, 18:57
Trump’s lumber tariff hits USD 1.1bn of Chilean exports with 10% surcharge
Oct 01, 17:37
CBW
MPC to hold at 4.75% in October, wait for more disinflation before final cuts
Oct 01, 15:45
KEY STAT
Economic activity contracts 0.7% m/m and rises below-expected 0.5% y/y in August
Oct 01, 14:45
Colombia
Manufacturing PMI eases to 52.0 in Sep; signals cooling momentum
Oct 02, 03:27
PRESS
Press Mood of the Day
Oct 02, 03:21
August tax revenues up 16.2% y/y, but miss monthly target of COP 19.3tn
Oct 01, 17:48
Costa Rica
PRESS
Press Mood of the Day
Oct 02, 01:43
World Bank approves USD 300mn loan for Costa Rica to support fiscal accounts
Oct 01, 13:55
HIGH
Assembly rejects extension of Eurobond issuances
Oct 01, 13:37
Dominican Republic
PRESS
Press Mood of the Day
Oct 02, 02:45
Govt will launch new Energy Strategic Plan to 2050
Oct 02, 02:45
President Abinader praises new UN force to support Haiti
Oct 01, 17:16
Ecuador
PRESS
Press Mood of the Day
Oct 01, 23:06
Pres Noboa sends urgent bill to strengthen Armed Forces and National Police
Oct 01, 19:50
Indigenous movement in Northern region announces temporary protests' truce
Oct 01, 16:30
RC leader González gives formal support for protests called by CONAIE
Oct 01, 15:52
El Salvador
PRESS
Press Mood of the Day
Oct 02, 03:57
HIGH
FinMin submits USD 10.5bn 2026 budget, promises no debt for current spending
Oct 01, 19:44
Tax revenues up 8.1% y/y in Jan–Aug, led by VAT and income tax
Oct 01, 15:22
Panama
PRESS
Press Mood of the Day
Oct 01, 23:10
Cabinet Council ratifies tax agreement between Panama and Ecuador
Oct 01, 19:46
Peru
PRESS
Press Mood of the Day
Oct 02, 04:23
KEY STAT
Lima CPI inflation rises 1.36% y/y in September
Oct 01, 16:45
Construction business chamber foresees 3.0% y/y rise in activity in August
Oct 01, 14:43
Middle East & N. Africa
Bahrain
Country raises USD 2.5bn in dual-tranche bond sale
Oct 02, 07:49
Israel
Public’s financial asset portfolio rises by 5.5% in Q2
Oct 01, 16:44
CBW
MPC will most likely remain prudent in last rate decision for 2025
Oct 01, 15:55
Jordan
Foreign direct investment rise by 36.4% y/y to USD 1.05bn in H1 of 2025
Oct 02, 08:53
Regulator hikes fuel prices in October adjustment
Oct 02, 08:30
Govt sells JOD 221mn in 5-year T-bonds
Oct 01, 16:03
Kuwait
FX reserves decrease 10% y/y to USD 42.9bn at end-August
Oct 02, 09:51
Lebanon
President and PM reaffirm commitment to May 2026 parliamentary elections
Oct 02, 08:39
UN human rights chief calls for permanent halt of hostilities in country
Oct 02, 08:12
Morocco
KEY STAT
Foreign trade deficit expands 15.5% y/y in Jan-Aug to MAD 225.9bn
Oct 02, 05:48
HIGH
Morocco’s GenZ protests turn deadly as unrest spreads nationwide
Oct 02, 05:29
Qatar
HIGH
Trump promises to protect Qatar
Oct 01, 21:29
Saudi Arabia
Personal transfer payments drop 15.6% m/m to USD 4.8bn in August
Oct 02, 11:57
PRESS
Press Mood of the Day
Oct 02, 08:03
Q&A
NFAs and interbank liquidity
Oct 01, 13:04
KEY STAT
Bank claims on private sector grow 13.2% y/y to SAR 3.1tn as of end-August
Oct 01, 13:01
Sub-Saharan Africa
Angola
Timetable for next stock exchange privatization still unclear
Oct 02, 06:11
Ethiopia
ECMA licenses three new firms to expand capital market
Oct 02, 08:56
Treasury plans ETB 243.5bn T-Bill auctions in Q2 of FY 2025/26
Oct 02, 08:48
Jet fuel price rises 9.62% to ETB 120.10 in October, diesel price unchanged
Oct 02, 08:48
Gabon
ExxonMobil to return to Gabon with offshore exploration deal – S&P
Oct 02, 08:55
Nguema’s ruling party leads in first round of legislative elections
Oct 02, 08:41
Ghana
President Mahama says govt is in talks with US on tariffs, AGOA
Oct 02, 08:40
PRESS
Press Mood of the Day
Oct 02, 08:11
KEY STAT
Inflation enters single-digit territory at 9.4% y/y in September
Oct 01, 15:55
Ivory Coast
Government announces USD 440mn development plan for palm oil sector
Oct 02, 08:54
Government approves draft 2026 budget
Oct 02, 08:26
Government launches new cocoa season, raises farm-gate cocoa price by 27.3%
Oct 02, 06:58
Govt, Eni sign deal for new exploration block CI-707
Oct 01, 13:15
Kenya
PRESS
Press Mood of the Day
Oct 02, 08:58
Senegal
Govt to prioritize local financing for major projects
Oct 02, 08:56
South Africa
October marks shift from fuel price deflation to inflation
Oct 02, 08:26
PRESS
Press Mood of the Day
Oct 02, 06:56
Malema found guilty in firearm case which could put him behind bars
Oct 01, 14:04
ABSA PMI signals manufacturing sector expansion in Q3
Oct 01, 13:53
Uganda
Government sells bonds above target again amid strong demand
Oct 01, 16:09
Zambia
PRESS
Press Mood of the Day
Oct 02, 08:41
Govt, SCO-China sign multi-sector MoUs to unlock USD 1bn investment
Oct 02, 07:59
IDC launches digital marketplace to boost ZMW 10bn intra-group trade
Oct 02, 07:58
World Bank warns of 2026 budget risks from ZMW 21.62bn domestic borrowing plan
Oct 02, 06:58
Asia
Malaysia
Govt raises MYR 1bn in rare 61-day Sukuk T-bills auction
Oct 02, 09:46
PRESS
Press Mood of the Day
Oct 02, 06:46
Mongolia
FX reserves rise to USD 5.68bn in August
Oct 01, 15:40
South Korea
KEY STAT
CPI inflation rises back above 2% y/y in September
Oct 02, 06:43
PRESS
Press Mood of the Day
Oct 02, 05:48
OpenAI to build 2 data centres rated 20MW in South Korea
Oct 01, 16:51
Government launches KRW 16.4tn debt relief fund for vulnerable borrowers
Oct 01, 16:17
KEY STAT
Exports increase by 12.7% y/y in September on working days difference
Oct 01, 13:07
Sri Lanka
Tourist arrivals touch 158,971 in September
Oct 02, 06:58
PRESS
Press Mood of the Day
Oct 02, 06:46
Government places LKR 43bn T-bills
Oct 02, 06:08
CBW
Rising inflation to limit room for rate cut in November
Oct 01, 17:18
KEY STAT
Current account surplus rises 7% y/y in August to USD 368mn
Oct 01, 17:10
Fitch affirms CCC+ sovereign rating
Oct 01, 14:11
Thailand
PRESS
Press Mood of the Day
Oct 02, 06:41
Business sentiment index rises to 48.0 in September
Oct 02, 06:33
CBW
BOT likely to cut policy rate on Oct 8
Oct 01, 15:34
Private consumption index rises by 1.9% y/y in August
Oct 01, 12:27
Vietnam
PRESS
Press Mood of the Day
Oct 02, 05:32
HIGH
SBV sells USD 1.2bn in forwards to stabilize FX market
Oct 02, 05:25
Treasury sells VND 5.1tn bonds, bond yields increase
Oct 02, 05:25
Czech Republic
President Pavel to launch government formation talks on Oct 5
Czech Republic | Oct 02, 11:38
  • A meeting with ANO leader Andrej Babis is already scheduled for Sunday morning
  • Pavel will meet other party leaders at a later time, and will reveal his plans for the procedure later on Sunday
  • Appointing the next PM is quite important, as a new government takes over immediately, even before it obtains a vote of confidence from the lower house

President Petr Pavel intends to launch government formation talks on Sunday (Oct 5), i.e. the day after the general election, Vit Kolar, head of Pavel's communication office, told Seznam Zpravy, a news site. There is already a meeting with ANO leader Andrej Babis scheduled for Sunday morning, and meetings with other party leaders will soon follow. Pavel will reveal his plans in public on Sunday afternoon.

We remind that Pavel met Babis earlier this week, discussing the legal proceedings against him, as well as his potential conflict of interest. After the meeting, Babis promised to do everything in his power to remove any potential conflict of interest, as required by Czech and EU law. He didn't commit to selling his stake in Agrofert, a major fertilizer producer, which is the main reason Babis is facing conflict issues. Agrofert is a major beneficiary of EU funding, and it is the reason the European Commission has withheld some subsidies to the company.

Regarding the government formation process, it appears that Pavel wishes to accelerate it as much as possible. There is no deadline when Pavel needs to appoint a prime minister candidate. However, once appointed, the new government will take over immediately, before it has obtained a vote of confidence from the lower house. Furthermore, that government will remain in power even if it fails to receive a vote of confidence, so appointing the next prime minister will be quite important. We remind that Milos Zeman waited for 6 months before he appointed a permanent government in 2018, after the first attempt of a minority ANO government to receive a vote of confidence failed. This was considered an abuse of power back then, so the odds are Pavel will try to avoid such a scenario this time.

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Finance ministry does no top-ups to Oct 1 bond auction
Czech Republic | Oct 02, 11:28
  • The finance ministry bought CZK 2bn of bonds into its portfolio
  • Gross financing needs were covered at 79.9% as of Oct 2

The finance ministry did no top-ups to the government bond auction on Oct 1, according to auction data reported by the CNB. Thus, the borrowed amount remains at CZK 13.9bn, quite above the CZK 10bn borrowing ceiling, and 50% of the monthly borrowing ceiling. We remind that there are two more bond auctions scheduled in October, on Oct 8 and Oct 22. The finance ministry did purchase CZK 2bn of bonds to its portfolio.

Based on the information above, we estimate that debt instruments maturing after the end of 2025 have reached CZK 443.8bn. The amount breaks down to:

  • CZK 304.1bn in CZK-denominated government bonds;
  • CZK 90.7bn in net bond purchases to the issuer's portfolio;
  • CZK 40.5bn in CZK-denominated T-bills;
  • CZK 12.2bn equivalent in EUR-denominated T-bills (EUR 0.5bn original value);
  • CZK 1.3bn in retail bonds (H1 2025 only);
  • CZK 7.2bn in loans (H1 2025 only).

Operations with financial assets added up to a net inflow of CZK 9.4bn in H1 2025. However, the funding and debt management strategy for 2025 envisages a net inflow of CZK 7.4bn only. Gross financing needs are projected at CZK 567.5bn in 2025, which means they were covered at 79.9% as of Oct 2. If we only include the financial asset flows as projected, the cover ratio was at 79.5%. We remind that this estimate is strictly unofficial and some data is outdated. An update to retail sales, loans, and operations with financial assets in Q3 will be available on Oct 17.

Government debt issuance, October
DateTypeCurrencyMaturityCeiling, bnDemand, bnAmount, bnCover ratioYield, %Last offered inPrevious amount, bnPrevious yield, %Change, bpsPurchased by issuer, bn
1-OctBondCZKOct-305.08.67.01.233.91newn/an/an/a1.0
1-OctBondCZKOct-355.010.26.91.474.45newn/an/an/a1.0
8-OctBondCZKApr-344.0Jan-254.64.03TBA on Oct 9
8-OctBondCZKSep-355.0Sep-257.44.40TBA on Oct 9
8-OctFRN*CZKJun-381.0Sep-252.031.78TBA on Oct 9
8-OctT-billEURMar-260.5Sep-250.52.05
16-OctT-billCZKOct-265.0Aug-2510.03.38
22-OctBondCZKOct-344.0Aug-257.54.29TBA on Oct 23
22-OctBondCZKJun-363.0Aug-259.84.45TBA on Oct 23
22-OctBondCZKJul-371.0Jan-252.34.42TBA on Oct 23
23-OctT-billCZKApr-265.0Jun-257.43.25
Note: * FRNs have average discount margin (in bps) instead of yield
Source: CNB
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No payments from EU cohesion funds reported in August
Czech Republic | Oct 02, 10:26
  • Progress will be seen in September, as budget data shows gross EU flows of CZK 21bn

No payments were reported from EU cohesion funds in August, according to figures from the regional development ministry. It makes it the third consecutive month without any progress, even though national co-financing payments have continued. It leaves the absorption rate at 15.6% of total allocations as of end-August. However, there will be a development in September, as according to the latest budget report, gross EU flows were CZK 21bn in September, and the bigger part was likely through cohesion programmes. Thus, you should expect some progress in September. We remind that this report covers only cohesion programmes, so the RRF payment of EUR 1.57bn due in October, will not be accounted for here.

As far as progress is concerned, the absorption rate is almost the same as in the respective period of the 2014-2020 MFF, at 15.6% against 15.4% in August 2018. Similarly, progress was reported in the final quarter of this year, and it appears everything has remained similar, as far as actual payments from the EU budget are concerned. Where this government has excelled is project approval, as it has reached 65.3% of total allocations, compared to only 24.7% at the same time of the 2014-2020 MFF.

EU funds absorption, CZK bn
Aug-24 May-25 Jun-25 Jul-25 Aug-25
Main allocation535.0527.3529.1526.7528.3
Projects with a grant decision/contract signed 214.8 326.7 333.6 343.9 350.7
Reimbursements to beneficiaries 62.0 119.9 126.7 135.0 139.6
Payments 27.8 86.8 86.8 86.8 86.8
Absorption rate 5.4% 16.5% 16.5% 16.5% 16.5%
Source: Ministry of Regional Development
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SPECIAL
2026 budget comes in as mostly a placeholder, no shift in policy
Czech Republic | Oct 02, 10:17
  • Take any numbers in this budget as provisional, since ANO is likely to submit a new budget in early 2026
  • The macroeconomic framework is cautious, GDP growth is projected at only 2% in 2026
  • General government deficit projected to remain flat at 1.9% of GDP, structural deficit will remain at 1.7% of GDP
  • We estimate gross bond issuance will reach 5.6% of GDP in 2026, while net issuance will be 2.8% of GDP; estimates are strictly unofficial, though
  • There are only a couple of discretionary measures to speak of, one of them being a 7.5% average wage hike in the public sector
  • Defence and energy are the sectors to see the greatest increase in spending
  • Gross EU flows to be lower by almost 10% due to smaller RRF payments planned
  • This budget bill is largely inconsequential, as we doubt it would be in this state if the ruling parties had a chance to remain in power

The 2026 budget bill is a weird one, as it is the first one we have seen in a while that feels mostly as a placeholder, than an actual budget. The reason is the general election, which is due on Oct 3-4, which will likely lead to a shift in government, and consequently an entirely new budget. ANO, the party that will likely lead the new government, has already promised, on numerous occasions, that it intends to withdraw this bill and write a new one, which is expected to happen in late February 2026. This mirrors what happened with the original 2022 budget bill, which ANO prepared, but then the current government withdrew and submitted its version. If there is no regular budget, a provisional one comes into play, which caps monthly spending at 1/12th of expenditure during the previous calendar year. Typically, it doesn't impact day-to-day operations much, but public investment tends to get delayed.

Thus, consider everything you see in this bill as provisional, and not reflecting the policy of the next government. Unfortunately, ANO didn't paint a clear picture of its fiscal policy plans, but the odds are that its budget will be much more expansionary, though nominally within SGP constraints, i.e. a general government deficit under 3% of GDP.

Macroeconomic framework - cautious amidst high external uncertainty

There is nothing that particularly stands out here, with "caution" being the key word. GDP growth is expected to remain modest, at 2% in 2026, which is in line with market expectations. Investment is expected to recover, but mostly due to inventory depletion, so the odds are recovery will be muted, mostly reflecting a low base. Inflation is projected to remain above the 2% target but relatively moderate, the labour market will remain tight, while the CA surplus should narrow, reflecting weak external demand and tariffs. Euro area growth is projected at only 0.5% in 2026, which should be the main warning sign, as any hopes for a major recovery will be subdued because of it.

This could be an argument on its own why the 2026 budget bill is cautious as well, as no one should count on a major revenue increase in 2026. The only positive development is that a strong CZK will likely mitigate any external price pressure, though given how low fx debt is, it will not matter much for public finances.

Table 1. Macroeconomic framework
IndicatorUnit20252026
GDPCZK bn8,4548,832
GDP% y/y2.12.0
Private consumption% y/y3.02.9
Government consumption% y/y1.91.4
Gross fixed capital formation% y/y0.12.9
Net exportscontribution, pps-0.4-0.5
Inventoriescontribution, pps0.70.1
GDP deflator% y/y2.82.5
CPI inflation% y/y2.42.3
Employment% y/y1.00.1
Unemployment rate%2.62.7
Wage bill% y/y6.65.4
Current account balance% of GDP1.20.5
EUR/CZK24.824.4
Long-term interest rates%4.24.1
Brent crude oilUSD/barrel7067
Euro area GDP% y/y1.20.5
Source: Ministry of Finance

No shift in structural fiscal position planned

The structural fiscal position is expected to remain unchanged, with the structural fiscal deficit to remain at 1.7% of GDP in 2026, the same as in 2025. There are no expectations to shift the general government deficit target, either, which is maintained at 1.9% of GDP. This reinforces the impression that without any policy change, which is very much the case with this budget bill, there will be no further improvement in the medium term. Yet, no government will do fiscal consolidation in an election year, even if necessary, so this is in line with expectations.

General government debt is expected to keep rising, however, reaching 45.5% of GDP at end-2026. This is still moderate for the AA credit rating group, and it remains far from the critical level at 55% of GDP, which activates a mandatory fiscal consolidation effort, as per the fiscal responsibility act. The main thing here is that if you don't do anything from here onward, debt growth will be inevitable, to a point where it will become difficult to sustain, in a decade or so.

As another evidence for policy stagnation, the effective tax burden will remain effectively unchanged, at 33.1%, as it has been in 2024 and 2025.

Table 2. General government, % of GDP
202420252026
Budget balance-2.0-1.9-1.9
Structural balance-1.7-1.7-1.7
Government debt43.344.245.5
Tax burden, %33.033.233.1
Source: Ministry of Finance

Financing, gross and net bond issuance

There has always been an issue with estimating gross and net government bond issuance in the Czech Republic, as unlike some other countries, like Poland, there is no detailed breakdown by instruments in the financing section. Furthermore, the finance ministry only announces debt issuance calendars month for month, so we have no idea what debt instruments will be offered in November and December. Moreover, borrowing ceilings are always indicative, i.e. the finance ministry has full discretion to go over or under declared limits. Thus, please be aware that our estimates below include several assumptions, which will likely turn out to be at least somewhat inaccurate. The only precise numbers are those in the funding and debt management strategy, which is traditionally published in the first week of January. This time, it will be delayed to February or even March 2026, given that a new budget will be prepared.

Here are some base assumptions. We expect that the finance ministry will continue relying on money market instruments in Q4 2025, which means it will add CZK 30bn in CZK-denominated T-bills and EUR 0.5mn of EUR-denominated T-bills that mature in 2026. According to the latest finance ministry data, amortisation of government bonds and T-bills should reach CZK 324.2bn in 2026, out of which CZK 249.3bn in bonds and CZK 74.9bn in T-bills. Loan amortisation is projected at CZK 26.5bn in 2026, according to the latest update to the 2025 funding and debt management strategy.

All this puts the gross borrowing requirement to CZK 636.7bn in 2026. Based on current government debt structure, the net amortisation of short-term foreign debt, at CZK 11.9bn, matches exactly outstanding foreign short-term loans, so we assume that no new loans of that kind are planned. There is also a net issuance of CZK 3.6bn of short-term domestic debt, which we expect to be entirely through T-bills. Our assumption for maturing T-bills in 2026 is CZK 74.9bn, which includes our estimates for T-bill issuance in Q4 2025. Thus, this puts gross T-bill issuance at CZK 71.3bn in 2026.

Moving on to loans, the latest update of the funding and debt management strategy puts loan amortisation at CZK 26.5bn in 2026. Since the finance ministry has a clear preference to issue debt in the domestic market, we will assume that the net issuance of foreign long-term debt will be entirely through loans, likely from IFIs. This will put gross borrowing through loans to CZK 73bn in 2026.

Based on all this, we estimate that gross government bond issuance should add up to CZK 492.4bn (5.3% of GDP), while net bond issuance should end up at CZK 243.1bn (2.8% of GDP) in 2026. Please consider these estimates strictly unofficial and preliminary. The information we are using is likely to go through revisions until the end of the year, and we are making several assumptions. Furthermore, since there will be an entirely new budget, the odds are that the gross and net borrowing requirements will change as well. Thus, consider this as only a starting point, not a definitive projection.

Fiscal policy to remain effectively unchanged

Unlike previous years, there are barely any major discretionary measures to speak of, reinforcing the impression that this budget bill is a placeholder. The biggest discretionary measure is the planned hike in public sector wages, which should reach 7.5% on average. We remind that at the time the budget bill was approved, there was no agreement between the government and unions, so the government went with its latest proposal. It offers a 9% wage hike for the lowest-paid positions, and 5% to everyone else. As a result, the increase is planned to cost CZK 20.8bn. There is some offloading of expenses to regional governments, which will cover the salaries of non-teaching staff at schools as of 2026. Yet, this is reflected through higher non-investment transfers to local governments, which the number above accounts for.

The other measure is conditional on approval from the European Commission, as it is related to the expansion of the Dukovany nuclear power plant. The government intends to spend CZK 18.3bn on that expansion in 2026, but if the EC doesn't approve the state aid scheme, that spending will not be made, and deficit targets will be reduced accordingly.

Finally, there is the final year of excise tax hikes on alcohol (10%) and tobacco (5%). Unlike previous years, the finance ministry did not outline the specific impact from the hike, though it noted that it expects consumption to decline further. All this makes us believe that the fiscal impact is negligible this time. There was no projection about the fiscal impact beyond 2025 when these hikes were introduced as part of the fiscal consolidation, and the finance ministry previously mentioned that any impact would be residual.

Table 3. Discretionary measures (major effects only)
ItemCZK bnReason
Public sector wages-20.8A 7.5% average increase
Dukovany power plant expansion-18.3Conditional on EC approval
Excise taxn/aBased on earlier changes, impact likely negligible
Note: Only changes not related to economic cycle included
Source: Ministry of Finance

Defence and energy are the only sectors to see a spending hike

Changes to the state government budget plan are planned to be relatively small, even with the last-minute addition of CZK 28.4bn on both the revenue and expenditure side, which has been arbitrary. As a result, revenues are expected to rise by 1.8%, while spending should be higher by 3.5%. The relatively subdued revenue increase is due to lower inflows from EU funds and property income. We will cover EU funds in more details in the next section, but the main reason for lower inflows is less RRF funding. Meanwhile, tax revenue is expected to rise by 3.8%, driven almost entirely by social contributions, up 8.3%.

Meanwhile, the main spending items that will see growth in 2026 are capital investment, maintenance, social expenses, and the wage bill. We remind that as far as the wage bill is concerned, a part of it is reflected in transfers, which is why numbers don't match the fiscal impact of the 7.5% wage hike. Defence and energy are the sectors that will see the greatest increase in funding, as defence spending is expected to expand from 2% of GDP in 2025 to 2.35% of GDP in 2026. Most of the money will go for modernisation of military equipment, as there are some big projects in play, like the purchase of new tanks and armoured vehicles, among others. As far as energy is concerned, a big part of those expenses are conditional, as noted in the section on discretionary measures.

Table 4. State government budget, CZK bn
202520262026/2025% y/y
REVENUES2,086.12,122.736.61.8
Tax revenues1,840.11,909.269.13.8
Personal income tax184.7194.19.45.1
Corporate income tax244.3221.5-22.8-9.3
VAT414.0415.41.40.3
Excise tax161.1171.310.26.3
Social security contributions809.4876.767.38.3
Other taxes26.630.13.613.5
Non-tax and capital revenues, transfers246.0213.5-32.5-13.2
o/w: EU and financial programmes153.6138.9-14.7-9.5
EXPENDITURE2,327.12,408.781.63.5
Current expenses2,076.92,136.359.42.9
Personnel178.9195.116.29.0
Maintenance200.4221.521.110.5
o/w: debt service costs98.9108.79.79.9
Social expenditure930.5950.920.52.2
Transfers729.2739.29.91.4
Other current expenses37.929.6-8.3-21.8
Capital expenses250.2272.422.28.9
o/w: Mandatory expenses1,796.91,892.795.85.3
BALANCE-241.0-286.0-45.018.7
w/o EU and financial programmes-241.0-286.0-45.018.7
FINANCING241.0286.045.018.7
Domestic224.6251.526.912.0
short-term-7.4-3.63.8-51.3
long-term232.0255.123.19.9
Foreign16.434.518.1110.7
short-term0.0-11.9-11.9n/m
long-term16.446.530.1183.5
Source: Ministry of Finance

EU funds

Gross EU flows are expected to be visibly lower in 2026, down by 9.8%. Currency fluctuations will have a modest impact, though the fx-adjusted decline will be still considerable, at 8.3%. The main reason is lower RRF funding, which will decrease by 60.4%. This is mostly due to the progress of projects in the National Recovery and Resilience Plan, as RRF funding is entirely project-based. It will be partially mitigated by cohesion funding, which is expected to be higher by 22.2%, as more projects will proceed to a financing phase. This is not unusual, as member states always report a slow start to EU funds' absorption, and accelerate the pace as the MFF progresses.

There will be no major flows from other financial programmes, as this section is traditionally dominated by EU funding.

Table 5. EU and other financial programmes, CZK bn
20252026
Co-financingEUTotalCo-financingEUTotal
MFF 2014-2020, o/w:1.52.33.90.00.00.0
Cohesion policy0.00.00.00.00.00.0
CAP1.52.33.80.00.00.0
Connecting Europe Facility0.00.00.00.00.00.0
MFF 2021-2027, o/w:18.9150.9169.817.2138.2155.4
Cohesion policy8.274.182.310.390.6100.9
CAP9.227.036.23.827.531.3
Recovery and Resilience Facility1.442.043.42.616.719.2
Connecting Europe Facility0.07.17.10.02.52.5
EU20.5153.2173.717.2138.2155.4
Financial programmes0.10.40.40.10.70.9
Total20.6153.6174.117.3138.9156.2
Source: Ministry of Finance

Conclusion

We consider this budget bill as largely inconsequential, an admittance on behalf of the ruling parties that they will likely go into opposition. In contrast, ANO prepared a budget that reflected its policy back in 2021, even though polls predicted it may lose that election. Yet, fatalism is the general feeling we get when looking at this bill, which is a sad end to this government, which came to power with some considerable ambitions. While a lot was achieved during this government's term regarding public finances, we may witness a great deal of that work going to naught, given the generous fiscal promises of ANO and its potential allies.

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Opposition leader Babis would like a single-party ANO government
Czech Republic | Oct 02, 06:26
  • Babis claims SPD doesn't want to be a part of the next government, which is not quite the case
  • He hopes to get enough votes to be able to rule alone
  • Babis reiterates direct support to Ukraine will decrease, but to the benefit of Czech healthcare and education
  • He confirmed that ANO intends to rewrite the 2026 budget bill, but did not provide hints how the new budget would look

Andrej Babis, president of the leading opposition party ANO, would like to see a single-party ANO government in the next parliament, he told Mlada Fronta Dnes, a newspaper. He deflected questions about a potential alliance with the SPD, a nationalist party, saying only that ANO would like to receive a majority big enough to be able to rule alone. Babis did mention that the SPD did not really want to be part of the next government, which is not quite the case. The SPD has been constantly mentioning how they deserve a seat on the table, which would allow them to implement their policies. The party that is not that eager to enter the next government is rather the Motorists, who have stated they are ready to provide support in parliament only. In any case, Babis' goal is clearly to aim for a bigger vote share so that he has more leeway in forming a government. He tried to do the same after the 2017 general election, though unsuccessfully, so this is not a precedent.

Babis furthered that the Czech electoral system should be a majority one, like in the United States. He expressed regret how difficult it was to pass legislation in the Czech Republic, unlike the United States, where President Donald Trump has already passed close to 30 bills. We don't need to say this is quite the misleading statement, given that the Republican Party currently controls the entire Congress, which is the main reason Trump's legislative agenda is advancing, though there are still obstacles. The main thing is, Babis would love to be in a first-past-the-post system, where ANO, while not having an absolute majority, could be still in power.

Policy-wide, Babis remained evasive. Specific steps were discussed only in regard to foreign policy, where Babis intends to dial down support to Ukraine, and transfer current initiatives to NATO. He criticised the current government for using money to aid Ukrainian refugees that could be given to healthcare and education. This sounds vaguely familiar - ah, yes, some people once promised that the NHS would get a lot of money if there is no need to pay to the EU budget. Oh, well. Anyway, Babis softened previous views that Ukrainian refugees might see restrictions under an ANO government, as it appears to be going too far. Still, Babis was clear that after the war was over, only Ukrainians with jobs should stay in the Czech Republic.

Babis did confirm ANO's intent to rewrite the 2026 budget bill passed by the current government. Yet, he did not provide any hints what an ANO budget would look like, which falls into a pattern. He did suggest that funding for motorway construction will be severely reduced, to the benefit of healthcare and education, but nothing more than that.

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PM Fiala comes out as clear winner from debate with Babis
Czech Republic | Oct 02, 06:13
  • Fiala scored some points on foreign policy, where Babis sounded very unconvincing
  • Yet, Babis did not make any blunders, which may be just enough for an election victory
  • Fiala's good performance comes a little too late, given how dull Spolu's campaign has been so far

PM Petr Fiala (ODS, Spolu) came out as the clear winner after his debate with ANO leader Andrej Babis on Wednesday evening (Oct 1), hosted by CNN Prima News, a TV channel. Even media outlets who have always favoured Babis and ANO admitted that it was Fiala who came on top, though they commented negatively about Fiala's aggressive style. Indeed. Fiala was on the offensive the entire time, and he didn't leave any breathing space to Babis. As a result, Babis appeared tired, though he did not make any blunders. Still, Fiala created the impression that he is the more active one, though everyone appears to agree that this may have come a bit too late, given how dull Spolu's campaign has been thus far.

Fiala's biggest advantage was on foreign policy, where Babis stumbled a bit. Babis claimed that defence capabilities would have been acquired much cheaper under an ANO government, though it didn't sound convincing. Furthermore, he tried to mock some European armed forces, which hit the wrong tone, especially given the rising belligerence of Russia. Babis also claimed he had everyone's phone number, to which Fiala calmly replied that a phone number was not enough, as the other side needed to take you seriously. Fiala also had some advantage on domestic policy, pointing out that his government had worked towards stabilising public finances, like implementing a pension reform. Meanwhile, Babis only argued that pensioners did not like it, which is true, but he didn't really offer an alternative.

This went back and forth in a similar way, and we agree that Fiala was indeed the debate winner. Yet, we also agree that it may have been a little too late, and it is unlikely to be decisive in convincing voters to back the ruling parties. It may help bringing back some undecided voters who previously voted for Spolu, but at the end of the day, it will be likely not enough, as ANO's lead remains too big.

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PRESS
Press Mood of the Day
Czech Republic | Oct 02, 05:52

Fiala outmanoeuvred Babis. Also thanks to this that he did not answer questions and co-hosted the duel (Lidove Noviny)

Fiala insults half the nation, Babis says (Mlada Fronta Dnes)

Partitioning election millions. To whom will alliances not pay out? (Hospodarske Noviny)

An election victory of Babis will be the end of support to Ukraine, German media write (Lidove Noviny)

ANO, Stacilo! and SPD to become harder on NGOs (Pravo)

We will lower taxes on business and kickstart the economy, says former ANO minister Adam Vojtech (E15)

Together. EU meets in Copenhagen (Pravo)

Fog around incentives (Hospodarske Noviny)

Czechs' real estate frenzy is spilling over to investments. Developers are sensing an opportunity and setting up funds en masse (E15)

Israel intervenes against Gaza flotilla, participants complain about use of water canons (Mlada Fronta Dnes)

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Q&A
Stacilo! polling numbers
Czech Republic | Oct 01, 18:26

Question:

Thank you for the report. I had a question regarding your comment on Stacilo!'s performance. You mentioned that the party "has been steadily on a decline", but looking at the polls, the only one showing a recent decline is STEM. They were trending lower on NMS, but the latest reading shows a rebound, and in all the other polls (Median, Ipsos, Kantar), their numbers seem to be improving. Are you seeing any data suggesting a broader deterioration in support? Or is there a particular reason to place more weight on the STEM series? Thanks!

The question was asked in relation to the following story: ANO likely to lead the next government, but path to power may be thorny

Answer:

As far as the Kantar poll is concerned, its field work was Sep 1-19, so it covers mostly the first half of the month when its numbers match the rest. This mostly applies to Median, whose fieldwork is Sep 1-25, so the odds are the sample is shifted towards a period earlier than later in September. Besides, Median also shows a decline when compared to August (by 2pps), and the TV debates we refer to took place only in the past week or so.

This leaves NMS, about which we have some reservations. That pollster already admitted sample issues during the summer, and it tends to report big swings for some parties, up and down, without any plausible explanation. For example, it has Stacilo! at 8.2% in early August, then at 5.5% in early September, and then back at 7.3% in late September. The same goes for most other parties, as they have reported swings of 1-2pps in the past 3 weeks, which suggests their sampling methods are not the most reliable. It is why we are putting more weight on STEM, as their numbers have been very consistent, and they have had the entire year to refine their sample.

Maybe we are doubting NMS numbers too much, but at least in our experience, any pollster whose numbers swing too much is not reliable.

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Q&A
Election results and government formation
Czech Republic | Oct 01, 15:27

Question:

Thank you for this. Are you able to give some information on timings of When we will know results on Saturday and are there Friday exit polls? Are seat counts calculated immediately and are recounts prevalent? Also, how long may it be before we have a clear idea on next government? Thanks in advance!

The question was asked in relation to the following story: ANO likely to lead the next government, but path to power may be thorny

Answer:

Results will start showing up on Saturday afternoon, though ballot counting has been traditionally fast, so preliminary results will likely be available some time on Saturday evening, including seat distribution. To compare with the previous election, a sample of 98.67% of polling stations was available, though seat distribution was preliminary. Final results were then published some time on Sunday (we don't recall the exact time, though). Recounts rarely happen, so this has never been an issue. There are no exit polls available on Friday. These can be published only after the election day is over on Saturday, so after 14:00 CET.

As far as the next government is concerned, it is a question that is not that easy to answer. It will depend largely on election results, as well as on political will to reach an agreement quickly. If ANO does better than currently expected, then the odds are a government will be formed faster. If not, talks may last for a couple of months. If there is no clear way to establish a majority this time around, talks will likely stall. As we have pointed out, there is no formal deadline to appoint a new prime minister, and there have been elections where it has been months before a permanent government is installed. The most recent example is the 2017 election, which took place on Oct 20-21, while a coalition agreement signed on Jun 15, 2018.

On the other hand, it could take much shorter than that, as it happened at the previous general election in 2021. The current ruling coalition took about a month to negotiate, as it was clear they could establish an absolute majority with the seats they had. Talks started immediately after final results were available on Oct 10, 2011 (the election took place on Oct 8-9), and the coalition agreement was signed on Nov 8.

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KEY STAT
State government budget reports a deficit of CZK 153.9bn in January-September
Czech Republic | Oct 01, 13:38
  • The budget saw a CZK 11.5bn surplus in September, reversing from a CZK 6bn deficit a year ago
  • Corporate taxes were the main boost to revenue growth, with both corporate income tax and windfall tax outperforming
  • EU flows are still at 56% of the annual plan, but an RRF payment of EUR 1.6bn is coming soon
  • Spending growth remains contained, the biggest increase comes from capital spending
  • The government has stepped up on motorway construction and flood repairs in H2 2025
  • FinMin Stanjura expects that the CZK 241bn will be met, and we support his assessment
  • It makes it more likely that expanded debt issuance in October is to hedge against political risk

The state government budget reported a deficit of CZK 153.9bn (1.8% of GDP) in January-September, lower by 15.3% y/y, according to figures from the finance ministry. In September alone, the budget reported a second consecutive surplus, at CZK 11.5bn, reversing from a CZK 6bn deficit a year earlier. FinMin Zbynek Stanjura attributed the better performance to a strong intake of corporate taxes, considering that both corporate income tax and windfall tax have performed above expectations. He furthered that spending is expected to increase at a somewhat faster pace, reflecting planned public investment in the second half of the year. However, Stanjura is confident that this year's deficit target, at CZK 241bn, will be met.

There is reason to believe Stanjura's claim, as tax collection has been indeed steady, rising by 9.1% y/y in January-September, being the main driver of revenue growth, which reached 7.8% y/y. Tax collection was at 75% of the annual projection, though this is not fully indicative, as tax revenues are not spread equally throughout the year. Yet, the only tax that has been lagging a bit is VAT, with revenue rising by 8.2% y/y, though fully compensated by a major intake increase from corporate income tax (up 16.5% y/y) and windfall tax (up 20.9% y/y). At this point, corporate income tax revenue is at 83.2% of the annual projection, while windfall tax revenue is at 97.9%, so both will certainly outperform this year. We remind that this is the last year when windfall tax is collected, and it is due at the end of each quarter, so the last instalment will be seen in December. Everywhere else, tax collection was solid, with social contribution flows rising by 7.2% y/y, while personal income tax flows - by 12.2% y/y.

Non-tax revenues were still lower by 1.3% y/y, but this is mostly due to these flows being even more uneven than tax collection. This applies particularly to EU flows, which were lower by 1.2% y/y, and at 56.1% of the annual plan. However, this will soon change, as the European Commission approved the next RRF payment of EUR 1.57bn last week, which is worth roughly CZK 38bn. Thus, if only the RRF payment is added, EU flows will reach about 78% of the annual plan, not accounting for any other EU flows. We also remind that there is a base effect in play, as the final payments from the 2014-2020 MFF were made in 2024, and from now on, only payments from the 2021-2027 MFF are planned. There is also a base effect related to property income, as CEZ paid a lower dividend this time, after energy prices started normalising in 2024, and the company's profits narrowed, respectively.

On the expenditure side, spending rose by 5.2% y/y in January-September, driven by a boost in capital spending (up 29.1% y/y) and transfers (up 4.4% y/y). Capital spending was higher due to an advancement in public infrastructure projects, which accounted for almost the entire year-on-year increase. These include new motorways, as well as repairs from last year's heavy floods. Transfers increased mostly due to higher education subsidies, which were delivered early in the year and boosted the spending side disproportionately back then. The other big spending items were social expenses (up 2% y/y), interest (up 12.1% y/y), and personnel (up 5.6% y/y). We remind that not the entire public sector wage bill is included in the personnel item, as most healthcare and education institutions are managed at local government level, so any wage expenses there are included in transfers.

Overall, we tend to agree with FinMin Stanjura that budget performance has been favourable, and that the CZK 241bn deficit target will likely be achieved. We don't expect plenty of a safety cushion, however, though there shouldn't be much strain on the spending side, either. This makes it more likely that the finance ministry expanded debt issuance in October mostly due to political risk, as the odds are that the likelihood of an ANO-SPD government may inflate borrowing costs.

State government budget, January-September, CZK bn
20242025Change, % y/yChangePlan 2025% of plan
REVENUE1,444.71,557.87.8113.12,107.773.9
Tax revenue1,271.21,386.49.1115.21,840.175.3
VAT273.7296.08.222.4414.071.5
Excise tax119.8124.64.04.8161.177.4
Corporate income tax150.5175.416.524.9210.783.2
Personal income tax122.8137.912.215.0184.774.6
Windfall tax27.232.920.95.733.697.9
Social and healthcare contributions558.3598.37.239.9809.473.9
Retirement contributions493.8525.36.431.5710.573.9
Other taxes18.821.413.62.626.680.6
Non-tax and capital income, o/w:173.5171.3-1.3-2.2267.664.0
EU transfers99.598.3-1.2-1.2175.256.1
Property income34.923.8-31.8-11.122.7104.9
EXPENDITURE1,626.41,711.65.285.22,348.772.9
Current expenditure1,511.11,562.73.451.62,079.175.2
Personnel110.0116.25.66.2180.664.3
Maintenance119.0129.08.410.0204.163.2
Interest60.567.812.17.399.867.9
Transfers531.1554.34.423.2673.882.3
Social expenses677.3690.82.013.4913.775.6
o/w: pensions532.4536.30.73.9715.774.9
Contribution to EU budget39.842.56.92.760.770.0
Other current expenses33.929.9-11.8-4.046.165.0
Capital expenditure115.3148.929.133.6269.655.2
BALANCE-181.7-153.9-15.327.9-241.063.8
EU flows6.51.1-83.6-5.40.0n/m
Non-EU balance-188.2-154.9-17.733.3-241.064.3
Source: Ministry of Finance
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ELECTION WATCH
ANO likely to lead the next government, but path to power may be thorny
Czech Republic | Oct 01, 12:49
  • ANO has been losing some support, but ending up first is beyond a doubt
  • Yet, it will likely need an alliance with the SPD to be close to an absolute majority
  • Voters have mostly settled, as the combined support for ANO-SPD and Spolu-STAN has been stable in September
  • Liberal voters have been flocking towards the Pirates-Greens, but not in numbers that will matter
  • Stacilo! and the Motorists are not completely certain to make it past the 5% threshold, but we expect at least one of them will
  • Political division has grown, so odds of a grand coalition are very slim
  • The current ruling parties lack potential allies outside the Pirates-Greens, so they will likely go into opposition
  • An ANO-SPD government will likely be much less fiscally responsible, and more interventionist
  • ANO's key promises are to roll back pension reform and subsidise energy prices, none of which it can afford to abandon
  • Support for Ukraine will wind down considerably, as well as support for Ukrainian refugees
  • We expect a rating outlook downgrade at the very least after the new government reveals the 2026 budget, which it intends to rewrite

ANO is set to return to power after 4 years in opposition, as its lead is unlikely to melt in the days remaining to the general election on Oct 3-4. While the party will almost certainly end up first, its path to power may be much thornier than ANO's leadership initially hoped for. This election will likely produce the most fragmented Czech parliament in decades, and ANO will need to make some hard choices. An alliance with the SPD-led nationalist alliance appears to be the main path to a new government, as the SPD will demand a place on the table, a first for a party on the political fringe in the Czech Republic. Yet, ANO's desire to return to power has been considerable, so this will likely not be a major obstacle.

This election has also provoked a considerable division along ideological lines, very similar to what we have been seeing in the United States, so going across the aisle will be much more difficult than before. While the Czech Republic has seen a fair share of coalitions, there is no grand coalition culture as in Germany, so the odds that any of the current ruling parties may back ANO and its potential allies are slim. Furthermore, there has been a lot more populism than before, with generous election promises to back it, which may lead to a major shift in fiscal policy not seen soon. The Czech Republic has been on a fiscal consolidation path under the current government, but that will likely end soon, as neither ANO nor likely allies care for it any more.

Recent polling puts ANO's victory beyond any doubt, but it may end up with fewer seats than it currently has

Polling in the month immediately before the election tends to be the most reliable. It is even more the case here, as July and August are traditionally summer holiday periods, and survey respondents tend to be less reliable in those times. Yet, numbers have not been as consistent as we hoped for, and we have some doubts about some of the most recent polls. There is no more polling data coming out, as the blackout on publication of opinion polls starts on Oct 1. Exit polling will be available after the end of the election day on Oct 4 (Saturday), at 14:00 CET. Vote counting is usually very fast, so we expect results with a sample close to 100% some time on Sunday.

September polling has not been that good to ANO, which has been losing momentum, likely due to the recent activation of liberal voters. As a result, ANO has been polling at around or just under 30%, while it has been consistently in the 31-33% range in the months before. There is an important note to make here, however. Most of the variation in ANO's polling comes in direct correlation to the results for the SPD-led nationalist coalition. Thus, any ANO losses typically correspond to SPD gains, and vice versa. The combined vote for the two parties remains at about 42-43%, and it has not varied much (except a single survey, which is clearly an outlier).

We have also seen something similar with the voters of the current government parties, namely Spolu and STAN, where the combined vote has been stable at 31-32%. The recent activation of liberal voters has been mostly to the benefit of the Pirates-Greens alliance, which is now polling around 10%, up from 7-8% in June-August. There are plenty of voters disappointed with the government that have switched to the Pirates, who left this government last September due to internal disagreements. While some tension between the Pirates and the rest lingers, all parties listed have declared willingness to work together again. The big unknown here is whether Spolu will be able to convince hesitating voters to back them again. The odds of that are not high, but it is not entirely impossible. Our expectations are not high, however, as Spolu's campaign has not been inspired enough to inspire voters.

The big unknown is related to the leftist Stacilo! alliance and the Motorists, a populist party on the right, very similar to the US MAGA movement. Stacilo! has been steadily on a decline, and its debate performance has been largely the reason, as Stacilo! candidates behaved much more as Czechoslovak party officials than modern Czech politicians. Yet, some recent polling gives them a guaranteed entry in the next parliament, which we find a bit odd. The same goes for the Motorists, who are guaranteed entry by some pollsters, and are close to the 5% threshold according to others. This is where numbers have been the most inconsistent, so we are largely making a judgment call. We believe that the Motorists have slightly greater odds to make it past the threshold, while Stacilo!'s decline will likely continue. A breakdown by constituencies shows that Stacilo! is not really capitalising on the alliance, and the performance of the two main parties in it, the KSCM and SOCDEM, was better in 2021 than it is now combined. Still, this is the main source of uncertainty in this election, so we don't rule out any combinations, as far as these two are concerned.

Opinion polling, arithmetic mean
MonthPollsANOSpoluSPD+STANPirates+Stacilo!MotoristsPrisahaSOCDEMGreens
Polling, %
January934.218.57.611.16.15.35.42.62.82.0
February735.118.27.511.56.15.35.43.02.71.9
March833.019.28.511.76.45.66.12.22.71.7
April932.220.211.410.86.25.55.52.53.12.0
May732.521.112.510.56.35.83.92.12.52.0
June931.820.713.210.87.15.24.42.32.61.8
July831.820.712.911.48.06.74.02.22.8
August931.719.812.710.88.57.45.12.5
September1030.419.912.211.69.86.86.02.4
Projected seats in the Chamber of Deputies
January787451825121216
February584421726131113
March779431826121113
April775472623111111
May6785028241212
June775493023149
July6734628241613
August67044272218159
September868432524201110
Note: Calculations by EmergingMarketWatch
Source: Ipsos, Kantar, Median, NMS, STEM

ANO's most reliable path to a new government is through an SPD alliance

Regarding post-election scenarios, the next parliament promises to be the most fragmented one in modern Czech history, with up to 7 formations and up to 15 separate parties. We remind that there is one formal coalition, Spolu, which consists of the ODS, TOP 09, and the KDU-CSL, and three informal ones, the SPD-led one, the Pirates-Greens, and Stacilo! Setting a precedent in a Czech election, three of these alliances used a single party registration to take part in the election, thus circumventing the higher electoral thresholds for coalitions. Thus, the SPD-led alliance also includes Tricolours, PRO 2022, and Svobodni; the Pirates include Greens candidates on their ticket; and Stacilo! is an alliance of four parties, namely the KSCM, SOCDEM, the CSNS, and the SD-SN. Informal coalitions were challenged in court, but the Constitutional Court ruled that the letter of the law was observed, so these formations were allowed to take part in the election.

ANO's victory is beyond much doubt, but it cannot get close to a majority without the SPD

In any case, this has led to a situation where ANO, while almost certainly likely to win the election, may end up with slightly fewer seats than it currently has. The fewer formations make it past the 5% threshold, the easier it will be for ANO, but given recent polling, we expect that there will be at least 6 formations. Thus, ANO will likely have somewhere around 65-70 out of 200 seats, putting it very far from a single-party minority government, even though it is apparently what voters want. Meanwhile, an alliance with the SPD will bring them to about 95 seats, making it much easier to obtain the 101 votes that grant an absolute majority.

A grand coalition is not impossible, but it will require leadership change at Spolu

The big question is whether a grand coalition is possible in this environment. Our take is that the odds of that are very low. The campaign has been quite divisive, and division lines have become stronger than anything seen for some time. It has also impacted voters, as a grand coalition between ANO and Spolu, or the ODS in particular, is far less popular than even an ANO-SPD government. Voters are unwilling to forget the massive increase in costs of living seen under the current government, reflecting the tailgate of the Covid-19 pandemic and the energy crisis from 2022-2023. Meanwhile, ANO's ambivalent stance on Russia and the war in Ukraine is drawing thick red lines on any post-election co-operation.

We don't completely discard this scenario, but it will require a leadership change at Spolu parties. ANO and Spolu parties have been co-operating at local government level, and there are factions that would not mind a nationwide alliance. However, none of these factions are currently in power, and none are close to taking over. Thus, while it may be theoretically possible to assemble an ANO-ODS or ANO-Spolu government, we consider the chances for that as low. If there are post-election developments that remove the current red lines on ANO-Spolu co-operation, our assessment will change. However, it is not our baseline scenario, and it doesn't appear to become one any time soon.

The odds of the current government to remain in power remain very slim

Regarding the current ruling coalition, its chances to remain in power are very slim. The main reason is that the only potential partner not currently in the government is the Pirates-Greens alliance. Yet, the maths doesn't quite pan out, and it will require some remarkable last-minute push to get enough voters to repeat the current government. The SPD, Stacilo! and the Motorists are all considered to be on the political fringe, and they have much more to lose from backing the current ruling parties than remain in opposition. Meanwhile, ANO's verge into populism has made it much more accommodating, as it doesn't have that much ideological purity to defend.

We consider an ANO-SPD minority government backed by the Motorists as our base scenario

We consider a minority government of ANO and the SPD, backed by the Motorists, as our base scenario. The Motorists have said they don't necessarily need to be part of the next government, but would support an ANO-led government due to common policy goals. The option that includes Stacilo! rather than the Motorists is less likely, mostly because of the communists (i.e. the KSCM), who appear to have achieved the feat of becoming a less desired partner than even the SPD. We don't rule out Stacilo! breaking apart, and some of its constituent parties backing an ANO government, but there is no precise way to project how many seats each party will have, so we are not entertaining that option.

You will notice that we are not using percentage odds in post-election scenarios, and the reason for that is we find them too arbitrary. Instead, we prefer to provide a general assessment of how likely each scenario is, which provides a better idea of how things are likely to go. Furthermore, since we are not absolutely certain whether Stacilo!, the Motorists or both will make it to the next parliament, it also helps not to use numerical probabilities.

Post-election coalition scenarios, seats in lower house
ScenarioJanuaryFebruaryMarchAprilMayJuneJulyAugustSeptemberOdds
Spolu+STAN706869707471706567Very low
Spolu+STAN+Pirates+Greens828081818685868386Low
ANO878479757875737068Very low
ANO+SPD105101961011071051019794High
ANO+SPD+Stacilo!117112108112119114114112105Moderate
ANO+SPD+Motorists121114109112107117101105104Very high
ANO+SPD+Stacilo!+Motorists133125120122119126114120115Very low
ANO+Stacilo!999590869084868580Low
ANO+Stacilo!+Motorists115108103969096869390Very low
ANO+ODS10910510098103100959290Low to moderate
ANO+ODS+Motorists12511811310910311295100100Low to moderate
ANO+STAN1121101059810298979192Very low
ANO+STAN+Motorists12712311810910211097100103Very low
ANO+Spolu132126122122129124118114111Low
Repeat electionLow
Note: 101 seats needed for an absolute majority
Source: Pollsters, calculations by EmergingMarketWatch

Government formation likely to take a long time

Regarding the procedure of government formation, it will likely take a long time, given the likely fragmentation of the next parliament. There are very few deadlines, which could stretch the process for some time. A parliament gets three attempts to form a government, after which it can be disbanded and a repeat election called. During the first two attempts, the president is the one to name a prime minister candidate, and there is full discretion in that choice. In fact, a prime minister candidate doesn't even need to be an MP, as was the case with Jiri Rusnok, who took over as a sort of caretaker PM in late 2012 until the 2013 election. If a third (and final) attempt is required, then the lower house speaker names the PM candidate.

President Petr Pavel has been setting some conditions already, like not naming people who want the Czech Republic to leave the EU and NATO to the next government. Yet, we doubt Pavel will disregard election results, so the odds are ANO leader Andrej Babis, or his right hand, Karel Havlicek, to be the next PM. However, we expect Pavel to take his time, mostly because of how government formation works. Namely, once a prime minister is appointed by the president, they take over the executive immediately, even before they have sought a vote of confidence. Seeking a vote of confidence in the lower house is the only step that has a deadline, and it has to take place within 30 days of the new government's appointment. The important detail is that even if that government doesn't receive a vote of confidence, it remains in power until a new one is appointed.

Thus, we expect that Pavel will be very careful when appointing a new government, as it may remain in power for quite a long time. Milos Zeman created a precedent in 2018, when he first appointed Andrej Babis as PM, but Babis failed to obtain confidence. Then, Zeman waited for 6 months before he appointed Babis a second time, after which Babis managed to get enough votes and continued as a permanent PM. We don't expect the process to stretch that long this time, but we expect that Pavel will require that the next PM should have already secured the votes for a vote of confidence, and this may take some time.

In theory, Pavel could also appoint Petr Fiala as PM again, and then delay the next PM appointment. However, this will be considered a major abuse of power, and will kill any re-election chances Pavel may have. When Zeman delayed the second appointment of Babis in 2018, he was already in his second term, so he didn't really care for re-election. Otherwise, we doubt Zeman would have dared being so crass with the procedure. Thus, it will depend entirely on Babis how long it will take before he can become PM again, which will require talks with potential partners, most of all the SPD.

An ANO-SPD government is likely to cause massive fiscal expansion and debt-funded spending

In conclusion, we will ponder a bit on how government policy will be shaped under an ANO-SPD rule. Unfortunately, party manifestos have been quite vague this time, and there were few detailed promises. Still, there is a general idea of what policies ANO and the SPD will pursue. To start, fiscal policy will likely loosen visibly, though possibly not as much as seen in Poland. Both ANO leader Babis and his right hand Havlicek have said that the new government must invest much more in the economy, as insufficient growth was one of the main current risks. It means a much greater presence of the state, likely funded by more debt.

There are also some major promises with fiscal implications that ANO has made, which will lead to fiscal deterioration. We will summarise the more consequential ones below:

  • Rollback of this government's pension reform. The currently projected savings are 1.5% of GDP annually, so these will never take place. Technically, there will be no immediate fiscal impact, as the retirement age is currently at 65 years, and it will not change when pension reform is rolled back. However, there will be likely some impact from a likely faster pension indexation, which ANO has also promised, but has not provided details how it will achieve it;
  • A 2pp cut in corporate income tax, back to 19%. The higher tax rate has been in force since 2025, and it is projected to bring about CZK 30bn;
  • Subsidised energy prices, at least for households. ANO projects the fiscal cost at CZK 50bn annually, and it plans to pay for it through diverting investment in energy infrastructure. However, a great deal of that requires EU approval, as it affects projects with EU funding;
  • Recovery of social benefits taken away by the current government, an increase in parental allowances. The latter may have more than a fiscal impact, as it will likely push away women from the labour force once more.

ANO is unlikely to renege on rolling back pension reform and subsidised energy prices

Pension reform and subsidised energy prices have been the cornerstone of ANO's manifesto, and we don't believe they are promises ANO will renege on. Rolling back pension reform is particularly important, as a great deal of ANO's voters are now retired people, so it will hit the party disproportionately if it doesn't make good on that promise. Energy prices are instrumental as well, as they are one of the strongest reasons why so many voters have been disappointed with the current government. Promising lower energy prices and not delivering is a certain way to end a government's term short, and ANO realises that well. The ways to pay for these promises have been vague, and rely mostly on stronger economic growth and better tax collection, things notoriously difficult to achieve.

New government likely to be more Eurosceptic, and less friendly to Ukraine

As far as foreign policy is concerned, an ANO-SPD government will be much more Eurosceptic, and much less friendly towards Ukraine. As far as the EU is concerned, the SPD wants the Czech Republic to leave, but we doubt ANO will help with that goal in any way. The greatest extent ANO has agreed to co-operate is to pass a referendum law. However, Babis has clearly stated he sees the Czech Republic's future in the EU, even though through a different approach. Where Czech disruption will be seen more visibly is towards environmental policies, and policies that aim at greater integration. For example, an ANO-SPD government will certainly oppose any attempts to reduce member state veto powers. It will also oppose policies like the Migration Pact, the Green Deal, and the introduction of the ETS2.

Regarding Ukraine, you should expect a much less friendly attitude. The munitions initiative will end, and Babis has said he would rather have NATO co-ordinate it. Arms deliveries to Ukraine will likely cease, as the SPD is particularly hostile to those. Finally, Ukrainian refugees will likely see their access to the Czech labour market denied, and state support curtailed. This comes at a time when Ukrainian refugees have already been net contributors to the Czech budget, and they even recouped all initial state support they have received in Q2 2025, according to a labour ministry report. It doesn't matter much to the SPD, however, whose leader Tomio Okamura even blamed Ukrainian refugees for rising property prices and difficult access to housing.

We expect at least a rating outlook downgrade after the new 2026 budget is announced early next year

As a result, fiscal deficits will likely balloon, even if ANO has formally committed to respect SGP requirements, so fiscal deficits within 3% of GDP. We expect that the escape clause will be abused with, to hide additional spending as related to defence. Yet, even this may not be enough, so we expect a downgrade of the credit rating outlook at the very least, after the new 2026 budget is revealed. Speaking of budgets, ANO intends to rewrite the 2026 budget bill from scratch, and expects to have the new budget in late February 2026. If fiscal policy proves irresponsible, then we don't rule out a scenario where the Czech Republic loses its AA- credit rating. This will require some time, as general government debt remains relatively low for the AA rating group, likely to be around 44% of GDP at end-2025.

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Hungary
NBH posts HUF 248bn loss in H1
Hungary | Oct 02, 11:18
  • Loss narrows y/y due to slimmer net interest loss
  • Equity shortfall widens further to HUF 1,833.4bn at end-H1

The National Bank of Hungary (NBH) posted a HUF 248bn loss in H1, according to its half-year report, the news portal Portfolio reported. The negative result represented some improvement compared to the HUF 386.2bn loss in the corresponding period of the previous year, but this was the eighth consecutive quarter in the red for the NBH. The y/y decline in the NBH loss was on account of net interest income, which generated a HUF 257.4bn loss, narrowing by 40.9% y/y. The rate cut cycle up till Q4/2024 probably supported the shrinking loss, we believe. The positive impact from the shrinking net interest loss was partly offset by weaker y/y gains from revaluation of the forex reserves, which reached HUF 43.2bn in H1, somewhat suppressed by the strength of the forint since the start of the year. The average exchange rate of the forex reserves was EUR/HUF 377, according to the NBH report, so it will realise an exchange rate gain as long as the forint is weaker than this level. The loss widened the negative equity of the NBH further to HUF 1,833.4bn as if end-H1. According to the previous legislation, the government had to re-capitalise the NBH, but it was amended in 2023 in effect postponing the recapitalisation requirement on the budget. The law amendment did not impose a specific time period, in which the NBH should be recapitalised, so we expect that the government would avoid such costs given the narrow budgetary headroom.

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State-owned energy group MVM secures long-term LNG contract with Engie
Hungary | Oct 02, 10:32
  • Hungary to receive total of 4bcm from Engie during 2028-2038

State-owned energy group MVM signed a long-term LNG purchase contract with French Engie, foreign minister Peter Szijjarto announced. The contract involved the supply of 4bcm of LNG during the 2028-2038 period, or 400mcm annually, he said. This was the longest LNG purchase contract in Hungary's history, he pointed out. Hungary recently also secured 2bcm of gas supplies from Shell for a ten-year period as of 2026, we note. The new gas supply contracts aimed to foster energy diversification without aiming to replace existing sources of supply, Szijjarto had said when announcing the Shell contract.

Hungary's annual gas consumption amounts to around 9-10bcm of gas per year, while domestic gas extraction is around 1.9bcm, so the new gas supply contracts account for only a small fraction of local demand, we think. They would not be sufficient to replace the long-term gas supply contract with Russia, which entitles Hungary to 4.5bcm of gas deliveries per year. Hungary's gas supply security has come under threat by the EC and US efforts to require EU member states to completely separate from Russian gas. A related threat appeared from Bulgaria's intention to halt Russian gas transit through its territory, which includes Hungary's main gas supply route - the Balkan Stream pipeline.

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Social partners aim for minimum wage agreement by mid-November
Hungary | Oct 02, 06:25
  • Outcome of re-negotiation depends on government's job protection plan
  • Trade unions expect tenser discussions on minimum wage for skilled workers, insist on double-digit hike in 2026

Trade unions and employer associations have agreed to reach an agreement on the minimum wage for 2026 by mid-November, trade union leader Melinda Meszaros said for the business daily Vilaggazdasag after yesterday's bilateral meetings of social partners with the government. We note that the social partners had signed a three-year wage agreement last year, which envisaged the minimum wage to be hiked by 13% as of 2026 and by 14% as of 2027. The macroeconomic parameters - GDP and inflation, diverged from the assumptions significantly, prompting the ongoing re-negotiation of the stipulated 2026 hike as per a clause in the wage agreement, we note. Trade unions believed that the wage agreement could remain in force, but they were still open to discussions, Meszaros indicated. The outcome of the re-negotiation will depend on the government's upcoming job and industrial protection plan, which should be unveiled around mid-October, she added. Possible measures included a 1pp reduction of the social contribution rate and other smaller tax cuts like raising the VAT threshold or the thresholds for the small business tax.

Trade unions did not expect significant conflicts regarding the re-negotiation of the headline minimum wage, but rather about the minimum wage for skilled workers, Meszaros underlined. The existing three-year wage agreement did not cover the minimum wage for skilled workers, which was left to be determined separately each year, we note. Trade unions will still exist the minimum wage for skilled workers to be raised by at least 10% in 2026, Meszaros stated. Talks on the skilled worker wage with employers could be more tense because the market was more sensitive to it, she explained.

The minimum wage was raised by 9% to HUF 290,800, while the minimum wage for skilled workers was raised by 7% to HUF 348,800 as of the beginning of 2025. The minimum wage for skilled workers is relatively more important for the labour market since it covers around 750,000 people compared to around 250,000 people earning the headline minimum wage, according to earlier figures from the government.

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PRESS
Press Mood of the Day
Hungary | Oct 02, 06:24

PM Viktor Orban: It was particularly exciting European summit (Magyar Nemzet)

Exemption from personal income tax instead of Tisza tax - from today the life of every mother of three children will change (Magyar Nemzet)

Even in Budapest, people are no longer interested in Peter Magyar and Tisza Party (Magyar Nemzet)

Home Start programme: expectations are confirmed, sellers have also entered the market (Magyar Nemzet)

Minimum wage negotiations are accelerating: It has been revealed when agreement can be reached (Vilaggazdasag)

Leaked: PM Viktor Orban prevents Brussels from using dirty trick to admit Ukraine to EU at EU summit (Vilaggazdasag)

State debt manager AKK: 84.4% of issuance plan is fulfilled by end-Q3 (Vilaggazdasag)

Hungarian businesses can breathe sigh of relief - economy minister Marton Nagy has put tax reduction package on table (Vilaggazdasag)

PM Viktor Orban announces pension adjustment, but there are some problems with it (Heti Vilaggazdasag)

PM Viktor Orban is left alone in Copenhagen with his anti-Ukrainian veto (Heti Vilaggazdasag)

Extension of state of emergency must be discussed at extraordinary meeting on Tuesday (Heti Vilaggazdasag)

Government is attacking idea of wealth tax because "almost all ministers and their family members will be affected by it", according to opposition leader Peter Magyar (Heti Vilaggazdasag)

PM Viktor Orban: If something flies into Hungary that does not belong to us, we will shoot it down (Heti Vilaggazdasag)

PM Viktor Orban welcomes Angela Merkel at government headquarters (Heti Vilaggazdasag)

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AKK puts net financing coverage at 115% at end-September
Hungary | Oct 01, 19:26
  • Debt agency says net issuance hits HUF 5,309bn at end-Sep vs. original target of HUF 4,626bn

The State Debt Management Agency (AKK) said Wed. that it topped at end-September its net issuance target of HUF 4,626bn by issuing HUF 5,309bn in debt, according to a statement. It said the AKK 683bn overshoot would be used to cover maturities falling due during the remainder of the year. Contributions to net financing were almost equal in the case of HUF and FX institutional instruments, the AKK said. The domestic total was HUF 2,750bn while the FX amount was HUF 2,781bn. In terms of gross issuance, it said the end-September total was 84.5% of the target of HUF 19,526bn at HUF 16,487bn.

In the domestic HUF breakdown, the AKK noted that in the case of institutional HUF bonds some 76.7% of planned gross issuance was completed by end-September, as was 83.7% of the planned yearly gross issuance of short-term discount Treasury bills (which the AKK uses to mostly serve liquidity management purposes). In case of HUF loans, the contribution to net financing was positive and amounted to HUF 40bn against the planned negative contribution in the amount of HUF 35bn.

In terms of demand, it totaled HUF 4,815bn for bonds at end-September, compared with an offered amount of HUF 1,622bn. The AKK accepted demand worth HUF 2,554bn, implying a bid-to-cover ratio of 1.89. Including non-competitive sales, the AKK issued institutional securities worth HUF 2,908bn.

For FX, the AKK noted that 165.1% of the planned HUF 1,685bn net financing plan was completed in case of FX bonds and FX loans at end-September. Long-term international bond auctions contributed the majority of the HUF 2,781bn net issuance to the tune of HUF 2,608bn. FX loans contributed another HUF 177bn. Regarding gross issuance, of the HUF 3,083bn planned full-year gross international issuance target, some HUF 3,057bn was completed by end-September, implying a completion rate close to 100%.

For international bond issuance, the completion rate exceeded 100%, the AKK said. International bond issuance reached HUF 2,699bn, topping the HUF 2,636bn target. The AKK added that it issued bonds in three different currencies with multiple times oversubscription. Following its EUR 2.5bn issuance in January, it issued USD 4bn in June, and then EUR 595mn in so-called Panda bonds in July. It added that the Panda bond issuance was the largest and longest maturity sovereign issuance on the Chinese onshore market. The AKK noted that in addition to smaller sized bonds denominated in JPY and CNY a EUR 1bn will mature in the autumn, meaning FX debt relative to total debt will be close to the 30% benchmark. Some 99% of FX debt was still denominated in EUR, it noted.

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Lending to private sector rises 7.2% y/y to end-Aug
Hungary | Oct 01, 15:41
  • Household lending growth remains fast at 11.4% y/y, corporate lending is slower at 3.4%

The outstanding stock of bank loans to the private sector rose by 7.2% y/y as of end-August, according to data released Wed. by the National Bank of Hungary (NBH). Lending growth eased slightly from 7.3% the month before, but it remains slightly faster than the closer to 6% growth seen earlier this year. Household borrowing continued to drive the increase on growth of 11.4% y/y, which was even with that seen the prior month and comes due to continued strong income rises. Corporate lending ticked down to 3.5% y/y from 3.4% the month before and defying some expectations growth would continue to accelerate. It can still be expected that lending to non-financial companies will be moderate due to the sluggish economy and high uncertainty.

That is especially so since real, transaction-based corporate lending continued to fall, the decline widening to -0.7% in August from -0.4% in July. In terms of households, real, transaction based lending remained fast at 7.1% y/y in August, though that was down slightly from 7.2% the month before.

Overall, corporate lending growth remains capped by the slow economy whereas household growth is being supported by government stimulus as well as decent real income growth. Further lending growth should be expected in housing especially since the House Start program was launched in September and is said to be seeing high demand.

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General govt posts HUF 480mn surplus in Q2, gg deficit revised up 5.0% for 2024
Hungary | Oct 01, 14:26
  • General govt surplus is 2.2% of GDP after Q2
  • Revenues surge by 11.8% y/y in Q2, spending rises much slower 1.2%
  • General govt deficit revised up to 5.0% of GDP for 2024

Hungary's general government balance swung to a surplus of HUF 480.0mn in Q2 from a deficit of HUF 469.1mn the year before, according to ESA-compliant data published Wed. by the stats office KSH. The surplus amounted to 2.2% of GDP after Q2, the KSH said, though it added that in H1 2025 the deficit amounted to 0.7% of GDP factoring in the revised deficit of HUF 789.9mn in Q1.

Revenue growth accelerated to 11.8% y/y in Q2 from a revised 8.1% the quarter before. In particular, income and wealth tax receipts as well as VAT income flowed in despite the fact that economic growth remains muted and most likely tied to the extension of windfall taxes, the automatic indexation of some excise taxes, and still high wage growth.

Spending increased by a much slower 1.2% y/y in Q2, slowing from 3.9% the quarter before. Spending was lifted by a big rise in payroll costs due to the minimum wage hike and the raise of teacher wages.

As part of the coming Eurostat autumn debt and deficit notification, the KSH said it revised up the 2024 general government deficit to 5.0% of GDP. The first notification last April put the deficit at 4.9% of GDP. General government debt stood at 73.5% of GDP, it added on a total of HUF 59,879bn. To note, the general government deficit thus remains well above the 4.5% of GDP target that had been set for 2024, though it was down from 6.8% of GDP in 2023 (revised up from 6.7%), 6.2% in 2022 (unchanged from April), and 7.1% in 2021 (unchanged).

Overall, the Finance Ministry forecast a deficit of 3.7% of GDP in the April debt and deficit notification, but this has since been revised up to 4.5% of GDP and that will mean only very slight improvement compared with 2024. The NBH recently forecast that the deficit would be 4.1-4.5% of GDP, and so marking some improvement. Further deficit reduction is planned for 2026, with the NBH seeing 3.8-4.2% of GDP, though it remains to be seen how much the government will feel it needs to add stimulus in order to stave off electoral disaster.

General government balance
Q1 2025Q1 2025Q2 2025Q2 2025
HUF bn% y/yHUF bn% y/y
Total revenues8,628.38.110,082.311.8
Taxes on production and imports3,462.59.43,844.36.3
o.w. VAT1,877.912.12,078.311.4
Income and wealth taxes1,568.713.51,931.717.5
Social contributions2,205.69.22,324.29.2
Capital taxes5.73.65.911.5
Other revenue1,385.8-1.61,976.122.0
Total expenditures9,418.33.99,602.31.2
Intermediate consumption1,434.311.31,810.21.5
Compensation of employees2,180.010.42,329.810.9
Interest912.2-5.9829.2-16.1
Social benefits other than in kind2,672.95.52,166.76.0
Investments341.0-21.0769.918.0
Other expenditures1,877.80.81,696.5-11.4
Budget balance-823.9-26.7480.0-
Source: KSH
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PMI rises by 2.4pts m/m to 51.5pts in September
Hungary | Oct 01, 12:47
  • New orders mount in September, helping boost production

Hungary's PMI rose 2.4pts m/m to 51.5pts in September from a revised 49.1pts in August, returning to plus territory, the logistics association Halpim reported Wed. Companies reported a moderate expansion in the manufacturing sector, though September is considered a below-average month (long-term average since 1995 is 52.6) and the current seasonally adjusted index is the 12th lowest ever.

New orders helped lead the way with a 5.2-pt increase in September. Halpim noted that a bigger increase came only in the finished goods stock index, though that might be a worse sign. Production itself rose 1.8pts m/m, to follow.

Halpim also noted that the purchase volume index increased 3.9pts m/m, indicating a solid increase in the volume of purchases. The purchase price index, however, fell by 1.8pts m/m, indicating a slight decrease in prices. Delivery lead times increased by 5.1pts m/m while the level of purchased inventories increased 3.5pts.

Overall, the rise in the PMI bodes well for the economy going into the autumn and Q4. As noted by Halpim, manufacturers largely had a difficult summer, but perhaps there is more optimism and the economy will receive a boost. Auto and other manufacturing capacity is increasingly going to come on stream and the broader EU-wide defense push should help industry as well. The government is likewise launching stimulus packages ahead of next year's elections, which should help bolster domestic demand. In its latest forecasts, the NBH forecast that GDP growth would remain soft in 2025 at 0.6%, but then recover to 2.8% next year.

PMI data
Sep-24 Apr-25 May-25 Jun-25 Jul-25 Aug-25 Sep-25
PMI (pts) 49.4 50.2 49.8 49.0 50.5 49.1 51.5
Source: Halpim
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Poland
PRESS
Press Mood of the Day
Poland | Oct 02, 03:36

What did Russia's GRU bring to Poland? [front-page story on investigation into RU spies preparing acts or terror using drones and explosives; warning is about potential RU-instigated terror attacks] (Gazeta Wyborcza)

Poles are fed up with Russian provocations [77% of Poles believe Russian aircraft should be shot down if they violate PL airspace; only 17% said they shouldn't] (Rzeczpospolita)

Breath of optimism - PMI signals Polish industry is slowing emerging from its slump (Rzeczpospolita)

The end of high prices, so announces PM Tusk [editorial about the fact the inflation pace might be down, but price levels remain highs] (Rzeczpospolita)

So many succumbed to illusion of Polska 2050 [political scientist notes that party is falling apart] (Gazeta Wyborcza)

Govt won't let you smoke a joint [PM Tusk talked of perhaps some liberalisation of marijuana laws during 2023 election campaign, but govt has no plans to go further this term] (Rzeczpospolita)

Only way to save JSW is to amend the Mining Act (Rzeczpospolita)

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Q&A
Debt mgmt strategy
Poland | Oct 01, 22:12

Question:

Is there an English version available of the 2026-28 debt management strategy? Could you also comment on what the main changes/points are in the government's updated debt management strategy that we should be aware of? Is there any comment within the document on potential Euro/Dollar bond issuance and expected size for 2025-28?

The question was asked in relation to the following story: Borrowing coverage hits 100% for 2025 - FinMin

Answer:

The English version isn't published yet. When it is, it will be published here: https://www.gov.pl/web/finance/debt-management-strategies. I usually go off the Polish version and so am not sure how quickly they publish it, though I imagine it will be fairly soon.

I am just finishing my story, but the main takeaway is that the government now expects the adjusted public debt measure used to discern whether the public debt safety thresholds are crossed shows them being crossed in 2028, and nearly in 2027. That would trigger a forced fiscal consolidation program that would be painful indeed. The question is what doe the FinMin/govt do with this forecast? It might just hold off and that would make the next general election -- due in autumn 2027 -- very much about fiscal plans.

There are no comments on euro or dollar issuance plans for the coming years. The latest update for the total in PLN of gross foreign issuance this year is PLN 56.2bn from the 2026 budget details. That compares with the PLN 47.7bn raised already. This would suggest slight more issuance to come this year. The gross foreign issuance plan for 2026 is PLN 48.6bn, so in fact slightly lower than this year.

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Q&A
Funding in 2026
Poland | Oct 01, 22:11

Question:

The PLN 255bn figure suggests, as you point out, that there would be potentially a huge amount of funding supplied in 2026. Could you share how likely you think this is, what this hinges on and potentially where it would be deployed?

The question was asked in relation to the following story: Ministry now expects next RRF tranche of PLN 26bn by end-November

Answer:

One addition to this story is that the government is moving to reduce the RRF loan total by PLN 21.7bn and that will help reduce financing needs because for the loan part of the RRF program, it has to take out loans that it then pays back when it receives the tranches from the EU, which come with a delay. This could mean the de facto gross financing total is below the PLN 690bn and perhaps by the full PLN 22bn or so.

The government usually pre-finances 20-40% of its next year's financing target in the previous year and so I think the pre-financing total will be at least 25-35%. I'm not sure if it will be higher, though, since that would mean fairly heavy issuance. But I'm also not sure about the FinMin's thinking. If, for instance, the FinMin is actually scared of a sovereign rating downgrade, say, next year, perhaps it will want to borrow more this year. We shall see.

In the financing plans for 2026 (which you can see at the bottom of the story here), the FinMin sees some PLN 462.7bn in gross domestic financing (PLN 323.4bn for bonds, PLN 58.1bn for T-bills, and PLN 81.2bn for savings bonds) and PLN 48.6bn in T-bond issuance abroad. That marks the brunt of the financing. There are loans as well.

In the end, it looks like the FinMin will target about PLN 20bn more in T-bonds, but PLN 30bn more in T-bills, suggesting more action on the short end. The savings bond total is to rise some PLN 10bn, so that is important too.

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Q&A
Electricity price cap removal?
Poland | Oct 01, 22:10

Question:

What are your expectations for when the electricity price cap might be removed?

The question was asked in relation to the following story: President signs into law extension of power price cap through Q4

Answer:

I think that the government does not want to have a power price cap for households for 2026, and so it could be removed at the end of the year. The finance minister and the energy minister have both said in recent weeks [our story here] that the wholesale power prices on the Polish Energy Exchange (TGE) are low enough that a cap shouldn't be needed. The new head of the Energy Regulatory Office (URE) said more recently [story here] that though the power tariff itself could fall for 2026, the power distribution tariff might rise, meaning no change from PLN 500/MWh.

The government laid out in mid-September its priorities for the next two years until the general election set for autumn 2027 [story here] and said that the power price would not rise above PLN 500/MWh. It did not explain this further, but this does suggest that if there were any negative surprises in terms of electricity prices, it could impose some sort of cap again. But my expectation for now is that there will be no cap in 2026, though that is not set in stone and if the tariff is lining up to be above PLN 500/MWh, one can definitely not rule out the maintenance of the PLN 500/MWh frozen price.

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FinMin Domanski says goal is to cross 55% of GDP mark as late as possible
Poland | Oct 01, 17:41
  • Domanski says assumptions in debt strategy are based on no-policy change path

Finance Minister Andrzej Domanski said that fiscal policy was being conducted so that any crossing of the 55% of GDP level proscribed by public-finance legislation was done as late as possible, according to comments made in a late afternoon interview with broadcaster TOK FM. The latest public debt management strategy showed that the key measure for public debt would cross 55% of GDP in 2028, and that would trigger a mandatory austerity program in 2030. When it was noted that the previous government had simply removed the former lower safety threshold of 50% of GDP, Domanski said he would not do so and would abide by the current legislation, though added President Karol Nawrocki would be unlikely to sign anything on this into law anyway. As noted in comments cited being made Tues., Domanski likewise noted the public debt forecasts in the strategy assumed no policy change whereas the ministry was trying to improve the situation of public finances.

Domanski said the FinMin was trying to improve public finances step by step. It had repaid some PLN 35bn of the debt owed by the state bank BGK and the Polish Development Fund (PFR) even though it had also boosted defense spending. He said he would personally like to repay the debts incurred by the previous government more quickly, but due to this threshold, the repayment rate is slower than he would like. He also voiced support to consolidate the various funds managed by BGK since some were run inefficiently.

Domanski and the FinMin has proposed to hike the CIT rate on banks and to up the excise tax on alcohol and the levy on sugary products, though President Karol Nawrocki has said he opposes any tax increases. On the sense of including those moves in the 2026 state budget, Domanski said one could not include or exclude a potential item just because the president's aides said one thing or another. "We include in the budget the revenues that result from bills included in the government's legislative agenda," he said. "I will be very surprised if the president vetoes the corporate income tax increase for the banking sector." Domanski added that one of the reasons for the recent rating outlook revisions to negative was the fight between the government and the president, noting that if the president vetoed all of the government's proposals, rating agencies would react.

Overall, Domanski is trying to reassure the market that the public debt strategy's forecasts are a no-policy change path that won't come true. The first thing to say is that he and PM Donald Tusk do seem to realize that they can't add more spending or tax cuts, and so the promise to double the standard tax deduction has rightly been put off until public finance are in better shape. The second thing is that it is unclear whether the FinMin believes the CIT hike on banks or other tax hikes are enough or whether more measures will be announced. Considering the shaky ruling coalition and its general low popularity, it is hard to believe any major tax increases will be planned, but it is hard to believe for the same reasons that there will be any cut to social spending. Domanski's job is likely to ensure things don't get worse than expected and the 55% of GDP level is crossed early, and then fixing public finances will be left up to the next government.

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Polska 2050 said to be in shock as Holownia plots Polish political exit
Poland | Oct 01, 17:14
  • Party founder Holownia said to be trying to leave Polish politics to go to UN

Polska 2050 leader Szymon Holownia has said he planning to leave Polish politics and wants to join the UN as a high commissioner, leaving the junior ruling party in shock, according to a report from Onet.pl. Holownia founded Polska 2050 as a new third-way movement after his surprisingly strong showing with 13.9% in the first round of the 2020 presidential elections. Polska 2050 managed to carve out a strong position on the political scene and, in coalition with the Polish Peasants' Party (PSL) as the Third Way (TD), received 14.4% in the October 2023 general election. That led to Holownia becoming Sejm speaker, though he will leave that position in November as part of the ruling coalition deal that will see Left co-leader Wlodzimierz Czarzasty take over. Holownia ran for president again in May, but did much worse, getting 5.0%, and he has seen his star fall further since.

If it is confirmed that Holownia will leave Polska 2050, then that puts the rest of the party in a tough spot since there are no more major names. Many of the members also left the senior ruling Civic Coalition (KO) and so won't necessarily have a spot there. One Polska 2050 official told Onet that the process of "the disintegration of Polska 2050" has begun. "The only thing keeping us alive is our presence in government and profiting from being in power," it was added. Polska 2050, which broke off its coalition with the PSL, has been polling as low as 1.0%, which is well below the 5% threshold for parliamentary representation and is even below the 3% needed to receive state funding.

With Holownia to cease being party leader this December, there is the question of who will take over. Polska 2050 just on Tues. chose Fund and Regional Policy Minister Katarzyna Pelczynska-Nalecz as their candidate to be deputy PM [which is in replacement for losing the speaker's chair], but it remains to be seen if PM Donald Tusk will agree since there is no love lost between the sides. Still, the choice of the fund minister was seen as potentially strengthening her hand in taking over the party, though her profile is low. An ex-bank chief economist Ryszard Petru, who did lead the former third-way party Nowoczesna, has said he would like to take over Polska 2050 as well, though his chances are apparently low.

Overall, Polska 2050 still has 30 MPs, which is key in the ruling coalition mustering a majority and so its ultimate fate is important. The party's position doesn't look strong and it looks unlikely to make the next parliament, whether led by Pelczynska-Nalecz or anyone else. But there will be a question of how the post-Holownia party views its role in the coalition. It is simply hard to believe it will do nothing and sit quietly, and so there is a likelihood that it will have to do something shocking to win attention and potentially votes and so this will likely hurt coalition stability. On the other hand, a rump party with MPs that are bound to lose their privileges in the next election also means there will be an incentive to have the coalition survive. Where Polska 2050 falls on the scale of seeking a demonstrative way to win back support to sitting meekly to enjoy what it has won will be crucial into how it will impact coalition stability with about two years to go before the next scheduled general election.

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CBW
MPC still likely to pause in Oct
Poland | Oct 01, 15:54
  • Next MPC meeting: Oct 7-8, 2025
  • Current policy rate: 4.75%
  • EmergingMarketWatch forecast: 4.75%

Rationale: Monetary Policy Council members have not sounded like they are ready to cut rates again at the next policy sitting on Oct 7-8, having just cut by 25bps at the Sep 2-3 meeting, but one can't rule out a cut as the threat of a big power price rise in Q4 has been avoided. Despite the fact President Karol Nawrocki has signed into law government legislation holding the power price cap for Q4 and the fact CPI inflation was slightly below expected in September at 2.9% y/y, we think the MPC will be cautious. The MPC has gone out of its way to state it is not in an "easing cycle" and is only "adjusting" rates to the current reality. Leaving aside the academic differences here, the MPC clearly does not want the market to expect cuts too much. If it were to cut again, then that would open the door to the expectation of further cuts this year whereas all MPC members have tended to stress there is only 25bps less.

The MPC's caution has seen them cutting every second month, cutting in May, holding in June, cutting in July, holding in August [though there wasn't a meeting], and cutting in September. This cadence would suggest a hold in October followed by a cut at the following sitting on Nov 7-8, which could be timed to the updated Inflation Report and would mean the council could rest easy having delivered 125bps of cuts in 2025.

The MPC is likely to stress the fiscal policy risk to inflation at its October sitting, and that will give it a convenient excuse not to cut. Fitch and Moody's have both now cut the outlook on their ratings to negative, and it can only be a matter of time until S&P does the same in early November. The outlook for public finances is indeed poor and it is hard to believe there will be any real consolidation until after the next general election. Though it is unclear if the current ruling coalition will survive until the scheduled end of the term in autumn 2027, it doesn't seem likely there will be major fiscal consolidation until 2028, and that could be a year a key debt threshold is crossed. This leaves aside the idea that the government to win in 2027, or whenever the next election occurs, will likely be promising to spend more or not to raise taxes, and so it is unclear if there will be the political will to consolidate public finances unless pressed.

Overall, we still expect a 25-bp cut at the November sitting, though one can't rule out that the MPC will cut in October to time the move with the power price decision and then signal the taking of a longer wait-and-see stance. MPC members are cautious about repricing in 2026, the fiscal threat, and the longer-term threat of the EU's ETS2 rules being extended in a development NBP head Adam Glapinski has said could up CPI inflation by 2pps in 2027. All of these risks are likely to constrain the MPC's hand in 2026, though one should expect at least 50bps more in easing and slightly more if the outlook improves.

MPC breakdown
MemberBackerDate inDate outPol. supportLast commentsComment
Adam GlapinskiPres/SejmJun. 22, 2022Jun. 22, 2028PiSSep. 4, 2025Doesn't rule out cut in Oct on power, but cautious too
Wieslaw JanczykSejmFeb. 23, 2022Feb. 23, 2028PiSSep. 8, 2025Sees chance for another cut in near future
Gabriela MaslowskaSejmOct. 6, 2022Oct. 7, 2028PiSSep. 12, 2025Sees likelihood of only one more cut in 2025
Iwona DudaSejmOct. 6, 2022Oct. 7, 2028PiSAug. 28, 2025Duda doesn't rule out cut in Sep, prefers later move
Ludwik KoteckiSenateJan. 25, 2022Jan. 25, 2028PO/KOSep. 23, 2025Says power freeze could unlock cuts
Przemyslaw LitwiniukSenateJan. 25, 2022Jan. 25, 2028PSLSep. 23, 2025Sees cut in Nov at earliest
Joanna TyrowiczSenateSep. 7, 2022Sep. 7, 2028KO/LeftSep. 5, 2025Says key rate should be returned to 5.75%
Ireneusz DabrowskiPresidentFeb. 22, 2022Feb. 22, 2028PiSSep. 25, 2025Sees further cuts, but very cautious ones
Henryk WnorowskiPresidentFeb. 22, 2022Feb. 22, 2028PiSSep. 9, 2025Sees chance for further easing, but also fiscal risks
Cezary KochalskiPresidentDec. 21, 2019Dec. 21, 2025PISJul. 16, 2025Sees 25-50bps of cuts in '25, maybe in Sep
Source: NBP

Archived video of all MPC press conferences

MPC's post-sitting statements

Latest council minutes

Latest NBP inflation report (July 2025)

Most recent MPC voting results

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PMI jumps 1.4pts m/m to 48.0 in Sep, topping 47.0 consensus
Poland | Oct 01, 12:17
  • PMI rises for 3rd straight month, begins approaching 50 no-change mark

Poland's manufacturing PMI jumped 1.4pts m/m to 48.0 in September from 46.6 in August, rising for the third straight month to the highest since April, but still signaling an overall deterioration in operating conditions, according to a statement [link to actual report] published Wed. by S&P Global. The reading for September came in well above the 47.0-pt consensus. S&P noted that the rise was reflected in four of the five components, although all except suppliers' delivery times still had negative overall contributions.

New orders fell for the sixth month running in September, but the rate of contraction slowed for the third month in a row. New export orders fell for the sixth month running as well, but at the slowest rate in four months and some firms noted recovering demand from European markets.

Production fell as a result, falling for the fifth month running, with the rate of contraction the softest over this sequence and only modest. With lower orders and output, employment was cut for the seventh time in 2025, though the rate was marginal.

Backlogs of work increased for only the second time in over three years, goods producers reduced their input buying for the fifth month running in September, and stocks of purchases were cut for the sixth successive month. Suppliers' delivery times lengthened fractionally in September.

The 12-month outlook for production stayed positive in September. Companies linked growth forecasts to economic recovery, new markets, RRF funds, and new products.

Average input prices declined for the third time in the past four months and at the fastest rate since January. Output prices fell for the third time in the last five months, albeit only fractionally.

Overall, the PMI reading continues a slow improvement after crashing to 44.8 in June, and it appears foreign and domestic demand conditions are improving. In broad terms, economic growth is likely running at a decent 3%, wage growth remains in the 7-9% area, the unemployment rate is near a record low, inflation has fallen below 3%, and interest rates have been cut by 100bps. The question perhaps is why consumers and manufacturers are so glum rather than still pessimistic, with the domestic, regional, and global political backdrops likely to blame plus questions over affordability. At any rate, if the broad macro backdrop continues, there should be a continued improvement in sentiment writ large.

PMI index
Sep-24 Mar-25 Apr-25 May-25 Jun-25 Jul-25 Aug-25 Sep-25
Polish PMI 48.6 50.7 50.2 47.1 44.8 45.9 46.6 48.0
Source: S&P Global
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Turkey
External trade deficit widens by 33.4% y/y in September - preliminary data
Turkey | Oct 02, 10:17
  • Raw material imports rise by 11% y/y while consumption goods grow by 8% y/y
  • Gold purchases alone inject USD 2.3bn into widening deficit
  • Export revenues register modest 3.0% y/y increase

The external trade deficit experienced a significant 33.4% y/y expansion during September, reaching USD 6.9bn, trade ministry's preliminary statistics showed. This expansion was driven by import expenditures that exhibited 8.8% y/y rise, totalling USD 29.5bn in September. The most notable rise was observed in raw materials, which increased by 11% y/y, followed by consumption goods with 8.0% y/y increase and capital goods increased by 0.4% y/y. China stood as the top import market with 14.5% share, followed by Russia and Germany. According to trade minister Omer Bolat, fluctuations in gold imports added USD 2.3bn to the trade deficit.

Export revenues registered a 3.0% y/y increase to USD 22.6bn in September. The expansion was mainly on the back of raw material categories and consumption goods, which recorded respective increases of 6.5% y/y and 1.8% y/y. Capital goods exports, however, declined by 1.9% y/y. The EU sustained its commanding 44.5% market share as Turkey's predominant export recipient, with Near and Middle Eastern regions plus supplementary European markets maintaining sequential prominence. Germany preserved its leadership position among individual destination countries with 8.4% share, followed by the UK and the US.

Cumulatively, the Jan-Sep period witnessed 11.8% y/y trade deficit expansion to USD 67.0bn, primarily driven by 5.9% y/y import growth outpacing corresponding 4.1% y/y export advancement. Annualised calculations revealed the trade deficit achieving 13.5% y/y escalation, culminating at USD 89.3bn.

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NTV fires Washington chief after leaked Erdogan-Trump meeting criticism
Turkey | Oct 02, 10:15
  • Washington bureau chief Gunay's leaked footage declares Turkey gains nothing from Trump-Erdogan meeting
  • Gunay exposes rivalries between Bilal Erdogan, Fidan, and Bayraktar
  • NTV dismisses Washington bureau chief after leaked White House garden conversation
  • Erdogan avoids questions, and may weigh cabinet reshuffle to control party dynamics and messaging

Turkish broadcaster NTV proceeded with the dismissal of its Washington bureau chief Huseyin Gunay following a controversial incident during President Erdogan's recent visit to the White House for discussions with President Trump, the local media reported. The footage revealed Gunay engaged in conversation with a state-run Anadolu Agency cameraman in the White House garden. Throughout the captured video, Turkey literally obtained no gains from the diplomatic engagement, Gunay said, and further characterised the meeting results as unfavourable for Turkish interests. According to Gunay's claims, Trump asked Erdogan to accommodate potential Palestinian refugees, cease natural gas purchases from Russia, curtail commercial relations with China, and restrict financial transfers to Palestinian territories. Gunay additionally referenced perceived conflicts among senior governmental figures, specifically mentioning tensions involving Bilal Erdogan, foreign minister Hakan Fidan, and President Erdogan's son-in-law Selcuk Bayraktar. The dismissed correspondent's statements regarding internal governmental rivalries exposed, in our view, some deeper questions surrounding Turkey's political trajectory beyond Erdoğan's leadership tenure. The leaked remarks suggested ongoing competition among influential circles concerning the nation's future governance structure, we note.

Foreign minister Fidan emerged as a particularly significant figure in these reported internal deliberations. His background as longtime director of Turkey's National Intelligence Organization (MIT) positioned him as a prominent figure within government hierarchies, we assess. His recent comments on Turkey's fifth-generation KAAN fighter programme, specifically that engine licensing awaited US congressional clearance, continued to stir debate at home, we assess. It also raised additional questions suggesting, in our view, possible strategic positioning within internal political competition when viewed through the lens of MHP leader Devlet Bahceli's recent remarks on a Turkey-Russia-China (TRC) alignment, namely that Fidan may have calibrated his messaging to signal policy optionality to nationalist constituencies.

President Erdogan declined to address the matter during the Grand National Assembly's opening, we note. Given Fidan's long service as MIT chief and his embedded networks across the security and diplomatic apparatus, the controversy carried institutional significance rather than routine political noise, in our assessment. Erdogan, a highly tactical operator, may have been waiting for the optimal moment to remove Fidan, we assess. In that light, he could bring forward the long-discussed cabinet reshuffle and dismiss Fidan to reassert command over party dynamics and restore message discipline. The timing would aim to maximise control benefits while minimising policy disruption and external blowback, we judge. If he refrains, he risks projecting a loss of internal control to both the party base and the state bureaucracy, potentially emboldening rival alignments and narrowing room for manoeuvre on security and foreign-policy files, in our view.

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New vehicle sales are up by 25.7% y/y in September – ODMD
Turkey | Oct 02, 08:08
  • Volumes beat decade average by 66.5%, signalling broad market strength
  • Campaigns, gold-fuelled wealth effects, FX fears pull demand forward

New-vehicle sales rose by 25.7% y/y to 110,312 units in September, the Automotive Distributors and Mobility Association (ODMD) data revealed. Passenger car sales increased by 26.8% y/y to 88,274 units, while LCV sales advanced by 21.7% y/y during the month. We ascribe the upswing to mid-year campaigns that pulled demand forward. Another contributor may be high gold prices, which amplified the wealth effect and supported purchases, we think. In this regard, we note a recent study by QNB estimated that USD 363bn of Turkey's gold stock is held under the mattress. On the other hand, given the market's import reliance, any FX-depreciation expectations might have brought purchases forward as households sought to pre-empt possible price resets. Crucially, what we know is that the gain was not a mere statistical artefact. September volumes exceed the 10-year monthly average by 66.5%, indicating broad-based strength beyond base effects, we assess.

Cumulatively, total sales reached 927,647 units, up by 9.2% y/y in Jan-Sep. Passenger cars rose by 10.0% y/y to 742,687 units, representing 80.0% of the period total. Powertrain shares over the period were led by gasoline - 46.6%, hybrids - 26.7%, EVs - 18.0%, and diesel+LPG - 7.9%. LCV sales increased by 5.9% y/y to 184,960 units in the same period.

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PRESS
Press Mood of the Day
Turkey | Oct 02, 06:23

Foreign minister Hakan Fidan discusses ceasefire plan in Gaza with his Italian counterpart Tajani (Hurriyet)

President Erdogan: We can solve every problem and spoil every game (Hurriyet)

Justice minister Yilmaz Tunc's reaction to CHP not attending opening of Parliament: It is disrespectful to legislature and nation (Hurriyet)

Crude steel production increases by 7.9% y/y in August (Sozcu)

Manufacturing contraction accelerates in September (Sozcu)

Foreign trade is strengthening in Central Black Sea region (Sabah)

Agriculture ministry signs for TRY 2.5bn irrigation renovation project in Kahramanmaras (Sabah)

Rate of startups using artificial intelligence increases to 7.5% (Sabah)

Natural gas imports increase by 8.5% y/y in July (Sabah)

Sixth wave in bribery operation in Antalya metropolitan municipality (Sabah)

President Erdogan meets MHP leader Devlet Bahceli and DEM party co-chairs (Sabah)

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Argentina
PRESS
Press Mood of the Day
Argentina | Oct 02, 03:38

Javier Milei compared Scott Bessent to Messi and spoke about rebuilding ties with the dialogue-seeking opposition (Infobae)

The Treasury sold USD 500mn to contain the dollar and was almost the only seller in the market (Infobae)

Due to the temporary cut in export taxes, tax revenue fell 10% in September (Infobae)

[LLA top Buenos Aires candidate for the midterms] Espert refused to answer whether Fred Machado transferred USD 200,000 to him during the 2019 campaign (La Nación)

Fred Machado, the businessman investigated for drug trafficking who became a shadow over Espert's campaign (La Nación)

Pointing at Kirchnerism, Milei confirmed Espert as candidate: "It's clear this is a cheap operation." (La Nación)

Democrat lawmakers ask Trump to "immediately halt" the financial aid plan to Argentina (Clarin)

The Senate meets this Thursday and the opposition has the votes to overturn Milei's vetoes on the Garrahan and university laws (Clarin)

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Treasury believed to have sold nearly USD 500mn on spot FX market, fuels concern
Argentina | Oct 01, 21:52
  • Treasury paid a big fiscal cost to buy USD 2.2bn from grain exporters, sells a fifth on a single day to defend a strong exchange rate
  • Interventions still arrive with exchange rate not hitting the ceiling of the currency band
  • Interventions raise the cost of course-correction, market seems in agreement govt is making a mistake

The BCRA is estimated to have sold nearly USD 500mn on the spot FX market on behalf of the Treasury on Wed., with the goal of containing depreciation even though the exchange rate still hovered within the currency band that is supposed to be a free-floating zone. The Treasury purchased USD 2.2bn in the spot market between Sep 25-30 after offering grain exporters a special window to sell USD 7.0bn worth of product at 0% export tax, a fiscally costly initiative, and it has already sold at least a fifth of those purchases to defend a strong exchange rate for a single day. We said in our last article that seeing the Treasury sell USD in the spot market on Wed. would be a negative sign [link]. Not only did it sell, but it did so in a way that suggests it will either keep burning through USD aggressively or move to significantly tighten FX controls in the coming days (perhaps both).

For a brief explainer of the situation:

The risk evaluation of the Argentina story changed significantly for the worse over the last three months. The market sees a much higher chance that the populist Peronists could return to power in 2027, and this forces a significant change to the economic policy program that the government has been resisting. The government's program was banking on portfolio inflows sustaining a strong exchange rate and the sovereign returning to markets to refinance its debts starting in January 2026. The situation changed. Under the currently available information, the market judges that the government will not be able to return to markets any time soon, so the economy needs a significantly weaker exchange rate and for the government to start buying USD in large sums.

Not only is the government refusing to comply with what the market wants it to do, which is to float the exchange rate and buy reserves, it is betting all in on its prior approach under the belief that two catalysts will turn the story back around over the next month. Not only is Economy Minister Luis Caputo refusing to build up reserves, he seems willing to burn through the few borrowed USD the government has to defend an exchange rate that is not close to what would be a market equilibrium (under the current risk assessment for the economy).

Caputo's all-in bet is that exchange rate stability is absolutely necessary for the ruling Freedom Advances (LLA) to have a strong midterm election on Oct 26, and that LLA can win that election convincingly. A convincing LLA win would go a long way toward dispelling fears that the Peronists will return to power in 2027, and that would be a huge positive force leading to significant gains across asset classes, including sovereign bonds. That gain in confidence alone would be nearly enough bring the economic program back on track and allow the sovereign to potentially complete its return to sovereign debt markets in 2026. The other potential catalyst for a turnaround would be direct and strong involvement from the US Treasury, either through massive secondary market purchases of Argentina bonds or a direct loan.

The risks with Caputo's bet are obvious. If the election turns out even or LLA losses, and the US's monetary involvement isn't massive, the size of the exchange rate depreciation that will be necessary to balance Argentina's external accounts and make them consistent with external debt repayment becomes bigger the more Caputo burns through USD today.

Perhaps our biggest issue with Caputo's strategy is that we feel this is a problem that shouldn't exist. Looking back, it seems obvious that his insistence with a strong exchange rate was a mistake, and we said so repeatedly at the time. But even looking at the issue from today, we don't see the reason to be mortally afraid of depreciation. The REER today is a lot more reasonable than the REER Argentina had 4-5 months ago, but it remains strong. That depreciation over the last 4-5 months had a negligible impact on inflation, and if it was a cause of concern on markets and the press, it was because of the way the Treasury acted during it. We can't help but think that moving to a floating exchange rate regime in which the Treasury also buys USD to rebuild FX reserves would not be traumatic as Caputo seems to think. To the contrary, there would be a consensus that such as scheme would leave Argentina in prime position for strong growth over the next two years, assuming LLA doesn't get crushed in the midterm elections.

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Brazil
PRESS
Press Mood of the Day
Brazil | Oct 02, 02:46

Lula and Trump: [ForeignMin] Vieira talks about avoiding confrontation and provocation and separating trade from politics (Estadão)

Senate approves [second draft of] tax reform regulation [on consumption]; text returns to lower house (Terra)

Income tax exemption is not a favor from the state, it is a right, says [Speaker] Motta (Poder360)

Lula says he is convinced that the lower house and Senate will approve the expansion of the income tax exemption (G1)

[Rapporteur] Lira accepts only three of 99 amendments and maintains the core of the income tax reform (O Globo)

Commission approves BRL 4.9bn electoral fund [from previous BRL 1.0bn] with support from Lula's base (Gazeta do Povo)

Government publishes rules to prevent Bolsa Família and BPC [welfare program] beneficiaries from placing online bets (Carta Capital)

São Paulo confirms 22 cases and closure of bars due to methanol poisoning (UOL)

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Manufacturing PMI falls 1.2pts m/m to 46.5pts in September
Brazil | Oct 01, 15:08
  • Lower domestic demand reduces new orders at fastest pace in almost two and a half years, S&P says
  • Order cancellations caused by additional US tariffs are partially offset by higher demand from other countries such as Mexico and Italy
  • Input and final goods' prices fall due to dollar depreciation and increased input supply

The S&P Global Brazil PMI fell 1.2pts m/m to 46.5pts in September from 47.7pts in August, marking the seventh consecutive decline, according to data released Wed. by S&P Global. The indicator has remained below the 50-pt neutral mark for six consecutive months. Lower domestic demand reduced new orders at their fastest pace in almost two years while external demand declined more moderately. Companies noted that orders were canceled due to US tariffs, but this was partially offset by higher demand from Italy, Argentina, Mexico, Uruguay, and the UK. Despite the contraction, companies remain optimistic about the future, hoping demand will pick up and anticipating a potential tariff agreement with the US. This optimism allowed employment to increase marginally in September, following a moderate decline the month before.

Input prices fell for the first time since late 2023 due to USD devaluation and increased input supply, allowing final prices to decline for the first time since October 2023. Lower overall company expenditures also contributed to the decline in final prices.

Overall, the PMI has remained below the neutral mark for six months, signallng the impact of the BCB's monetary tightening on industry. The BCB forecasts industrial output to rise 1.0% in 2025, down from the previous 1.9% growth expected, according to the September Monetary Policy Report. The bank also indicated that US tariffs are hurting the sector, although the government's expectation that the impact would be limited appears accurate, as other markets are serving as alternatives. While the effects of monetary tightening continue to deepen on other sectors, the BCB is likely to hold the Selic at the current 15.00% level at least until year-end, in our view.

Manufacturing PMI (pts)
Sep-24 Jun-25 Jul-25 Aug-25 Sep-25
Manufacturing PMI 53.2 48.3 48.2 47.7 46.5
Source: S&P Global
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Mexico
PRESS
Press Mood of the Day
Mexico | Oct 02, 08:21

Mexico imposes a compensatory quota on Chinese Steel (La Jornada)

Treasury says growth has been positive and sustained, despite trade pressures (La Jornada)

Edgar Amador says supporting PEMEX rose the fiscal deficit (El Financiero)

Treasury defends rigorous fiscal discipline in the first year of the Sheinbaum administration (El Sol de México)

Edgar Amador Zamora says the fight on corruption and tax evasion have yielded fruit (El Economista)

Economy Ministry consults business leaders as the USMCA revision approaches (Reforma)

Sheinbaum strengthens her political power in her first year in office; MORENA shows scandals, nepotism and luxuries (Animal Político)

Claudia Sheinbaum surpasses López Obrador's popularity in her first year in office (El País)

Sheinbaum seeks to strip future legislators of their immunity (Milenio)

Fuel sales have their worst fall in two years (El Financiero)

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INEGI’s PMI falls 1.16% m/m sa in September
Mexico | Oct 01, 20:07
  • Down 3.1pts y/y, INEGI's PMI holds below benchmark
  • S&P's PMI falls 0.6pts m/m, warns weakness persists as output and employment fall

INEGI's Manufacturing Orders Index (PMI) fell by 1.16% m/m in September, per seasonally adjusted data published by the stats office INEGI on Wednesday. The contraction came with mixed performance of the index's components, with the sharpest contraction in the expected supply delivery component, down 5.37% m/m sa.

INEGI's PMI fell by 3.1pts y/y in September, in the second decline in a row. With this, the index remained below the 50.0pts benchmark for the third time in a row, at 47.9pts. This is consistent with S&P's PMI, which fell below the benchmark in September, down by 0.6pts m/m. This shows the positive deviation from the benchmark seen in August look like a fluke, in our view. Indeed, S&P warned the manufacturing industry remains fragile, with weakening employment and output.

Overall, the manufacturing industry continues to show weakness amid lingering adversity. US protectionism and reigning uncertainty hinder any strong rebound, in our view. However, PMI data, along with other indicators, show resilience in many industries, suggesting a more significant rebound can come once this uncertainty begins to fade.

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Remittances’ inflow plunges 8.3% y/y in August
Mexico | Oct 01, 17:48
  • Inflow remains strong, at USD 5.6bn in August
  • But negative trend is clear, inflow falls 5.9% y/y in Jan-Aug

The remittance inflow fell by 8.3% y/y in August, the CB said on Wednesday. This is the fifth contraction in a row, accelerating from a 4.7% y/y fall posted in July.

The inflow remains relatively robust, at USD 5.8bn in August, holding above 5.0bn over the last four months. However, a base effect is to blame for the y/y contraction, after the inflow jumped by 9.2% in August of last year. Indeed, a statistical effect should ease the contraction in the coming months. However, this will only moderate the contraction scored in 2025, considering the inflow fell by 5.9% y/y in Jan-Aug.

Overall, remittances have suffered through 2025 (and since late 2024), coming from a high comparison base. It's not clear to us what is pushing down the inflow. We've speculated the decline might be due to slowing economic growth in the US and the anti-immigration policy imposed by the Donald Trump administration, hindering work and transfers by those illegally in the US. However, this does not accommodate with remittance data from other countries in LatAm. Thus, it's unclear to us if the deceleration might be in part transitory.

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Analysts cut their 2025-end CPI inflation forecast
Mexico | Oct 01, 16:44
  • But raise their year-end core inflation projection for 2025
  • Increase their core and general inflation forecasts for 2026
  • Analysts continue to revise up their 2025 GDP growth forecast, trim their 2026 forecast

Analysts cut their 2025-end CPI inflation forecast from 3.97% a month ago to 3.85% in the poll published by Banxico on Wednesday. This adds to a revision down of 0.19pps over the last two months, in a welcomed development. However, analysts raised their year-end core CPI inflation forecast to 4.18%, adding to an upward correction of 0.42pps since Q1-end. This anticipates the experts predict weaker inflationary pressure from non-core inflation, which is volatile, might surprise, and is not linked to the economic cycle or the CB's monetary policy and, thus, should not drive the CB's actions, in our view.

Analysts lifted their 2026-end general inflation and core inflation forecasts. With this, analysts now see inflation closing 2026 at 3.80%, off from the CB's expectation that inflation will converge with its 3.00% punctual target by Q3 2026. This continues to show the poor credibility of the CB's forecast.

Analysts lifted their 2025 GDP growth forecast, to 0.50%, up by 0.30pps in Q3. This positive revision is consistent with better-than-expected performance in H1, fading uncertainty and a resilient private market. Still, projections remain weak, with analysts projecting growth at 1.35% next year, trimming their projection after a positive revision a month ago.

90% of analysts expect monetary easing in Q4. This surprises us, considering the CB is very likely to cut twice its policy rate, in our view, bringing the policy rate down to 7.00% by year-end.

Analyst consensus (median)
May-25 Jun-25 Jul-25 Aug-25 Sep-25
2025 year-end CPI inflation3.90%4.00%4.04%3.97%3.85%
2026 year-end CPI inflation 3.77% 3.74% 3.75% 3.70% 3.80%
2027 year-end CPI inflation 3.71% 3.72% 3.73% 3.75% 3.75%
2025 year-end core CPI inflation3.98%4.00%4.12%4.11%4.18%
2026 year-end core CPI inflation 3.70% 3.71% 3.72% 3.72% 3.78%
2027 year-end core CPI inflation 3.60% 3.65% 3.61% 3.60% 3.65%
2025 GDP growth0.2%0.2%0.3%0.4%0.5%
2026 GDP growth 1.4% 1.4% 1.4% 1.4% 1.4%
2027 GDP growth 1.8% 1.8% 1.8% 1.8% 1.8%
Source: Banxico

Click here for our comprehensive database of macro forecasts.

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CBW
CB governor insists on dovish discourse, further easing fully expected ahead
Mexico | Oct 01, 15:21
  • Next MPC meeting: November 6
  • Current policy rate: 7.50%
  • EmergingMarketWatch forecast: 25bps cut

After the CB cut its Monetary Policy Rate (MPR) by 25bps to 7.50% last week, as the market fully expected, CB Governor Victoria Rodríguez took it to the press to insist on a dovish discourse, insisting there are further conditions for monetary easing ahead. As in the past, she minimized inflationary pressures, saying there's been significant disinflation from 2024, something that is certainly true but is mostly contained in non-core inflation, which does not follow the economic cycle or the CB's monetary policy and should be secondary to the CB's actions, in our view. On core inflation, the governor seemed to celebrate it's stabilized; however, it's worrying to see the CB's board being content with where it's stabilized considering core inflation adds four months above 4.00%, with lingering upward pressure from many of its components.

Indeed, we believe Governor Rodríguez is not alone in this dovish discourse. Deputy Governor Omar Mejía continues to disregard inflationary pressures and insists weak growth expectations justify further monetary easing. Indeed, this was one of the arguments presented by the governor in her interview. However, we note the market, including the CB, has recently raised its growth expectations for both 2025 and 2026, with the CB insisting CPI inflation will converge to its 3.00% punctual target by Q3 2026 nevertheless.

With this, we fully expect both Governor Rodríguez and Deputy Governor Mejía to favor further monetary easing during the rest of the year and, probably, in early 2026. We are confident they'll remain in the majority during the rest of the year, joined by Deputy Governor José Gabriel Cuadra and, most likely, Deputy Governor Galia Borja. Both might be willing to look at the Federal Reserve's current easing as another argument to continue the easing cycle in the next two sittings and (perhaps) beyond. Indeed, Governor Rodríguez said this was another factor to justify further monetary easing ahead.

It'll be interesting to read whether Borja or Cuadra moved away a bit from the dovish rhetoric in the latest sitting; thus, we believe their position will be most relevant in the sitting's minute, to be published on October 9. However, we have been surprised by Cuadra's dovish discourse and expect him to remain on the side of further easing in the next few months. We believe Borja might abandon the dovish side of the board down the road, given she's voicing concerns on the pace of core inflation; however, there is no certainty she'll move to a more neutral tone anytime soon.

Consensus polls are now showing the market expects the MPR will close the year at 7.00%, in a swift correction, considering consensus polls showed the market expected no easing in November and December. The revision seems linked to recent monetary easing by the Federal Reserve.

We expect to read a lot about the Fed in the sitting's minute. However, we believe it will be interesting to see how many board members show concern about the pace of core inflation or the fact mid-term general inflation expectations are only loosely anchored. We expect the discussion of budget-linked inflationary pressures to be limited in the September sitting, with the board probably waiting for its approval. Still, the board should ponder the inflationary impact of the budget, in our view, given it will certainly pressure CPI inflation up in 2026 by imposing tariffs on some Asian imports and by raising taxes on sugary drinks, video games and tobacco.

Overall, we are confident the CB will cut its policy rate by 25bps in November, bringing down the policy rate to 7.25%. We expect the CB will vote for another 25bps cut in December and see the chances of further easing in Q1 above 50%. However, early 2026 easing is less clear, in our view, depending on the Federal Reserve's actions and the dovishness of the kingmakers in the CB's board. Indeed, early 2026 monetary policy should depend on inflation data and mid-term expectations, but it might not, given the dovish stubbornness of the bulk of the board. Thus, we see the MPR falling to 7.00% by year-end, anticipating further easing in early 2026, with the policy rate falling to 6.75 or 6.50% by Q1-end.

Monetary Policy Council members
MembersOverall biasLatest voteLatest commentDate
Victoria RodríguezDove25bps cutDovishSep-29
Omar MejíaDove25bps cutDovishMay-28
Galia BorjaDovish25bps cutNeutralAug-29
Jonathan HeathHawkishHoldNeutralSep-3
José Gabriel CuadraDovish25bps cutNeutralFeb-4
Note: Overall bias calculated from voting behavior and comments
Source: Banxico
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Manufacturing output expectations plummet in Q3
Mexico | Oct 01, 14:55
  • Deterioration slows in September, with relevant m/m rebound
  • Commerce net sales plunged in July and August, rebounded 1.7% y/y in September

Manufacturing output expectations plummeted in Q3, per data published by the stats office INEGI on Tuesday. The September contraction, of 6.8% y/y, shows quite an improvement vs the 19.9% y/y plunge scored in August. This was obtained thanks to a solid m/m rebound of the indicator, suggesting the quarter collapse might not carry on with all its strength into Q4.

The aggregate trend indicator for the manufacturing industry declined m/m, despite better output hopes. Moreover, the indicator continued to fall y/y, pressured down nearly across the board.

The aggregate trend indicator in commerce fell y/y too, but only by 0.5% y/y, showing a relative improvement vs the 14.0% y/y plunge posted in August. This rebound is consistent with better net sales expectations, up 1.7% y/y in September, after posting two two-digit contractions in July and August.

Business expectations in the non-financial services sector showed weakness too, with the aggregate trend indicator down by 3.9pts m/m. In turn, the construction industry posted mixed results, with the expectation of works as a principal contractor jumping by 31.6% y/y, ending a five-month negative trend with strength. This was not due to a base effect, with the index jumping to 57.0pts in September, the best result since March and second best in more than ten years.

Overall, business expectations for the manufacturing industry weakened severely in most of Q3, rebounding relevantly to close the quarter. It will be interesting to see how these expectations perform in Q4. In any case, it's curious to see a lag in these expectations vs the imposition of tariffs from the US, recalling most uncertainty seemed contained in Q2, when the US threatened with broad tariffs, which ended up contained to a few industries, in what seems like a privileged position held by Mexico vis a vis other key US trading partners.

Business expectations' change (% y/y)
Aug-24 Sep-24 Jul-25 Aug-25 Sep-25
Aggregate trend indicator in construction, pts48.551.444.541.448.7
Works as principal contractor 0.9% -21.8% -5.3% -16.7% 31.6%
Other works 13.0% 53.8% -40.8% -35.7% -47.4%
Total contracts 0.3% -4.9% -5.4% -8.9% 6.4%
Employment -6.3% -7.9% 1.7% 1.7% 6.1%
Aggregate trend indicator in manufacturing, pts55.550.348.050.549.5
Manufacturing output 6.1% -5.1% -9.0% -19.9% -6.8%
Plant utilization 8.8% -2.5% 0.2% -17.2% 9.4%
National demand 15.6% -6.1% -3.9% -0.1% -5.9%
Exports -3.7% -2.5% -3.7% -4.7% -2.9%
Employment -2.9% -1.4% -2.2% -1.3% -1.0%
Aggregate trend indicator in commerce, pts57.647.950.149.647.6
Commerce net sales 15.2% -15.5% -22.9% -13.3% 1.7%
Revenues for commissions 16.6% -15.4% -33.7% -30.9% -7.1%
Net acquisitions 7.3% -10.2% 16.0% -14.4% -1.4%
Inventory 2.5% -12.4% 17.4% -9.6% 0.5%
Employment 0.6% 0.5% -1.4% 0.6% 2.8%
Aggregate trend indicator in non-financial services, pts54.049.555.852.448.5
Revenues -1.2% 7.8% 1.8% -3.2% -1.9%
National demand -1.2% 5.3% 1.4% -4.6% -0.4%
Spending in goods and services -3.3% 9.9% -1.4% -0.2% -6.1%
Employment 0.1% -2.1% 0.7% -3.8% 0.2%
Source: INEGI
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Business confidence continues to fall, but slows its decline in September
Mexico | Oct 01, 14:42
  • Weaknesses persist across the board
  • But m/m deceleration comes across the board too

Business people confidence fell by 1.6pts y/y in September, adding 17 consecutive months in the red, per data published by the stats office INEGI on Tuesday. This is quite a deceleration from the 3.4pts y/y contraction posted in August and from the 5.2pts y/y contraction averaged in the first seven months of the year. This deceleration is in part due to a base effect; however, the global business people confidence index rose in September a bit, doing so for the third time in a row, suggesting a slight change in course.

The weaknesses persisted across all measured industries, with confidence down y/y in construction, manufacturing, commerce and non-financial services. However, as with the general index, the contraction slowed in all too. Notably, the perception of this as a positive time to invest moved to positive territory in commerce and non-financial services, due mostly to a base effect.

Overall, business confidence remains relatively weak, with the general index below 50.0pts in the last seven months. The recent deceleration of an ongoing contraction is in part due to a base effect, and a mild rebound over the past three months is no proof of recovery, in our view. Indeed, a relevant rebound would surprise us at this time, considering weak growth and poor expectations for the mid-term, with reigning uncertainty weighing on the business climate.

Businesspeople confidence, pts
Jul-24 Aug-24 Sep-24 Jun-25 Jul-25 Aug-25 Sep-25
Global businesspeople confidence53.552.751.048.649.049.349.4
Construction 50.6 51.1 47.9 47.5 47.0 46.2 46.5
Adequate time to invest 32.1 34.7 26.9 22.4 25.4 22.5 23.4
Manufacturing 53.0 52.9 51.6 49.2 49.3 49.2 49.3
Adequate time to invest 44.6 45.9 42.5 37.1 38.2 36.6 37.1
Commerce 54.8 55.0 54.4 51.1 49.6 51.0 51.7
Adequate time to invest 40.6 42.2 40.9 38.3 33.9 37.1 43.7
Services (non-financial) 54.5 53.1 51.1 49.1 50.1 50.4 50.6
Adequate time to invest 40.9 38.7 32.3 32.3 34.6 35.2 37.1
Source: INEGI
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Egypt
Deposit dollarization rate moderates to 25.6% as of end-August
Egypt | Oct 02, 11:43
  • Rate likely to improve further as pound appreciates vs USD
  • Total deposits excluding government and foreigners' deposits rose 23% y/y and their stock covers bank loans twice

The Deposit Dollarization Rate fell by strong 50bps m/m to 25.6% as of end-August after falling by 30bps m/m in the preceding month, according to CBE monetary data. The m/m decline came as a result of a falling stock of foreign currency deposits, while total deposits expanded on the month. More specifically, the m/m drop in the foreign currency deposits was driven by the falling stock of time and saving deposits, although the stock of demand deposits of the households and the private business sector increased. We attribute the drop in the value of foreign deposits to the recent appreciation of the pound and we think the deposit dollarization rate will drop further in the coming months as the pound has gained even more strength in September. We remind that remittance inflows through the official banking channels have improved considerably, which coupled with strong portfolio and FDI inflows boosted FX liquidity and shored up the pound.

Meanwhile, the total bank deposits - excluding government deposits and the deposits held by foreigners (external sector) - rose by 23.4% y/y to EGP 12.0tn as of end-month following a 22.9% y/y increase in the preceding month. According to our estimates, the bank loans to total bank deposits ratio has remained stable at around 50%. The IMF had noted that while banks are reported to remain compliant with regulatory limits, foreign currency loans, particularly to public sector entities, are not fully matched by foreign currency deposits (particularly on the balance sheets of the biggest banks). This implies a potential vulnerability to exchange rate movements, including through credit risks. Banks remain compliant with regulatory limits on net foreign exchange open positions, according to the available data.

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KEY STAT
Private business sector credit expands 22.6% y/y in August
Egypt | Oct 02, 11:30
  • Domestic credit expands robustly y/y driven by lending to private business sector, households and government
  • Government accounts for 57% of all received loans
  • CBE claims on central governments edge down in August, but remain elevated
  • CBE promised to stop direct financing to government agencies

Private business sector credit expanded by a strong 22.6% y/y to EGP 3.07tn (USD 64bn) as of end-August (about 20% of GDP), slowing from a 32.8% y/y increase in February, according to monthly data release by the central bank (CBE). Most of the funds are channeled into the industry and services sectors, each accounting for about 25% of total loanable funds, but a more detailed breakdown is not available. Lending to the private corporate sector has remained robust despite the economic uncertainty and high nominal interest rates, which has fueled a revival in private investments and a recovery in domestic demand. Looking at m/m dynamics, the expansion of loans to the business sector was underpinned by a modest 1.1% m/m growth, edging down from a 1.3% m/m increase in the previous month. Claims on private sector companies account for about 20% of total domestic credit as lending to the government continues to dominate the credit market. Growth in lending to households has also remained strong, expanding by 26.6% y/y in the month (previously: 26.2% y/y) and accounts for about 9% of total credit in the economy.

Overall, the expansion of credit to the private economy (business plus households) has recovered and is likely to strengthen further as consumer inflation moderates, non-oil manufacturing expands, and nominal interest rates are slashed. However, elevated broad money growth running above its historical average also contributes to existing inflationary pressures.

Domestic credit (EGP bn)
May-25Jun-25Jul-25Aug-25
Domestic credit 14,619 14,871 15,270 15,531
Net claims on government 8,254 8,415 8,693 8,820
CBE claims on government (net) 2,161 2,258 2,461 2,413
Bank claims on government (net) 6,093 6,158 6,232 6,407
Claims on private business sector 2,937 2,998 3,038 3,070
Claims on households 1,280 1,303 1,329 1,364
Source: CBE

Lending to government

Net claims on the government, which account for 57% of total credit, rose by 1.5% m/m to EGP 8.82tn following a 3.3% m/m increase in the preceding month and the annual growth rate eased to 31.6% from 34.2% previously. The new lending to the government came entirely from the banks, who saw their net claims rising by EGP 175bn m/m, while CBE's net claims on the government fell by EGP 48bn on the month. The drop in CBE's net claims on the government was mostly due to the falling stock of credit facilities. Egypt had promised the IMF in an USD 8bn financial support agreement signed in March last year that it would reduce CBE lending to the government, which undermines monetary policy and puts pressures on the pound. Egypt told the IMF in June 2024 that it would reduce borrowing by other government agencies from the CBE by EGP 150bn by the end of June and by EGP 100bn in subsequent years until it had fallen to zero.

Local banks have large exposure to high-yielding government securities, which has limited the decline in banks' asset quality over the past few years in which Egypt's underlying economic weaknesses have been tested by a series of external shocks. The share of NPL/total loans has remained broadly stable and low at around 3% before moderating to 2.2% as of end-March. The banking system's net foreign assets have improved recently on the back of strong portfolio inflows and tranches from the USD 35bn UAE deal.

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No electricity tariff before January 2026 – minister
Egypt | Oct 02, 08:18
  • There had been speculations that tariff increase would be pushed back to early 2026

The government does not plan to increase electricity prices until January 2026, according to the minister of electricity. Electricity prices will be reviewed based on actual costs to determine the new price structure. This is not a surprising piece of news, as unnamed government officials already told the local press in September that the tariff adjustment would be delayed to early 2026. The recent appreciation of the pound gave some room for the delay, the sources explained.

The cost of electricity production has soared after the float of the EGP in March 2024 and Egypt's increased reliance on more expensive LNG imports. Egypt raised electricity prices by 14-40% in September 2024 and has repeatedly told the IMF it remains committed to its phase-out plan. Electricity subsidies surged to EGP 10bn in FY 2024/25, exceeding the EGP 2.5bn original budget target.

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PRESS
Press Mood of the Day
Egypt | Oct 02, 06:53

Egypt unveils Smart Cities Strategy to drive sustainable urban transformation (Zawya)

Suez Canal activity drops 52% YoY in FY2024/25 amid geopolitical tensions (Zawya)

Harms of the GERD revealed (Ahram)

Egypt private investment hits 5-year high in FY24/25 (Ahram)

Egypt becomes MENA's 3rd-largest construction hub with USD 1.4bn boost: Report (Ahram)

Korean direct investments in Egypt surpass USD 6bn, trade volume hits USD 1.6bn in 2024 (Daily News Egypt)

Egypt summer 2025 sees rise in last-minute travel, leisure spending (Egypt Business)

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Surplus in banking system’s NFAs drops 3.4% m/m to USD 18.2bn as of end-August
Egypt | Oct 02, 06:48
  • M/M drop due to falling foreign assets of commercial banks
  • Commercial banks' NFAs remain positive for sixth straight month
  • EGX recorded modest capital inflow in August

The Net Foreign Assets (NFA) of the banking system (banks + CBE) fell by EGP 30bn or 3.4% m/m to EGP 870bn (USD 18.2bn) as of end-August, following a strong 21.4% m/m increase in the preceding month, according to data released by the central bank. The fall was entirely due to falling foreign assets of the commercial banks (-USD 860mn m/m), which offset a system-wide drop in foreign liabilities (-USD 13mn m/m). We usually attribute the movements in the bank's foreign assets to capital inflows, but there was a modest net foreign purchase of T-bills recorded through the local stock market in August. The simultaneous drop in the banks' foreign liabilities (-USD 84mn m/m) suggests the resident banks may have paid off some external loans in the month under review, but the drop in foreign assets is most likely due to higher imports (e.g. more expensive LNG during the peak demand for electricity).

We remind the system-wide NFAs stood at USD 22bn net liability as of end-February 2024 and their sharp improvement since then was due to USD 35bn UAE deal and a surge of portfolio inflows that followed the pound's float and the securing of massive external financing. While this massive inflow of hot money has raised the risks related to capital outflows and roll over risks, Egypt has largely emerged unscathed from the sell-offs triggered by Trump's tariffs and the 12-day war thanks to recent reforms and relatively large external reserves. Interestingly, the pound has appreciated since April, partly due to returning portfolio investors, and partly due to US monetary policy aimed at weakening the US dollar.

Foreign Assets of Banking System (EGP bn)
May-25Jun-25Jul-25Aug-25
Net Foreign Assets 733 742 901 870
Foreign Assets With4,1124,1484,2524,216
Central Bank of Egypt 2,347 2,352 2,330 2,334
Banks 1,765 1,796 1,922 1,882
Foreign Liabilities With3,3793,4063,3523,346
Central Bank of Egypt 1,855 1,852 1,819 1,817
Banks 1,524 1,554 1,533 1,529
Source: Central Bank of Egypt
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Qatari Dair and St. Regis plan USD 3.5bn Red Sea project
Egypt | Oct 02, 06:30
  • Qatar has pledged USD 7.5bn in direct investments in Egypt
  • Remaining USD 4bn Qatari investments will go towards a project on Egypt's north coast

Qatari Dar, which is owned by the Qatari sovereign wealth fund, and Mariott-owned hospitality chain St. Regis will soon launch a USD 3.5bn tourism project on the Red Sea coast, according to the local press. There are no details yet, but the local press links the investment plans with previously reported negotiations with unnamed GCC sovereign wealth fund to launch a big-ticket project in the 174 sq km Ras Shukeir zone on the Red Sea. Last month, Emaar Misr and Saudi-owned real estate developer Citystars Properties announced an EGP 900bn integrated tourism project on the Red Sea.

The Qatari-led project is a part of the larger USD 7.5bn direct investment pledge made by the Gulf country. The Qatari ambassador to Egypt said recently that the remaining USD 4.0bn will go towards a project on Egypt's north coast. He said the project will be announced "as soon as possible". Negotiations with the Qatari Real Estate Regulatory Authority are reportedly underway and are focusing on the final parts of the agreement.

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Foreign funds buy USD 1.8bn worth of bonds/T-bills on EGX in September (net)
Egypt | Oct 02, 05:45
  • Pound has appreciated since April on back of strong portfolio inflows, tourism and remittances
  • Foreign funds bought USD 27.3bn worth of debt notes through EGX since March 2024, attracted by high nominal interest rates
  • Foreign investors held USD 39.9bn worth of T-bills as of end-May, according to CBE data

Foreign institutional investors bought EGP 273bn worth of T-bills and bonds through the local exchange (EGX) in September and sold EGP 188bn worth of the debt instruments, recording a net acquisition of EGP 86bn (USD 1.8bn) in the month, according to datafrom the local bourse. The non-Arab institutional investors, who we believe are more sensitive to global and regional volatility, recorded a net inflow of USD 1.1bn in the month. Egypt has weathered the two global sell-offs - the global meltdown triggered by Trump's tariffs in April and the 12-day war between Israel and Iran in June - relatively unscathed. Further, the FX market was liquid enough to accommodate smooth and orderly exit in April and June. The pound has appreciated since April, partly due to returning portfolio investors, tourism and remittance inflows and partly due to US monetary policy aimed at weakening the US dollar.

It should be noted that the EGX launched secondary trading of T-bills relatively recently and the data is now lumped together (bonds + T-bills), with demand most likely geared almost entirely towards the short-term notes.

The total purchases of foreign investors through EGX (including foreign Arab and non-Arab funds) was EGP 1.32tn since March 2024, resulting in a total FX inflow of USD 27.3bn through the bourse (not accounting for roll-overs and maturities). Separately, the foreign investors bought around USD 8-10bn worth of T-bills directly from the banks, according to our calculations. While this massive inflow of hot money has raised the risks related to capital outflows and roll over risks, Egypt has largely emerged from the April and June sell-offs unscathed thanks to recent reforms and relatively large external reserves. Foreign investors held USD 39.9bn worth of T-bills as of end-May, accounting for about 40% of the outstanding stock and for nearly 80% of CBE's official FX reserves. The CBE said that the foreign holdings include collaterals (contingent liabilities) worth USD 23.4bn.

Trading of T-bills/bonds by institutional investors on EGX (EGP bn)
May-25Jun-25Jul-25Aug-25Sep-25
Buy 942 1,215 1,439 1,173 1,367
Egyptians 720 911 1,102 961 1,094
Arabs 119 87 154 98 137
Foreign non-Arab 103 217 183 113 136
Sell 942 1,216 1,440 1,174 1,370
Egyptians 816 968 1,263 979 1,183
Arabs 65 89 99 88 105
Foreign non-Arab 61 159 79 107 83
Source: EGX
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CBW
MPC likely to cut rates by 100-200bps on Oct 2 as pound firms, inflation eases
Egypt | Oct 01, 12:30
  • Next MPC meeting: October 2, 2025
  • Current policy rate: 22.5%
  • EmergingMarketWatch forecast: 20.5% - 21.5%

The MPC will hold a meeting on Thursday (Oct 2) and we expect that the committee will continue the easing cycle after delivering an expected 200bps rate cut in August. Following the positive CPI inflation report for August, we are anticipating a 100-200bps rate cut tomorrow. Despite the surge of portfolio inflows over the past year and a half, Egypt has managed to boost its resilience to external shocks and the latest two major external shocks - the US tariffs announced in early April and the 12-day war between Israel and Iran mid-June - had limited impact on the country. It should be noted that some analysts expect the MPC to hold the rates as the government is set to raise the fuel prices any day now as part of its reform program that is monitored by the IMF. However, we do not expect a major price adjustment because of the current global crude oil prices and the recent appreciation of the pound, so we think the MPC would not be deterred from implementing a further rate cut. Indeed, the pound has gained some strength since early July, partly due to capital inflows and partly due to US policy to weaken the US dollar, which will allow the CBE to cut the interest rates.

The CBE slightly revised its baseline and alternative annual headline inflation forecasts and now sees inflation averaging 15-16% in 2025, up from its 14-15% forecast, and 11-12% in 2026 (previously: 10-12.5%). Still, headline inflation is expected to remain contained during H2 2025 driven by the cumulative impact of monetary policy tightening and favourable base effects. Consumer inflation is expected to moderate during 2026, albeit at a slower pace given the expected drag effect from the fiscal measures aimed at tightening the fiscal stance. As such, underlying inflation is expected to converge to its historical average over the medium term as inflation expectations improve further.

GDP growth recovered in 2024/25, as the FX shortages were eliminated, non-oil manufacturing rebounded, FDI inflows picked up, and tourism inflows remain resilient. Remittance inflows soared following the FX reform from March 2024, which supports private consumption. The MPC said that GDP growth should reach its full potential by mid-2026 and the negative output gap is helping to reduce inflationary pressures. Beyond that point of convergence, demand-side inflationary pressures may begin to surface, but the central bank expects that these pressures will remain contained under the current monetary policy stance.

Monetary Policy Committee Statement

Monetary Policy Review

Monetary Policy Committee Meeting Schedule

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Nigeria
HIGH
Stanbic Bank PMI falls to 53.4 in September
Nigeria | Oct 02, 10:53
  • Survey reflects continued gains in output and new orders
  • Cost pressures softened, with purchase price inflation at its weakest since March 2020
  • Confidence remained muted but expectations for future growth supported optimism

The Stanbic IBTC Bank Nigeria PMI fell to 53.4 in September from 54.2 in August but remained above the 50.0 threshold for the tenth month in a row, indicating continued expansion. New business rose significantly driven by stronger customer demand, though the pace of growth moderated to a three-month low. The expansion in new orders translated into higher business activity across all four broad sectors covered by the survey.

Inflationary pressures continued to ease, with overall input costs rising at the slowest pace in 30 months. This was driven by weaker increases in both purchase prices and staff costs. Purchase price inflation reached its softest level since March 2020. Staffing levels grew at the fastest rate since October 2023. At the same time, input buying surged and contributed to an accumulation of inventories.

According to Stanbic IBTC, non-oil sector growth is expected to remain strong into 2026, supported by likely lower interest rates, subdued inflation and reduced exchange rate volatility. While companies remained optimistic about the 12-month outlook, sentiment eased slightly to a four-month low and remained below the series average.

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NNPC reports heavy losses during PENGASSAN strike
Nigeria | Oct 02, 08:42
  • Disruptions occurred across oil, gas and power output during the three days
  • Losses translated into 16% of oil, 30% of gas and 20% of electricity supply
  • Delays affected crude lifting, maintenance work and monetised gas restoration

The Nigerian National Petroleum Company Limited (NNPC) on Wednesday (Oct 1) reported heavy losses following a three-day strike by the Petroleum and Natural Gas Senior Staff Association of Nigeria (PENGASSAN). In a letter addressed to regulatory authorities and security agencies, NNPC chief executive officer Bashir Ojulari said the industrial action disrupted oil, gas and power production nationwide. Within the first 24 hours, the strike deferred 283,000 barrels of oil per day, 1.7bn standard cubic feet of gas daily and more than 1,200 megawatts of power generation. This translated into 16% of oil production, 30% of marketed gas and 20% of electricity supply. The strike was suspended on Wednesday after a resolution was reached between PENGASSAN and the Dangote Refinery.

Despite the suspension of the strike, Ojulari stressed that losses had already reached critical levels. According to him, scheduled maintenance works had been delayed, crude lifting operations disrupted and demurrage costs triggered at export terminals. Further, about 100,000 bpd of crude oil and 1.34bn standard cubic feet of monetised gas expected to be restored were delayed. He said the strike's impact went beyond Dangote's operations, affecting national revenues and the country's energy infrastructure. The NNPC warned that unless a sustainable resolution was achieved, disruptions would continue to place national energy stability under severe strain.

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PRESS
Press Mood of the Day
Nigeria | Oct 02, 07:43

Nigeria's eight-month debt service bill hits $2.86bn - CBN (Punch)

Pressure mounts on government over subsidy looters' disclosure (Punch)

Tinubu didn't push 15m into poverty, Presidency replies Obi (Punch)

Opposition govs joining APC over Tinubu's performance - Akpabio (Punch)

PENGASSAN Suspends Strike After FG Brokered Deal With Dangote (ThisDay)

FG To Blacklist Defaulting Contractors In Housing Sector (ThisDay)

PenCom clarifies "overturning" N1 billion Leadway sanction, denies working for Odukales (Nairametrics)

SEC urges youth to build wealth through capital market investment (Nairametrics)

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Net portfolio flows into equity turn positive in August
Nigeria | Oct 02, 06:47
  • Foreign inflows rose by 88% m/m, foreign outflows fell by 20%
  • Total market turnover fell by 50% m/m to NGN 908bn
  • The fall was due to the absence of block trades that dominated in July

Net offshore portfolio flows into Nigerian equity recorded a surplus (net inflow) in August of NGN 18.47bn (USD 12.4mn), according to NGX data. This follows a deficit of NGN 45bn in July. Foreign inflows rose by 88% m/m, to NGN 95.14bn from NGN 50.5bn in July. Meanwhile, foreign outflows fell to NGN 76.67bn from NGN 95.5bn in July, a 20% drop. Overall market turnover also fell, by 50% m/m to NGN 908.4bn from the record-high of NGN 1.8tn in July. August saw stronger foreign participation, with foreign portfolio investment (FPI) activity on the NGX accounting for 19% of the total market turnover compared to just 8% in July.

Domestic transactions dropped by 56% m/m to NGN 736.6bn from NGN 1.67tn in the previous month (which had been driven largely by block trades). Domestic activity weakened across both retail and institutional segments. In addition to the influence of large block trades, analysts caution that the sharp monthly decline in domestic activity reflects market volatility. For the year-to-date, total domestic transactions reached NGN 5.5tn and accounted for about 79% of total activity. Total transaction value on the NGX reached NGN 6.9tn for the year-to-date as of August, up 99% from NGN 3.5tn for the same period in 2024.

NGX transactions summary (NGN bn)
Apr-25May-25Jun-25Jul-25Aug-25
Total foreign inflow 26.6 66.1 72.8 50.5 95.1
Total foreign outflow 36.4 52.8 66.5 95.5 76.7
Total domestic transactions 419.0 581.6 639.3 1,669.1 736.6
Domestic retail 181.3 337.5 274.6 516.5 343.7
Domestic institutional 237.7 244.1 364.7 1,152.6 392.9
Total transactions482.0700.5778.71,815.0908.4
Source: NSE
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Q&A
Domestic borrowing plan 2025
Nigeria | Oct 01, 20:00

Question:

Can I please have a link to the the gross financing amount (domestic) for Nigeria for this financial year?

The question was asked in relation to the following story: New external financing plan does not mean immediate debt rise - FinMin

Answer:

The FG plans domestic borrowings of NGN 7.4tn in 2025 (and NGN 1.8tn in foreign borrowings) to plug a budget deficit of NGN 13.1tn. This can be found in the 2025 MTEF on page 41 of 70 (here). Please note that since the publishing of the framework, the president increased the budget from NGN 47.9tn to NGN 54.9tn, which we covered here. However, the government did not publish an updated MTEF.

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Q&A
Consequences of failing to meet recapitalisation deadline
Nigeria | Oct 01, 19:59

Question:

Do you know what would/could happen for banks which fail to meet recapitalisation requirements in time for the CBN deadline?

The question was asked in relation to the following story: Recapitalisation deadline puts pressure on tier-2 banks - report

Answer:

The CBN said it will be taking regulatory action against banks that don't meet the deadline. This may possibly include more monitoring, increased oversight and sanctions. Based on the CBN's framework and past recapitalization exercises (2004-2005 as well as 2009), non-compliant banks could face forced mergers or acquisitions with stronger institutions, license downgrades or revocations, or regulatory penalties such as fines or operational restrictions. Some local analysts also think temporary forbearance may be granted if a bank showed genuine efforts to raise capital. The exact actions will depend on the specific circumstances of each bank and the CBN's assessment.

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India
Cabinet approves INR 11.4tn pulses scheme to boost output
India | Oct 01, 15:06
  • INR 842bn outlay approved for MSP for rabi crops
  • Scheme to run from FY26 to FY31
  • Focus on tur, urad and masur

The cabinet approved today (October 1) a six-year central scheme, Mission for Aatmanirbharta in Pulses, with an outlay of INR 11.4tn, aimed at boosting domestic output, reducing import dependence, and strengthening food security. The plan will run from FY26 to FY31, with a sharp focus on tur, urad, and masur.

The programme coincides with the cabinet's approval of INR 842bn towards minimum support prices (MSP) for rabi crops, underlining the government's parallel focus on farmer welfare and income stability. The mission will follow a holistic approach spanning research, seed systems, area expansion, procurement, and market stabilisation. A cluster-based model across 416 districts will be adopted, supported by 1,000 new post-harvest processing units with subsidies of up to INR 2.5mn each. NAFED and NCCF will undertake 100% assured procurement of tur, urad and masur for the next four years under PM-AASHA, while monitoring global prices to safeguard farmer confidence.

By 2030-31, the mission aims to expand the pulses area to 31mn hectares from 24.2mn hectares in FY24, and raise production from 24.2mn tonnes to 35mn tonnes. Productivity is targeted to rise to 1,130 kg/hectare from the current 881 kg/hectare. To achieve this, 12.6 quintals of certified seeds will be distributed, covering 37mn hectares, while 8.8mn free seed kits will be provided to promote expansion into rice fallow areas and crop diversification.

India, the world's largest producer and consumer of pulses, continues to face a 15-20% import gap. By addressing this, the mission is expected to cut foreign exchange outflows, stabilise prices, and enhance farm incomes, thereby supporting rural consumption.

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Gross GST collections increase 9.1% y/y in September
India | Oct 01, 14:34
  • Net collection rises 5% y/y
  • Recent GST rate cut feeding into demand momentum
  • Revenue collection higher than August

India's gross Goods and Services Tax (GST) collections rose 9.1% y/y to INR 1.89tn in September, according to data from the GST council. The uptick was attributed to stronger sales following recent tax rationalisation. Revenues were also higher than August's INR 1.86tn. Domestic collections grew 6.8% to INR 1.36tn, while GST from imports jumped 15.6% to INR 524.9bn. Refunds increased sharply by 40.1% y/y to INR 286.6bn, leaving net GST revenue at INR 1.60tn - up 5% from last year.

The gains come just weeks after the rollout of GST 2.0 on September 22, which streamlined the structure into four slabs - 0%, 5%, 18% and 40%. Essentials such as UHT milk, Indian breads, life-saving medicines and individual health and life insurance premiums are now zero-rated, while daily-use goods from toothpaste to ghee fall in the 5% bracket. White goods and small cars are taxed at 18%, and luxury cars, tobacco and alcohol at 40%.

By reducing rates on nearly 375 items, the reforms aim to spur consumption and ease compliance. With the festive season under way, September's pickup suggests that GST rate cuts are already feeding into demand momentum.

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Indonesia
PRESS
Press Mood of the Day
Indonesia | Oct 02, 06:14

Indonesia to Broaden Economic Stimulus to 30 Million Vulnerable Households (Tempo)

Prabowo to Choose From Three Finalists for New Immigration (Jakarta Globe)

Indonesia to receive new T-50i jets from S Korea in November (Antara News)

Pancasila as pillar: Indonesia targets food self-sufficiency in 2025 (Antara News)

Stimulus to Boost Economy Above 5% (Bisnis)

Thickening Social Assistance Will Not Help the Economic Slowdown (Media Indonesia)

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KEY STAT
General govt debt rises by 0.3% q/q to IDR 9,219.6tn at end-Q2
Indonesia | Oct 01, 17:57
  • Debt-to-GDP ratio falls to 40.2% due to nominal GDP growth
  • Loan stock rises faster than debt stock
  • Govt continues to increase long-term debt, reduce short-term debt
  • We expect debt-to-GDP ratio to remain above 40% in H2 2025

The general government debt increased by 0.3% q/q to IDR 9,219.6tn at end-Q2, according to data released by the Treasury (DJPPR). In annual terms, the public debt rose by 7.2% y/y. However, the debt-to-GDP) ratio fell to 40.2%, down from 40.8% at end-Q1, and up just 0.1pp from a year ago.

The quarterly increase was driven by mainly by loans, which accounted for two-thirds of the growth, while bond issuance accounted for the remaining third. We should note that the loan stock has been growing consistently over the last three quarters.

In another breakdown, long-term debt accounted for almost the total quarterly increase of public debt. Within that, debt issuance long-term bonds rose by 0.8% q/q, while the long-term loan stock was up 1.9% q/q. The government continued to reduce its short-term debt, with the stock of securities due in less than a year down by 6.7% q/q.

Breakdown by currency shows that rupiah-denominated debt rose by 1.4% q/q, while FX-denominated debt declined by 2.3% q/q. However, some of that decline could be attributed to the rupiah's appreciation in the period. By creditors' residence, domestic residents increased their public debt holding by 0.8% q/q, while the non-residents' debt fell by 0.5% q/q.

Overall, the public debt-to-GDP ratio has remained more or less stable over the past year, largely due to the nominal GDP growth. Still, it has exceeded the 40% threshold in four of the last five quarters, while it seems it will remain above that threshold in H2 2025 as well.

Gross General Government Debt (IDR tn)
Q2 24 Q3 24 Q4 24 Q1 25 Q2 25
General government debt8,600.38,607.68,892.19,187.79,219.6
Debt-to-GDP ratio (%) 40.1% 39.5% 40.2% 40.8% 40.2%
Short-term by original maturity 84.2 88.4 106.0 122.4 124.6
Long-term, by original maturity: 8,516.1 8,519.3 8,786.1 9,065.3 9,095.0
Debt securities 7,433.1 7,483.5 7,725.7 7,970.6 7,980.9
Loans 1,126.6 1,083.9 1,122.7 1,173.6 1,193.9
Domestic creditors 5,408.5 5,462.1 5,600.9 5,760.0 5,808.7
External creditors 3,191.8 3,145.6 3,291.2 3,427.7 3,410.8
Source: DJPPR
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Foreign tourist visits rise by 12.3% y/y in August
Indonesia | Oct 01, 17:22
  • Highest monthly nominal number of arrivals since Aug 2019
  • Occupancy ratio declines as new establishments open

Foreign tourist visits rose by 12.3% y/y in August, slowing from 12.0% y/y growth in July, according to BPS data. Nominally, foreign tourist visits reached 1.5mn, the highest monthly level since Aug 2019. In cumulative terms, foreign tourist visits were up 10.4% y/y to 10.0mn in Jan-Aug, again the strongest performance in the post-COVID period.

The hotel occupancy rate continued to fall, down to 50.5% in August, which was 4.3pps lower than a year ago. This was the seventh consecutive month of declining occupancy ratio, which is consistent with the opening of new establishments as the tourism sector's growth gains pace.

Overall, the tourism sector is set to post its strongest performance since 2019. It is unlikely to beat the arrivals seen back then, though it will likely aim for a record high in 2026.

Foreign tourist visits
Aug-24 May-25 Jun-25 Jul-25 Aug-25
Number 1,339,946 1,306,000 1,415,965 1,481,346 1,505,220
% y/y 18.3% 14.0% 18.2% 13.0% 12.3%
Cumulative 9,092,856 5,634,214 7,050,179 8,531,525 10,036,745
% y/y 20.4% 7.4% 9.4% 10.0% 10.4%
Hotel occupancy rate (TPK) 54.9% 48.3% 50.0% 52.8% 50.5%
Change y/y 2.4% -5.8% -4.7% -3.6% -4.3%
Source: BPS
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KEY STAT
External trade surplus nearly doubles y/y to USD 5.5bn in August
Indonesia | Oct 01, 15:03
  • Export growth slowed, but exports increased for the 17th month in row
  • Imports fell for second month running, dragged down by all but electrical machinery and parts
  • Import contraction signals slowdown of private consumption, investment
  • Robust export growth may partially offset the latter's impact on GDP growth

The merchandise trade surplus rose by 97.8% y/y to USD 5.5bn in August, marking another strong performance after it rose nearly sixfold in July, according to BPS data. The trade surplus increased for the fourth month running, reflecting the robust export growth and the declining imports.

In more detail, export growth slowed to 6.5% y/y from 9.9% y/y in August, but it remains very solid. Exports increased for the 17th month in a row, highlighting the strong competitiveness of domestic exporters. Non-oil exports were the sole export growth driver, reflecting higher vegetable oil exports, which were up 51.1% y/y. Iron and steel, vehicles and jewellery exports also registered strong growth. In fact, only mineral fuels exports declined, which was in line with crude oil export decline as well.

By destination, exports to China, ASEAN and the EU drove the overall export growth, while exports to the US also rose by 3.0% y/y despite the imposition of tariffs. In cumulative terms, exports rose by 8.0% y/y in Jan-Aug, boosted solely by non-oil exports.

On the import side, imports fell by 5.8% y/y in August, declining for the second month in a row. Non-oil imports were the main drag as oil imports posted small growth. Within non-oil imports, mechanical equipment and parts were the main drag, though all groups but electrical machinery and parts posted contraction. In cumulative terms, imports still rose by 2.5% y/y in Jan-Aug, reflecting the strong growth in Feb-Jun.

Overall, the declining imports clearly signal a slowdown in private consumption, as well as investment. On the other hand, the export sector is booming, though it may not be enough to offset the impact on GDP growth from lower private consumption and investment, in our view.

External trade
Apr-25 May-25 Jun-25 Jul-25 Aug-25
Exports 20,743.8 24,613.8 23,436.5 24,748.9 24,963.2
Imports 20,585.0 20,312.3 19,333.0 20,575.4 19,475.2
TRADE BALANCE158.84,301.54,103.54,173.55,488.0
Exports (% y/y) 5.8% 9.7% 11.3% 9.9% 6.5%
Imports (% y/y) 21.8% 4.7% 4.3% -5.9% -5.8%
12m rolling balance32,402.333,661.335,245.938,748.241,461.1
Source: BPS
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Pakistan
FinMin rules out new taxes to meet revenue target
Pakistan | Oct 02, 06:59
  • Aurangzeb said resolution of tax disputes would support revenue collection
  • The government is committed to achieving targeted tax-to-GDP ratio in FY26

The government will not impose additional taxes to meet its revenue targets, FinMin Muhammad Aurangzeb told reporters on Wednesday. He expressed hope that the early resolution of ongoing tax litigation in the courts - estimated at around PKR 177bn - would help cover part of the revenue shortfall faced by the Federal Board of Revenue, which stood at PKR 199bn in Q1 FY26. According to media reports, most of these cases are related to the super tax, which has been levied since 2015 on banks, high-earning companies, and wealthy individuals.

An IMF mission is currently in Pakistan for the second review of its loan program. Aurangzeb said that the talks were going smoothly. He reiterated that the government remains committed to raising FBR's tax-to-GDP ratio from 10.2% in FY25 to 11% in FY26, in line with IMF targets.

The successful completion of the review will pave the way for the IMF board to greenlight the disbursement of the third tranche of USD 1bn to Pakistan.

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PRESS
Press Mood of the Day
Pakistan | Oct 02, 06:23

Interior ministry to consider steps to quell unrest in Azad Kashmir (Dawn)

September sees militants 'on back foot' amid drop in violence: reports (Dawn)

Public debt hits Rs80.6tr despite lower interest costs (Dawn)

Punjab to dole out 'ATM cards' to aid flood survivors (Dawn)

Finance czar vows to lift tax take to 11% of GDP despite shortfall (Express Tribune)

PPP, PML-N rush to heal coalition cracks (Express Tribune)

Off-grid levy costs gas sector Rs110bn (The News)

Procter & Gamble to exit Pakistan as part of global restructuring (Business Recorder)

Floods devastate crops, threaten exports: Pakistan minister (Business Recorder)

Matured on 30th Sept: USD500m Eurobond paid off in full: MoF (Business Recorder)

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Yields rise at T-bills auction amid fading rate cut bets
Pakistan | Oct 01, 17:10
  • PKR 730.4bn raised from T-bills sale, below both the target and maturing amount
  • Demand remained robust
  • Additional PKR 246.8bn raised through floating-rate PIB

The government sold T-bills worth PKR 730.4bn in a scheduled auction on Wednesday, falling short of the PKR 750bn target, according to the State Bank of Pakistan (SBP). The issued amount was also well below the maturing amount of PKR 846bn, reflecting the government's aim to limit net issuance of T-bills in FY26 in a bid to reduce refinancing risk.

Bids totalled nearly PKR 1.5tn, resulting in a bid-to-cover ratio of 2.0, indicating robust demand. While this was sharply lower than the 5.3 ratio recorded in the previous T-bills auction two weeks ago, it is too early to conclude that demand for government bonds is weakening, especially as investors continue to prefer risk-free government securities over lending to the private sector.

Meanwhile, cut-off yields rose across the papers, with the sharpest increase of 40.6bps registered in the 1-month bond. This likely reflects absence of more rate cuts prospects, as flood-induced supply shock put upward pressure on inflation. Last month, the SBP held the policy rate steady at 11.0%, citing a slight deterioration in the near-term macroeconomic outlook due to floods.

Separately, the government raised another PKR 246.8bn through an auction of floating-rate Pakistan Investment Bonds (PIBs), exceeding the PKR 200bn target. Total bids stood at PKR 394bn, down from PKR 502bn in the previous tender.

T-Bills auction result, Oct 1
Tenor1-month3-month6-month12-monthTotal
Offering, PKR bn200150200200750
Tendered, PKR bn793.2140.4210.3350.91,494.7
Accepted, PKR bn310.243.566.8220.9641.4
Cut-off yield, %11.15011.05011.05011.190
Yield change, bps40.620.021.219.0
Non-competitive bids accepted8.212.745.722.589.1
Total acceptance318.456.2112.4243.4730.4
Bid-to-cover2.52.51.91.42.0
Source: State Bank of Pakistan

Floating rate PIB auction, Oct 1
Tenor10-year
Offering, PKR bn100
Tendered, PKR bn394.0
Accepted, PKR bn244.0
Non-competitive bids accepted2.8
Total acceptance246.8
Bid-to-cover ratio1.6
Source: SBP
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KEY STAT
CPI inflation rises to 11-month high of 5.6% y/y in September
Pakistan | Oct 01, 15:11
  • Food inflation surged the most since April 2024 as floods destroy crops, disrupt supply chain
  • Core inflation remained broadly stable
  • Policy rate pause likely to be extended in the medium-term

CPI inflation rose to 5.6% y/y in September, quickening from 3.0% y/y in August, according to data released by the Pakistan Bureau of Statistics. The pace of growth, the fastest since October 2024, came in well above the Finance Ministry's forecast range of 3.5%-4.5%. The increase mainly reflected disruption to the food supply chain and crop losses from monsoon floods, which inundated an estimated 1.8mn acres of farmland in Punjab. Sequentially, consumer prices rose 2.0% m/m, following 0.6% m/m contraction in August.

Food inflation jumped to 5.0% y/y, the fastest rate since April last year, driven largely by a surge in the cost of wheat and wheat flour, tomatoes and sugar. This segment added nearly a third to the headline figure. Moreover, inflation in housing and utilities edged up to a ten-month high of 3.7% y/y, primarily due to the higher gas tariff, while a steep increase in water charges also contributed notably to the uptick. However, a sharp decline in electricity prices partially offset these increases.

Higher pump prices and transport fares pushed up transport inflation to 4.2% y/y - the highest since July 2024. Similarly, the cost of healthcare and education, as well as miscellaneous goods and services, remained elevated, posting a double-digit growth.

Core inflation remained broadly stable, rising 7.8% y/y in rural areas, unchanged from the previous month, while climbing to 7.0% y/y in urban areas, up fractionally from 6.9% y/y in August.

The impact of floods on food prices is largely seen as temporary. Last month, the State Bank of Pakistan maintained its inflation forecast for FY26 at 5%-7%, although it projected inflation to breach the upper bound of this range for most of the second half (Jan-Jun) of the fiscal year.

Inflation in Q1 FY26 averaged 4.2% y/y, well below the central bank's full-year projection and down from 9.2% y/y in the same period last year. However, the recent uptrend in CPI suggests that the easing cycle, which started in June 2024 and saw a cumulative 1,100bps cut in the policy rate, has likely ended, in our view. Last month, the key rate was maintained at 11.0% for the second straight meeting as the SBP cited a slight deterioration in the near-term macroeconomic outlook due to ongoing floods.

CPI inflation, % y/y
Sep-24 Jun-25 Jul-25 Aug-25 Sep-25
TOTAL6.9%3.2%4.1%3.0%5.6%
Food and non-alcoholic beverages -0.6% 2.6% 0.9% -1.8% 5.0%
Non-perishable food items -3.5% 4.8% 2.6% 2.0% 6.5%
Perishable food items 20.4% -10.5% -8.2% -21.6% -3.7%
Alcoholic beverages and tobacco 6.7% 5.1% 3.7% 3.6% 3.4%
Clothing and footwear 15.5% 9.0% 8.4% 8.1% 8.0%
Housing and utilities 20.9% -3.3% 3.6% 3.6% 3.7%
Furnishing & household equipment 6.6% 3.7% 3.3% 3.5% 4.1%
Health 13.7% 12.2% 10.8% 10.6% 10.6%
Transport -7.3% 0.6% 2.7% 2.5% 4.2%
Communication 12.7% 0.5% 0.5% 0.5% 0.4%
Recreation and Culture 7.5% -1.0% -1.5% -2.3% -2.7%
Education 12.6% 10.1% 10.2% 10.9% 10.7%
Restaurants and hotels 9.1% 8.4% 7.7% 7.2% 6.1%
Miscellaneous goods & services 12.2% 15.3% 14.9% 14.4% 14.9%
Core inflation
Urban 9.3% 6.9% 7.0% 6.9% 7.0%
Rural 12.1% 8.6% 8.1% 7.8% 7.8%
Source: PBS
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Manufacturing PMI falls to record low of 48.0 in September
Pakistan | Oct 01, 13:39
  • The deterioration was partly driven by flood-related disruption
  • Subdued demand led to declines in output, employment and purchasing activity
  • Input prices rose sharply, weighing on business sentiment

The Manufacturing PMI fell from 50.1 in August to 48.0 in September, the lowest since data collection began in May last year, according to a joint report from S&P Global and Habib Bank Limited. The reading signals a deterioration in the manufacturing sector's operating conditions, in part due to disruption caused by monsoon floods, which weighed on production, demand and supply chains. It also points to renewed pressure on large-scale manufacturing industries, which had expanded to over three-year high of 9.0% y/y in July after contracting for most of FY25.

New orders fell for the fifth straight month, led by weak demand from both domestic and overseas markets. Alongside electricity load shedding and inflationary pressures, this led firms to scale back output - the first contraction since data collection began. Employment levels declined for the fourth month in a row, while input purchases dropped at a record pace amid higher raw material costs. Manufacturers also struggled to sell finished goods, resulting in an increase in post-production inventory for the first time since April.

On the price front, firms' cost burdens soared, with input price inflation accelerating sharply in September, largely due to higher raw material and electricity prices as well as flood-induced supply constraints. In response, manufacturers raised their selling prices at a faster pace.

Lastly, firms expressed strong optimism regarding year-ahead output. Nevertheless, business confidence slipped to a three-month low amid concerns over persistent inflationary pressures and a subdued domestic economy.

In her forward-looking commentary, Humaira Qamar, Head of Equities and Research at HBL, remained upbeat about Pakistan's growth prospects, citing favourable global conditions and milder flood-related damages compared to the previous flooding episodes. She also noted that the expected rise in inflation in September was likely transitory, as supply-side constraints gradually ease.

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Philippines
PRESS
Press Mood of the Day
Philippines | Oct 02, 04:28

IMF trims Philippine growth outlook (BusinessWorld)

BSP sees wider BoP, current account deficits until 2026 (BusinessWorld)

TDF yields drop further (BusinessWorld)

NDRRMC: Reported deaths from Cebu quake climb to 72 (Philippine News Agency)

60-day freeze ordered on Cebu prices after quake (BusinessWorld)

'Rice for All' bags P10B, agri budget hits P256.5B in 2026 NEP (Philippine News Agency)

Chip industry council unveils five-year workforce dev't plan (BusinessWorld)

SC postpones BARMM parliamentary polls to 2026 (Philippine News Agency)

DOJ eyes charging up to 200 persons over anomalous infra projects (Philippine News Agency)

DA flags P125M 'ghost' farm-to-market roads in Mindanao (Philippine News Agency)

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Albania
KEY STAT
Bank of Albania holds policy rate at 2.5% amid stable inflation forecasts
Albania | Oct 02, 09:36
  • Inflation rising slightly to 2.4% due to increased rental prices, while economic activity grew by 3.5% in Q2, driven by consumption and investment, and the labour market showed improvement
  • The Q3 Interim Monetary Policy Report reveals positive economic trends, bolstered by prudent monetary policies, although external uncertainties, including trade dynamics and geopolitical tensions, pose ongoing risks

The Bank of Albania's (BoA) supervisory council decided to maintain the key interest rate at 2.5%, BoA governor Gent Sejko announced. Sejko noted that inflation slightly increased to 2.4% in July and August, influenced primarily by rising rental prices and stabilised oil prices, while food price inflation declined. Domestic inflationary pressures are attributed to strong demand for goods and services, alongside rising wages and production costs. The central bank expects inflation to reach the 3.0% target by H1 2026. Economic activity grew by 3.5% in Q2, driven by increased consumption and investment, although challenges such as declining goods exports and rising imports were noted. Labour market improvements were reflected in a 3.4% increase in employment in the non-agricultural private sector and a drop in unemployment to 8.5%, Sejko mentioned.

In addition, the BoA's supervisory council reviewed and approved the Interim Monetary Policy Report for Q3. The report indicates ongoing positive trends in both the economic and financial sectors, with increases in economic activity, employment, and wages, while inflation remains low and stable. Prudent monetary policies have contributed to calm financial markets and accommodative financing conditions, supporting further expansion of private sector lending, Sejko added. Despite these positive developments, external uncertainties, including trade dynamics and geopolitical tensions, continue to pose risks to the economy.

On the questions asked during the conference, Sejko stated that BoA has assessed the current performance of the Albanian economy as stable, with economic growth recorded at 3.5% in Q2 and 3.7% in Q1 2025. The economic growth was primarily driven by the tourism sector and related activities, despite a decline in agriculture and industry, particularly due to falling exports. While wage increases and other factors are expected to bolster consumption, they may also exert upward pressure on inflation, which is currently below the target of 3.0%. BoA maintains a cautious outlook, projecting growth to remain within the range of 3.5% to 4.0% for the upcoming year.

In response to the government's initiative to reduce cash usage, the BoA is actively collaborating with the ministry of economy to modernize payment systems. The implementation of the Single Euro Payments Area (SEPA) on Oct 7 is a significant step in this direction, allowing Albanian citizens to conduct transactions similarly to those in EU countries. BoA has also announced reductions in transaction commissions, making digital transfers significantly more affordable. These measures aim to enhance financial inclusion, reduce cash reliance, and facilitate easier transactions for citizens and businesses, while ensuring that Albania aligns with European standards in payment systems.

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Foreign investment in Albanian government debt reaches ALL 20.0bn by H1 2025
Albania | Oct 01, 14:32
  • Non-resident investors now hold 2.5% of the domestic debt
  • BoA reported a decline in the weighted average interest rates for both short-term (2.8%) and long-term (3.7%) securities, with strong investor demand allowing the government to meet approximately 90.0% of its short-term borrowing needs
  • The entry of foreign investors into the Lek debt market, primarily institutional investors, has been supported by improvements in Albania's sovereign debt ratings, with upgrades from S&P Global Ratings and Moody's in the past two years, in our view

The portfolio of government debt instruments held by foreign investors in Albania reached ALL 20.0bn by H1 2025, according to data from Bank of Albania (BoA), indicating that non-resident investments in the country's sovereign debt securities have increased by approximately ALL 6.0bn, or 43.0%, since the beginning of the year. Foreign investors now hold about 2.5% of the Albanian government's domestic debt, up from 1.8% at the end of 2024. These figures suggest a growing presence of non-resident investors in the domestic government securities market. We think that most of this increase occurred in Q1 2025, while investment activity slowed significantly in Q2, likely due to declining yields.

In addition, the BoA reported that the weighted average interest rate on short-term securities fell to 2.8% in H1 2025, down from 3.0% in the previous half and 3.5% a year earlier. This decline was largely influenced by the rates on 12-month securities, which fluctuated between 2.7% and 2.8%. Despite lower interest rates, demand from investors has remained strong, allowing the government to meet approximately 90.0% of its short-term borrowing needs. For long-term securities, the weighted average interest rate decreased to 3.7%, compared to 4.6% and 5.1% in the previous two half-years. Interest rates for 2- and 3-year securities fell by 0.9pts to 2.9% and 3.1%, respectively. Rates for 7- and 15-year securities also decreased by 1.2 and 0.6pts, reaching 4.0% and 5.6%. Similarly, the rates for 5- and 10-year securities dropped by 1.0pp to 3.4% and 5.0%. The demand for long-term securities in the primary market remained robust, meeting about 80.0% of the government's borrowing needs.

We recall that foreign participation in the Albanian Lek debt instruments market began in 2024, primarily focusing on bonds. While the identities of these investors are protected by confidentiality rules, market sources suggest that they are mainly institutional investors, such as hedge funds, who are incorporating Albanian government Lek bonds into their portfolios for the first time. In addition to domestic securities, there has been significant interest in Albanian Eurobond issuances. In Feb 2025, the Albanian government issued Eurobonds valued at EUR 650.0mn, yielding 5.0%. The demand for these Eurobonds was notably high, reaching a total of EUR 3.7bn.

We also think that the entry of foreign investors into the Lek government securities market has been bolstered by improvements in Albania's sovereign debt rating over the past two years. In Mar 2025, S&P Global Ratings upgraded Albania's long-term sovereign debt rating for the second time in two years, from BB- to BB with a stable outlook. This followed an upgrade from B+ to BB- in Mar 2024. Additionally, Moody's upgraded Albania's rating from Ba1 to Ba3 in Oct 2024.

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Economic sentiment indicator contracts by 1.3pts m/m in September
Albania | Oct 01, 14:28
  • ESI remains approximately 7.0pts above the historical average with declines in confidence noted in the trade and industry sectors, while the services sector and consumer sentiment saw improvements
  • Industry confidence dropped by 6.3pts, falling below its historical average, indicating weakened sentiment in current production and order assessments, along with decreasing expectations for future prices
  • Services increased by 2.0pts, significantly surpassing the historical average due to positive demand evaluations, whereas the Trade fell by 9.7 points, primarily driven by lower assessments of current business performance and future employment expectations

The Economic Sentiment Indicator (ESI) declined by 1.3pts m/m in Sep 2025 but remained approximately 7.0pts above the historical average, the latest Bank of Albania (BoA) survey showed. Its decrease was largely influenced by reduced confidence in the trade and industry sectors. In contrast, confidence in the services sector and consumer sentiment improved. Additionally, confidence in the construction sector remained unchanged from the previous month.

The Industry Confidence Indicator (ICI) recorded a significant decline of 6.3pts in Sep 2025, dropping below its historical average. The downturn reflects weakening sentiment in three key areas: businesses' evaluations of current production, assessments of total order books, and export order books. Additionally, expectations for future prices continued to trend downward, signaling increasing concerns about market conditions and potential pricing pressures.

In contrast, the Construction Confidence Indicator (BCI) remained relatively stable compared to previous months, currently standing at about 12.1pts above its historical average. This stability suggests that the construction sector is demonstrating resilience amid the broader industry challenges, in our view. Within BCI, components showed minor fluctuations that offset each other: businesses slightly raised their assessments of construction activity, while their evaluations of current order books saw a small decline in Sep 2025. Expectations for future prices were also revised downward, indicating that construction firms may anticipate softer demand or cost pressures in the near future, in our opinion. We think that the contrasting trends between the ICI and BCI highlight differing dynamics within the industrial and construction sectors. While the industrial sector faces declining confidence, the construction sector appears more stable, which may influence investment decisions and economic growth trajectories.

The Services Confidence Indicator (SCI) increased by 2.0pts in Sep 2025, reaching a level that is 17.5pts above the historical average. This rise is attributed to more positive assessments of current demand from businesses in the services sector. However, these businesses have slightly adjusted their expectations for future prices downward. Conversely, the Trade Confidence Indicator (TCI) fell by 9.7pts in Sep 2025, reversing the upward trend seen in the previous two months. Despite this decline, the current TCI remains approximately 4.0pts above the historical average. The decrease is primarily due to reduced assessments of current business performance, with negative impacts also stemming from lowered expectations for future employment. Trade-related businesses have also revised their future price expectations downward.

The Consumer Confidence Indicator (CCI) experienced a slight increase of 0.8pts in September, positioning it about 1.4pts above the historical average. This increase was mainly driven by heightened optimism regarding major purchases and related expectations. However, consumers' perceptions of their financial situations and the overall economic outlook have declined.

Quarterly indicators indicate that businesses' evaluations of their financial situations and capacity utilization rates have slightly decreased compared to the previous quarter, although both remain above historical averages, BoA reported. This mixed outlook suggests that while some sectors are experiencing confidence gains, others are facing challenges that may influence future economic growth. Continued monitoring of these indicators will be crucial for understanding evolving trends in consumer and business sentiment, in our view.

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Albania, Italy, and UAE establish partnership for submarine power cable project
Albania | Oct 01, 14:25
  • Submarine power transmission cable to begin within the current government mandate, facilitating Albania's integration into the European energy market
  • The project is part of Corridor 8, linking Italy to Bulgaria through Albania and North Macedonia, with discussions initially starting in 2007 and activity renewed in 2023

The government announced plans to begin construction of the Albania-Italy submarine power transmission cable within its current mandate, as outlined in the recently approved 2025-2029 programme. Initial discussions for the project began in May 2007, but momentum picked up in 2023 when Albania's Transmission System Operator (OST) and Italy's Transmission Operator (TERNA) initiated a technical and economic feasibility study. In Dec 2023, Albania, Italy, and the United Arab Emirates signed an agreement to jointly support the project. A follow-up meeting between the two transmission operators occurred in Aug 2024, highlighting the project's importance for energy supply and geopolitical cooperation.

This project is designed to fully integrate Albania into the European energy market. We note that the submarine cable is part of Corridor 8, which connects Europe to Bulgaria through Albania and North Macedonia. The proposed route will extend from Italy's Bari and Brindisi to Albania's Vlora and Durres, then to Elbasan and Qafe - Thana, linking with North Macedonia before reaching Varna and Burgas in Bulgaria. Currently, Albania's transmission system is connected to those of Kosovo, Montenegro, and Greece through six cross-border interconnections, with an additional connection to North Macedonia under development. The expanding network positions Albania as a key player in regional energy dynamics, enhancing its role in the broader European energy landscape.

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BoA boosts foreign exchange purchases to EUR 194.8mn in H1
Albania | Oct 01, 14:23
  • BoA bought EUR 122.1mn from auctions and EUR 72.7mn in direct purchases
  • BoA aims to purchase between EUR 270-350mn through auctions in 2025, with 17 out of 22 scheduled auctions already conducted

The Bank of Albania (BoA) increased its foreign exchange purchases in Q2, according to the report it recently published. Data on money market interventions indicate that the BoA acquired a total of EUR 161.6mn in the domestic foreign exchange market during this period. Of this total, EUR 122.1mn were purchased through programmed auctions aimed at boosting foreign exchange reserves, while EUR 72.7mn were direct purchases intended to support monetary policy and financial stability.

On May 9, the BoA reported that it resumed direct foreign exchange purchases to mitigate the strengthening of the Albanian lek against the euro. When combined with the EUR 33.2mn purchased in Q1, the total for H1 2025 reached EUR 194.8mn. However, this year's foreign exchange purchases are lower than those of the same period last year, when the central bank acquired EUR 271.8mn. The previous year also recorded a historical high of EUR 933.0mn in total foreign exchange purchases by the BoA. While the BoA's purchases have slowed the appreciation of lek against the euro, they have not completely halted it. As of the end of June, the EUR/ALL exchange rate stood 98.08, a 2.2% y/y appreciation for the lek. The lek further appreciated in Q3, reaching a new low of ALL 96.78 in September.

For 2025, the BoA has scheduled a total of 22 foreign exchange purchase auctions, with 17 already conducted. The highest concentration of these auctions occurred in July and August, coinciding with a greater availability of foreign exchange. The BoA aims to purchase between EUR 270-350mn through auctions, which is an increase of EUR 20.0mn compared to the 2024 target. The overall volume of purchases will also be influenced by direct purchases to prevent further strengthening of the lek. Market participants have noted that while direct purchase values appear to be slightly lower this year, they remain significant, as indicated by Q2 figures.

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Armenia
Speaker blocks release of inquiry into 2020 war
Armenia | Oct 02, 08:42
  • Speaker blocks release of inquiry into 2020 war

Parliament Speaker Alen Simonyan said that there are no legal grounds to submit the findings of a parliamentary inquiry into the 2020 war with Azerbaijan for parliamentary discussion. Simonyan said the report would be presented to MPs, either at a plenary session or at parliamentary hearings.

The Armenian parliament in 2022 set up an ad hoc commission to examine the causes of Armenia's defeat in the war. The parliamentary majority appointed seven of the 11 members of the commission, while the two opposition blocs in parliament refused to appoint the four other members. They said the commission would try to whitewash the government's wartime incompetence.

The commission led by ruling party MP Andranik Kocharyan finished its work earlier this year. Kocharyan submitted the report to Simonyan in early September with the expectation that it would be released and debated during the parliament's plenary session in early October.

The authorities may be reluctant to publish the report, fearing that it would revive questions about wartime decision-making and also undermine the current peace process with Azerbaijan.

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Armenia discusses construction of small modular reactor with several countries
Armenia | Oct 02, 08:33
  • Discussion are undergoing with 5 different countries

Armenia has decided to build a small modular reactor, according to the Prime Minister Nikol Pashinyan.

Armenia is discussing a project to build the new reactor with 5 countries, including the United States, Russia, China, South Korea, and France, he said, adding that there is no political component to this issue. The PM claimed that Armenia would make a choice based on commercial and economic feasibility.

Russian President Vladimir Putin and Pashinyan discussed the operation of the Armenian Nuclear Power Plant on September 26. Putin said that Rosatom "is currently working to extend the service life of this nuclear power plant." For his part, Pashinyan said that Armenia is closely cooperating with Russia, in particular, on extending the service life of the Armenian NPP until 2036.

The Armenian NPP is one of the country's main sources of electricity. The plant operates a single power unit with a first-generation VVER-440 reactor, and its fuel is supplied by TVEL, a Rosatom company.

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KEY STAT
CA deficit amounts to USD 479mn in 2Q25
Armenia | Oct 02, 08:29
  • This is lower than the USD 721mn gap posted in 1Q25
  • CA deficit equals 7.4% of GDP on an annual basis

The current account deficit declined to a still large USD 479mn in the second quarter of the year from the much large gap of USD 721mn registered in 1Q25. The deficit was chiefly driven by the trade balance, which posted a deficit of USD 719mn. The primary income balance also contributed with a deficit of USD 210mn, while there was a USD 398mn surplus on the services balance. Finally, the secondary income balance was also at a slight surplus of 52mn.

The CA gap equaled 7.2% of GDP during the quarter and 7.4% of GDP on a 4-q rolling basis.

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Azerbaijan
KEY STAT
FX Reserves increase to USD 11.31bn in Sep
Azerbaijan | Oct 02, 08:40
  • Reserves up from USD 11.25bn in Aug

FX Reserves rose to USD 11.31bn in Sep from USD 10.25bn in Aug. Reserves have been accelerating in the last couple of years boosted by strong FX purchases by the CBA. The favorable external position generates surpluses on the current account, which puts upward pressure on the exchange rate, so that the central bank intervenes on the market by buying foreign exchange in order to maintain the fixed exchange rate regime. This is exactly what has been happening over the last couple of years as Azerbaijan posted significant current account surpluses of 15.1 percent of GDP in 2021, 29.8 percent of GDP in 2022, 11.5 percent of GDP in 2023, and 6.3% of GDP in 2024. The official FX reserves do not include SOFAZ assets, which currently amount to USD 66.51bn (as of Jun).

Reserves fell in the last two months of 2024 after the central bank resumed dollar sales in October to help the government cover expenses. Total FX assets, including those at the disposal of the CBA and SOFAZ, thus amount to USD 77.82bn vs the forecast 2025 GDP of USD 76.4bn.

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Belarus
Russia may raise imports of gasoline from Belarus
Belarus | Oct 01, 15:41
  • Sep imports estimated at 45,000 tonnes, but could rise to 300,000 tonnes per month
  • Russian market faces shortages due to Ukrainian drone attacks

Russia could raise its imports of gasoline from Belarus, according to a document quoted by Russian media. They claim to have access to a proposal submitted by Russia's deputy PM Novak. It reportedly suggests an increase of Belarusian gasoline imports to 300,000 tonnes per month. For comparison, Belarus' respective exports to Russia are estimated at 45,000 tonnes in September.

At present, Russia employs a gasoline export ban that will be in place at least until year-end. The Russian market is estimated to face a shortage of 20% of normal supply due to Ukrainian attacks on local refineries. In this context, the media's current reports seem credible. We remind that this year President Lukashenko complained Belarus' refineries are being stifled by oil delivery prices. A significant expansion of exports could be seen as compensation, at least in the short term.

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Bosnia-Herzegovina
EC President Ursula von der Leyen expected to visit BiH
Bosnia-Herzegovina | Oct 02, 07:40
  • Reform Agenda, approved by Council of Ministers, needs green light from the Commission

European Commission President Ursula von der Leyen will visit BiH next week, Chairwoman of the Council of Ministers of BiH, Borjana Kristo, said at a press conference on Oct 1. The EU Delegation told unofficially Radio Slobodna Evropa that President von der Leyen could visit the country on Oct 14, but the visit is yet to be confirmed.

The visit will follow the last-minute adoption of the Reform Agenda by the Council of Ministers on Sep 30. The document is a precondition for the allocation of funds under the EU's Growth Plan for the Western Balkans. The move should prevent the cutting of more EU funds for the country.

Kristo emphasised that the work was not finished because the document still needed approval from the Commission. BiH Foreign Minister Elmedin Konakovic estimated that BiH did not have much time left, as some tasks must be completed by December. Konakovic mentioned that some compromises have already been made, especially from the RS, highlighting issues with the Constitutional Court of BiH and the ethnic veto in the State Aid Council. He stated that the compromise is outlined in the Draft Reform Agenda as "addressing the issue of foreign judges," and he believes that the three ruling parties from the FBiH will accept it once the state of BiH is secure from secessionist threats. However, for now, this is not the case, the minister added. Foreign Trade Minister Stasa Kosarac (SNSD) rejected Konakovic's claims and stressed that there would be no transfer of competencies from the entities to the state.

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PRESS
Press Mood of the Day
Bosnia-Herzegovina | Oct 02, 06:43

SNSD leader Dodik: I supported the Reform Agenda to show what a farce it is (Dnevni Avaz)

Five political parties and two independent candidates certified to participate in early presidential in RS (Dnevni Avaz)

Serb member of BiH presidency Cvijanovic: It is realistic for the referendum and the elections to be held on the same day (Nezavisne Novine)

There is still a lot of work ahead of BiH until receiving the EU funds (Nezavisne Novine)

Dodik: Early elections will not change anything, I will remain president (Nezavisne Novine)

What is written in the Reform Agenda: Electricity prices in BiH to be harmonized with the EU (Nezavisne Novine)

Is the optimism in Sarajevo realistic after the adoption of the Reform Agenda? RS PM Minic: Public enterprises have an unnecessarily large number of workers (Glas Srpske)

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Gross indirect tax revenues rise by 6.0% y/y to KM 9bn in January-September
Bosnia-Herzegovina | Oct 01, 15:40
  • Net revenues amount to KM 7.3bn

Gross indirect tax revenues increased by KM 513mn or 6.0% y/y to KM 9.0bn in January-September, BiH Indirect Tax Authority (ITA) said today. VAT returns amounted to KM 1.6bn. Net revenues of KM 7.3bn (up by 5.7% y/y) were distributed among users. The state-level institutions received KM 749mn, the FBiH got KM 4.1bn in total allocations (including settling of external debt), the RS - KM 2.3bn, and the Brcko District - KM 228mn. In September alone, ITA collected KM 1.1bn in indirect tax revenues, up by KM 130mn in annual terms.

The Macroeconomic Analysis Unit (OMA) of the Governing Board of ITA has revised upwards 2025 indirect tax revenues projection by KM 187.6mn to KM 9.9bn, which could be overshot, judging by revenue collection trends to date. The revision reflected favourable trends in collection in VAT revenues, customs duties and excise taxes.

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BiH Council of Ministers approves EUR 136.7mn grant agreement with EIB
Bosnia-Herzegovina | Oct 01, 15:30
  • Grant to finance Ozimice-Poprikuse subsection on Corridor Vc

The Council of Ministers of BiH approved today a EUR 136.7mn grant agreement with the EIB for the northern section of Corridor Vc. The grant provided through the Western Balkans Investment Framework (WBIF) will be allocated to the FBiH to finance the Medakovo-Poprikuse section, specifically the Ozimice-Poprikuse subsection. This project will connect already built or under-construction sections of the highway, improving functionality of the northern Corridor Vc and shortening travel time between Zenica and Doboj. The agreement proposal will be forwarded to the BiH Presidency for further procedures, with the Minister of Finance proposed as the signatory for BiH.

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RS to pay KM 240mn for purchase of Comsar Energy RS
Bosnia-Herzegovina | Oct 01, 12:58
  • RS PM Minic says money will be secured within ten days, either through budget or credit borrowing

The RS government will secure KM 240mn within ten days to purchase Comsar Energy Republika Srpska (CERS), PM Savo Minic told capital.ba. He stated that the funds would be secured once the contract was ready for signing, either through the budget or credit borrowing. The state-owned gas company Gas-Res has been negotiating the acquisition with the Cyprus-based Comsar Energy Group Ltd. of the Russian tycoon Rashid Serdarov. The RS has already paid KM 58.6mn to Comsar.

CERS was set up in 2012 as a joint venture between Comsar Energy Group and RiTE Ugljevik. Comsar, with founding capital of KM 10.5mn, got a 90% ownership stake, while RiTE Ugljevik, which contributed land for construction and KM 100,000 - a 10% share. In 2013, Comsar Energy Group invested an additional KM 53mn into the joint company, thereby reducing the state's ownership stake to just 1.8%. The CERS owns the concession for the Ugljevik East Two coal deposit, which is estimated to contain around 50mn tonnes of coal. Some 2mn tonnes are required annually for the uninterrupted operation of RiTE Ugljevik. The purchase aims to resolve supply issues and ensure the uninterrupted operation of the power plant.

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Bulgaria
PRESS
Press Mood of the Day
Bulgaria | Oct 02, 06:57

Budget 2025 very close to 3% of GDP deficit in Jan-Aug (Capital Daily)

Noise is rising over garbage, or how Sofia is once again fighting for its cleanliness (Capital Daily)

Ruling parties are strongly expanding competition regulator's powers (Sega)

Re-elected opposition WCC leader Asen Vasilev does not offer new horizon for this party (Sega)

PM Zhelyazkov: We are going to actively participate in strengthening EU's and NATO's security and defence capacity (24 Chasa)

Labour minister Gutsanov signs proposal to increase maternity benefits to BGN 1,100 in second year (24 Chasa)

Opposition MP Martin Dimitrov: We must avoid raising VAT, it is going increase prices of everything (24 Chasa)

What share do elderly people have in total working-age population in Bulgaria? (Trud)

Authorities are delaying money for repairs in capital Sofia (Trud)

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KEY STAT
Government budget deficit soars y/y to BGN 5.2bn in Jan-Aug
Bulgaria | Oct 02, 06:57
  • Budget deficit reaches 2.4% of GDP amid Fiscal Council's warnings that it will reach 5.1% of GDP in full 2025
  • Finance ministry expects receipt of second and third RRF tranches in Q4, totalling BGN 4.4bn that should mitigate deficit
  • Cumulative expenditure grows by 19.9% y/y, faster compared to 13.3% y/y revenue growth

The general government budget deficit soared y/y to BGN 5,215.0mn in Jan-Aug, from the BGN 1,681.6mn deficit in the same period of the previous month, the finance ministry reported. The deficit thus reached 2.4% of GDP compared to the 3.0% of GDP target for the full year. The finance ministry expected the receipt of both the second and the third tranches under the Recovery and Resilience Fund (RRF) totalling just above BGN 4.4bn in Q4, expecting them to compensate fully the accumulated deficit on the EU fund accounts and partially to improve the budget balance. We note that the Fiscal Council recently projected the budget deficit to reach 5.1% of GDP in 2025, signalling that the personnel costs in the public sector were nearly BGN 1bn more than planned in Jan-Jul and noting that tax revenues will be BGN 3bn less than the planned. The Fiscal Council asked for the cancellation of the automatic formulas for wage indexation in the public sphere. In August alone, the budget deficit rose by 32.0% y/y to BGN 936.5mn, as spending growth of 14.1% y/y exceeded the 11.7% y/y revenue growth.

In cumulative terms, expenditure growth slightly eased to a still very strong 19.9% y/y in Jan-Aug. Capital expenditure continued to soar y/y, by 93.9% y/y, the interest rate expenditure rose by 46.1% y/y increase and wage costs - by 21.4% y/y. Social expenditures continued to account for the largest share in the total and rose by 13.4% y/y to BGN 25.5bn in Jan-Aug, while subsidies grew by 10.4% y/y. All these strong increases in almost all expenditure items result from a number of decisions approved in the 2025 budget bill, including strong hikes of wages in the defence and security sector and slightly lower hikes in other public sector activities, as well as the new 8.6% pension indexation as of July. Capital expenditure growth will stay very strong until the end of the year, on the back of the government's actions aimed at accelerating the EU funds absorption and fund municipality investment programmes. Interest expenses will also stay on the rise in the short- and long-term, driven by higher government borrowing, in our view.

Revenue growth slightly eased to 13.3% y/y in Jan-Aug. Tax revenues rose by slower 14.9% y/y and non-tax revenues increased by faster 19.8%. However, grants fell by 28.6% y/y. The collected revenues in Jan-Aug represented 58.3% of the annual plan. The finance ministry attributed the shortfall to the late adoption of the 2025 budget law and the respective delay in the start of measures to raise revenues and fight the shadow economy.

The fiscal reserve fell by 1.1% m/m to BGN 19.6bn at end-August, after the strong 50.3% m/m increase in July. The larger share of the fiscal reserve - BGN 17.8bn, was held as deposit at the Bulgarian National Bank (BNB) and the remaining BGN 1.8bn were receivables from the EU for certified expenditure.

Central government budget, BGN mn, cumulative
Aug-24 Aug-25
Revenue and grants, BGN mn46,490.652,661.5
Tax revenue 37,528.5 43,122.1
Non-tax revenue 6,482.3 7,767.7
Grants 2,479.8 1,771.7
Expenditure47,192.156,564.4
Wages and salaries 12,682.1 15,400.8
Social and health insurance contributions - -
Maintenance 4,633.9 4,656.6
Interest 522.1 762.5
External 430.5 603.5
Domestic 91.5 159.0
Social expenditure, scholarships 22,480.3 25,501.3
Subsidies 3,693.7 4,076.5
Capital expenditure and net state reserve gain 3,180.1 6,166.7
BG contribution to the EU budget 980.0 1,312.2
Budget balance-1,681.6-5,215.0
Source: Finance ministry
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KEY STAT
Central government debt rises by 0.4% m/m to EUR 31.3bn at end-August
Bulgaria | Oct 01, 22:35
  • Mild increase driven by BGN 300mn of domestic government bond issue
  • Total government debt rises to 28.5% of GDP at end-August
  • External government debt inches down by 0.1% m/m to EUR 25.3bn

The central government debt edged up by 0.4% m/m to EUR 31,319.3mn at end-August, the latest finance ministry's data showed. The government debt thus reached 28.5% of GDP at the end of the month, flat on a m/m basis but up compared to 25.2% of GDP at end-June. We recall that in July, the government debt rose by very strong 12.3% y/y due to the EUR 3.2bn Eurobond placement. Until the end of the year, we expect only borrowing on the domestic market to reach gross issuance target of BGN 18.9bn for the full year.

The milder increase in the debt in August was entirely driven by domestic debt, which rose by 2.6% y/y to EUR 6,048.1mn. We recall that the government placed BGN 300mn of three-year government securities during the month, which explained the increase. The share of the domestic government debt in the total increased to 19.3% respectively.

Conversely, the external government debt inched down by 0.1% m/m to EUR 25,271.3mn at end-August, representing 80.7% of the total. The share of Eurobonds declined to 72.4% of the total government debt, followed by domestic government securities with a 18.2% share and loans with 9.4% share.

Government debt
Mar-25 Apr-25 May-25 Jun-25 Jul-25 Aug-25
Total, EUR mn24,429.824,631.727,724.027,780.931,199.531,319.3
Domestic, EUR mn 6,122.2 6,402.7 5,545.8 5,700.3 5,894.4 6,048.1
External, EUR mn 18,307.6 18,229.0 22,178.3 22,080.7 25,305.1 25,271.3
Total, % of GDP22.2%22.4%25.2%25.2%28.4%28.5%
Source: Finance ministry
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Croatia
Faster energy prices increase in September drive inflation acceleration – HNB
Croatia | Oct 02, 09:35
  • Food and services prices slow down, prevent stronger inflation acceleration
  • Food prices continue to have biggest contribution to headline inflation, services follow

The acceleration of CPI inflation in September was driven by the faster increase of energy prices as meanwhile food and services prices increased at slower rates, the HNB said in a comment on stats office flash inflation estimate for September released on Wednesday. At the same time, industrial product price inflation remained at the previous month's level (0.5% y/y). The central bank noted that despite the slowdown in food price growth in September, food prices remained the largest contributor to overall inflation - 1.8pps, while services contributed 1.6pps. The difference between the harmonized and national indicators of overall inflation narrowed slightly in September compared to the previous month, to 0.4pps, which is much smaller than a year ago when it was 1.5pps.

The central bank also said that the HICP inflation remained unchanged at 4.6% y/y in September as although the annual growth in energy prices accelerated significantly in September, it was offset by a slowdown in food price growth. In addition, the growth in service prices slowed slightly, so, with unchanged industrial product price inflation, core inflation (which excludes energy and food prices) slowed slightly in September, to 4.0% y/y from 4.1% in August. The HNB estimated that the contribution of food prices to overall HICP inflation decreased to 1.7pps, while the contribution of service prices remained at 2.3pps; furthermore, due to the slight slowdown in service price growth, coupled with unchanged industrial producers price inflation (0.4% y/y), core inflation also slowed slightly, to 4.0% y/y in September from 4.1% y/y in August.

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Croatia capable of producing over a million FPV drones – defence minister Anusic
Croatia | Oct 02, 05:52
  • Contract for anti-drone protection of domestic critical infrastructure to be signed soon

Croatia is ready to produce several million First-Person View (FPV) unmanned aerial vehicles (UAVs) a year, or however many are needed, defence minister Ivan Anusic announced on Wednesday. The minister said that Croatia has made itself available as a leading nation within the NATO alliance for the production of FPV drones, small combat drones that are often seen in reports from the battlefield in Ukraine. He stressed that Croatia was currently producing around 200,000 of them and that they were in use with the armed forces of Croatia, Bulgaria, the US, France and Saudi Arabia, and would be, as the situation develops, in the armed forces of many other countries. He assured that companies were ready to produce more than the current quantity, with the possibility of very rapidly increasing production to 500,000, or more than that, of these drones annually, realistic. Anusic emphasised that the drone, that is every part of it, was entirely a product of Croatian knowledge and expertise.

Concerning the topic of a drone defence system in Croatia, he said that an agreement would soon be signed with one domestic and one foreign company for the procurement and development of anti-drone protection for the country's critical infrastructure, which would very soon be implemented in NATO critical infrastructure as well, serving as a shield against potential drone attacks.

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PM Plenkovic again refutes Hungarian accusations of war profiteering
Croatia | Oct 02, 05:37
  • Thanks to LNG terminal on Krk, JANAF pipeline, Croatia positions itself as regional energy hub, country contributing to Europe's energy security

PM Andrej Plenkovic on Wednesday rejected accusations of profiteering made by the Hungarian side regarding oil transport prices via the JANAF pipeline, HINA newswire reported. During an informal EU summit held in Copenhagen, Plenkovic said that JANAF had the capacity to transport sufficient quantities of oil to meet the needs of refineries in Hungary and Slovakia, thereby providing an alternative supply route. He added that with the LNG terminal on the island of Krk and the JANAF pipeline, Croatia was positioning itself as a regional energy hub and a country contributing to Europe's energy security. He also stated that, in the context of continued support for Ukraine and halting the financing of Russian aggression, it was crucial for the EU to adopt a unified stance on ending energy imports from Russia.

Recall that Hungarian foreign minister Peter Szijjarto has repeatedly accused Croatia of war profiteering, claiming that it unfairly increased oil transport fees, while also alleging that the Adriatic Oil Pipeline (JANAF) lacked the capacity to continuously supply Hungary with the required volume of oil. According to diplomatic sources, Hungarian Prime Minister Viktor Orban responded by saying he did not want a conflict with Croatia but maintained that the oil transport price remains too high.

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PRESS
Press Mood of the Day
Croatia | Oct 02, 05:24

Croatia has been suffocating in unprecedented inflation for two years (Vecernji List)

Plenkovic rejects Hungary's accusations: Croatia is not a war profiteer, but an energy hub for Europe (Vecernji List)

FinMin Primorac: To support growth, we need tax relief on highest incomes (Vecernji List)

More than a million pensioners will receive an annual allowance, Plenkovic said: We are not giving up on EUR 800 [average pension by end-mandate] (Vecernji List)

Plenkovic responded to accusations from Hungary at the summit, Orban also spoke out: We don't want a conflict with Croatia (Dnevnik)

HNB raises banks' countercyclicalcapital buffer to 2% (Poslovni Dnevnik)

Pensioners get EUR 6 per year of service and tax abolition from 2027 (Poslovni Dnevnik)

Plenkovic: Supplement for pensioners is a continuation of improving their situation (Jutarnji List)

The amount of the 13th pension has been announced: We are paying the first permanent supplement in December! (Jutarnji List)

Tax on 474,000 pensions is being abolished. Pensioners to have up to EUR 370 more (Jutarnji List)

Plenkovic rejects Hungarian accusations of Croatia's profiteering: We have sufficient capacity to transfer oil (Slobodna Dalmacija)

Croatia becomes a Frontex training centre? EU concludes that we have achieved a good balance (Novi List)

Plenkovic again rejected Hungarian accusations and said: Croatia contributes to Europe's energy security (Novi List)

Pensioners' Association is not satisfied with the pension supplement, BUZ goes a step further: It's humiliating (Novi List)

Croatians pay European prices, but they don't have European salaries. Citizens' purchasing power continues to decline (Novi List)

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Govt offers pensioners EUR 6 per service year as 13th pension – Minister Piletic
Croatia | Oct 01, 14:36
  • Average 13th pension will exceed EUR 170, to be paid in December
  • Coalition ally HSU head heralds abolition of tax on pensions from 2027, bill to be presented in early-2026

The government will propose an annual pension supplement of EUR 6 per year of service, with the first payment due in December, labour minister Marin Piletic announced on Wednesday. The average payout or the so-called 13th pension, will thus exceed EUR 170, lifting the average total pension to about EUR 705 by year-end, up from the current EUR 690. Those with 30 years of service will receive EUR 180, while 40 years will bring EUR 240, he said. For his part, PM Andrej Plenkovic said that thanks to the one-off pension supplement, the average total pension will amount to more than EUR 704 at end-2025. The premier underlined that the objective of his government was to raise the average pension to EUR 800 by the end of its mandate. There are some 1.23mn pensioners in Croatia.

Croatian Pensioners' Party HSU leader Veselko Gabricevic pointed out that the measure, part of the new pension insurance law, comes alongside plans to abolish tax on pensions from 2027. He said the reform would cost EUR 210mn annually and reduce revenues for local governments, with Zagreb losing about EUR 20mn, while Vukovar - around EUR 600,000. A bill is expected in early 2026, with full abolition to take effect in 2027. Gabricevic said the change would significantly raise incomes for pensioners, noting that those in Zagreb receiving EUR 850 a month currently pay about EUR 350 in pension tax annually. He welcomed the deal despite earlier expectations of a higher supplement of EUR 7-8 per service year.

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Georgia
29 international observation missions have signed up to monitor local vote
Georgia | Oct 02, 08:48
  • The largest international missions deployed to monitor the 2021 race are missing from this year's lineup

Georgia's October 4 municipal elections will take place against the backdrop of a partial opposition boycott, as several major opposition parties have opted to sit out the race.

The vote will take place in parallel with a mass opposition protest outside the parliament, an anticipated event expected to draw at least some of the spotlight away from the elections.

The tense political context, coupled with lackluster races in many constituencies where the ruling party faces little competition, has also led to what may be the least-observed elections in Georgia in decades, with major international missions such as OSCE/ODIHR, as well as key local watchdogs, unwilling or unable to monitor the municipal vote.

29 international and 23 local groups are registered to observe this year's municipal vote in Georgia, down from 29 international and 64 local missions that observed the 2021 local elections. However, the largest international missions deployed to monitor the 2021 race are missing from this year's lineup. That includes the OSCE/ODIHR mission, which said it would be unable to deploy a mission following a last-minute invitation by Georgian Dream authorities. Other major international missions, including from U.S. non-profits such as the National Democratic Institute (NDI), the International Republican Institute (IRI), as well as a delegation from the European Parliament, are also absent from the list.

The remaining listed groups this year largely cover smaller deployments by election commissions, diplomatic missions, and state bodies from countries including Turkey, Hungary, Azerbaijan, Uzbekistan, Belarus, Armenia, Slovakia, the UK, and others.

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Kazakhstan
Kazakhstan’s oil output estimated at 1.88mn bpd in September - sources
Kazakhstan | Oct 02, 11:40
  • Estimate in line with OPEC data for August, but above result reported by EnergyMin
  • Kazakhstan pledges compensation for overproduction totalling 2.917mn bpd
  • EnergyMin says oil output will drop to 90mn tonnes in 2026, link to compensation plans possible

Kazakhstan's oil output equaled 1.88mn bpd in September, according to industry sources quoted by Reuters. This is in line with the data reported by OPEC+ in August, when production was estimated at over 1.8mn bpd. Yet, we remind that the EnergyMin later made its own statement, saying output levels were lower at 1.712mn bpd. The ministry refused to comment on the current publication. Kazakhstan's OPEC+ quota was set at 1.55mn bpd in September.

Reuters also reported Kazakhstan presented a new compensation plan to OPEC+ for its overproduction so far. The country is said to have pledged compensation for overproduction in the amount of 2.917mn bpd. The compensation will need to happen between Sep 2025-Jun 2026. Yet, we note that earlier comments by the Kazakh authorities signalled there is no intention of complying with OPEC+ quotas by the end of this year. This will add to the country's overproduction and will also require more drastic compensation in H1 2026.

Importantly, today EconMin Akkenzhenov commented on next year's oil production plans. The projection he outlined was 90mn tonnes, down from the 96.2mn forecast for 2025. We also recall that earlier government plans projected oil production to exceed 100mn tonnes in 2026. According to the minister, this target has been delayed to 'the long term'. The conservative output estimate could be in line with compensation requirements, but compliance implies downside growth pressures.

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PRESS
Press Mood of the Day
Kazakhstan | Oct 02, 06:54

Russia reports bottlenecks at Kazakh border due to sanctions-related checks (InBusiness)

Use of water-saving technologies increases by 86% since 2023 (Inform)

Prosecutor's office voids decision to release banker jailed for embezzlement (Inform)

Almaty authorities involved in legal proceedings over nationalisation of 282 land plots (Lsm)

Senate ratifies agreement with Armenia simplifying migration rules (Zakon)

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KMG and CNOOC set up joint venture to develop Zhylyoi deposit
Kazakhstan | Oct 01, 15:55
  • Exploration costs estimated at USD 31.5mn, CNOOC will cover them

Kazakhstan's oil and gas concern KazMunayGas (KMG) and China's CNOOC have set up a joint venture that will undertake exploration of the Zhylyoi oil deposit. It is located in Kazakhstan's Atyrau region, partially in the Caspian Sea. It is considered complex, which is why KMG sought a partner to start exploration works. Costs are projected at USD 31.5mn and CNOOC will cover them, in line with a contract signed this June. According to a preliminary estimate, the Zhylyoi field's size equals 185mn tonnes of oil.

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Q&A
Details on gold purchase mirroring scheme
Kazakhstan | Oct 01, 15:10

Question:

How does the gold purchase mirroring scheme work and when was it implemented? How much has the NBK sold under the scheme so far?

The question was asked in relation to the following story: NBK sees FX sales from sovereign fund at USD 600-700mn in October

Answer:

The NBK makes FX sales to mirror its purchases of gold from local producers. The bank first received a 'priority right' to buy gold domestically in 2012. The measure was aimed at expanding its reserves to ensure a stable buffer in case of sudden shocks. Essentially, these purchases require additional KZT issuance, which expands the monetary base and ultimately acts as an inflationary factor.

In the context of ongoing exchange rate / inflationary pressures, the NBK was forced to look for a more neutral strategy, hence the decision to sell FX from its reserves alongside the gold purchases. As a whole, the bank's efforts to enhance inflation management have mostly focused on liquidity withdrawal. It already employs deposit auctions and note issuance to this aim. Yet, the gold purchases were a virtual counterbalance due to the associated increase in liquidity, so it introduced the new scheme.

The mirroring sales began this January. Over Jan-Sep, sales amounted to KZT 1.96tn. The annual plan is to use KZT 3.3-3.6tn as part of the scheme, which is why Q4 sales are projected at KZT 1.4tn in total.

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KEY STAT
CPI inflation increases to 12.9% y/y in September
Kazakhstan | Oct 01, 15:00
  • Monthly price growth edges up as well, food inflation drives overall outcome
  • Non-food inflation also higher as tenge weakens, services inflation flat
  • Result above NBK's forecast range, makes monetary tightening probable

Headline CPI inflation increased to 12.9% y/y in September after 12.2% y/y in August, according to data published by the statistical office. In monthly terms, price growth was slightly higher at 1.1% (from 1%) and remains elevated above historical levels. Food inflation was the main driver of September's outcome as price growth in the segment posted 12.7% y/y (from 11.7% y/y). The greatest upward push comes from meat prices, which is in line with broader regional tendencies. Yet, we also note that farmers have complained different export restrictions force them to reduce livestock numbers. More recently, sectoral representatives have also requested more substantive tax benefits.

Non-food inflation was also higher in September, posting 10.8% y/y (from 9.7% y/y). This corresponds with reports by local enterprises, which suggest the tenge's depreciation has elevated input costs. In recent days, the national currency started to weaken again, which has negative implications for the short term. In services, inflation was flat at 15.3% y/y. It is still high overall, but Q4 will not see additional tariff hikes, so the segment's inflationary contribution will moderate.

Importantly, the September CPI outcome is above NBK's year-end forecast range (11-12.5%). This will be a concern for the bank, especially ahead of the new tax code's implementation in 2026. We believe the result makes monetary tightening a more likely option for the NBK in October. A small hike (25bps) is possible, though we would not be surprised to see a 50bp hike, assuming that the bank remains committed to its medium-term target.

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Montenegro
Net FDI inflows increase by 0.4% y/y to EUR 296.2mn in Jan-July
Montenegro | Oct 02, 07:19
  • Direct investments increase by 6.8% y/y in Jan-July, mainly due to higher property investments
  • FDI outflows up by 15.8% to EUR 240.5mn in Jan-July on withdrawals of non-resident funds
  • Most investments in H1 come from Turkey (EUR 88.2mn) and Serbia (EUR 81.1mn)

Net FDI inflows increased by 0.4% y/y to EUR 296.2mn in Jan-July from EUR 294.9mn in the same period of 2024, according to preliminary data from the Central Bank of Montenegro (CBCG). The increase came entirely on the back of direct investment inflows, which rose by 6.8% y/y to EUR 536.6mn in the period. Property investments increased the sharpest among the major categories by 14.9% y/y to EUR 272.6mn in Jan-July, suggesting that the real estate market activity is gaining pace again. We note that property investments were earlier supported by the influx of Russians and Ukrainians to Montenegro, following the Russian invasion of Ukraine in February 2022. Investments classified as ''other'' also increased by 4.0% y/y to EUR 19.6mn in Jan-July. The intercompany debt rose slightly by 0.5% y/y to EUR 182.7mn in Jan-July but accounted for 34.0% of the total direct investment inflows in the period. On the other hand, investments of firms and banks remained a major drag on the direct investment inflows in Jan-July as they declined by 4.5% y/y to EUR 62.0mn in the period.

FDI outflows rose by a sharp 15.8% y/y to EUR 240.5mn in Jan-July. Withdrawals of non-resident funds invested in Montenegro were higher at EUR 180.3mn compared to investments of Montenegrins abroad in Jan-July, which amounted to EUR 60.2mn. Most of the foreign investments in Jan-July came from Turkey (EUR 88.2mn), Serbia (EUR 81.1mn) and Cyprus (EUR 39.3mn). The investments from Turkey were mainly related to intercompany debt (EUR 50.3mn) and the real estate sector (EUR 33.3mn). Some 65% of the investments from Serbia in Jan-July were also related to property buying. Regarding the investments from Cyprus, they were most likely related to Cyprus-based financial holding company Aik Group's purchase of 75% of Montenegro's second-largest lender Hipotekarna Banka. S&P has commented that FDI inflows financed 90% of the current account deficits in the past three years and that the net inflows of FDIs will continue to finance the current account gaps in the coming period. Net FDI inflows previously rose by 13.0% y/y to EUR 489.9mn in 2024 from EUR 433.6mn in the previous year.

Net foreign direct investment, EUR mn
20232024% y/yJan-July 2024Jan-July 2025% y/y
Companies and banks95.3113.919.664.962.0-4.5
Intercompany debt264.9290.89.8181.7182.70.5
Real estate463.3455.3-1.7237.3272.614.9
Other38.829.7-23.618.619.44.0
Direct investment inflows 862.3889.83.2502.4536.66.8
Direct investment outfows 428.7399.9-6.7207.6240.515.8
Net FDI433.6489.913.0294.9296.20.4
Source: Central Bank of Montenegro
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North Macedonia
PRESS
Press Mood of the Day
North Macedonia | Oct 02, 06:55

[Hungary's Foreign and Trade Minister Peter] Szijjarto to [Serbian public broadcaster] RTS: Double standards in the EU towards Serbia, but also regarding the blockades towards North Macedonia (Nova Makedonija)

Toll-free telephone line for reporting electoral irregularities (Nova Makedonija)

[PM Hristijan] Mickoski: There are dozens of cases of grand corruption since the time of [the main opposition] SDSM and [ethnic Albanian opposition party] DUI, lackeys do not allow major criminal cases to occur (Vecer)

Bulgaria may support [Hungarian PM Viktor] Orban in blocking Ukraine [over its EU membership bid] to maintain veto power over Macedonia (Sloboden Pecat)

[PM Hristijan] Mickoski threatens judges: After the elections, you will be replaced and held accountable! (Nezavisen Vesnik)

[PM Hristijan] Mickoski: On one side is the coalition of money, on the other side are us (Koha)

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Romania
Hidroelectrica’s net profit falls 41% y/y to RON 1.6bn in H1
Romania | Oct 02, 11:04
  • Due to bad weather, lower output, higher electricity purchases
  • State may receive RON 3.2bn dividend from last year profit

Romania's biggest electricity generator, the state-controlled Hidroelectrica, decreased its net profit by 41% y/y to RON 1.6bn (EUR 317mn) in H1, according to a company release. Electricity output fell by 26% y/y to 6,263 GWh, due to drought. Revenue decreased by 16% y/y and operational margin - by 31% y/y. The company had 14.8% market share in electricity supply in Romania, coming second after PPC.

Hidroelectrica estimates its net profit to drop by 26.8% y/y to EUR 600mn in its revised budget plan for 2025. Profit fall forecast is grounded on worse weather conditions that reduce production and increase electricity purchases, higher personnel and depreciation expense. Therefore, the sold electricity is estimated to fall by 6% y/y to 13.9 TWh in 2025, while total revenue should be by 4% y/y lower this year. Purchased electricity from free market will reach 2.5 TWh, up from 1.5 TWh in 2024, triggering 34% y/y jump in spending on inventories and 5% higher overall expenses. Yet, tax expenses are estimated to be by 35% y/y lower this year.

Hidroelectrica has more than 6,444 MW installed capacity in 208 generation units. The company has been among the most profitable state-controlled companies for years. It has EUR 1.4bn investment plans in medium term which it intends to cover from own sources, despite profit fall estimations and notable dividend distribution required by the main shareholder. The company plans to distribute more than RON 4bn as dividend, of which the state will get RON 3.2bn.

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Fiscal Council considers government budget revision realistic
Romania | Oct 02, 10:31
  • Budget gap could have reached 9% of GDP without fiscal measures
  • Deficit seen narrowing to 6.5% of GDP in 2026 under current policies

The Fiscal Council has assessed the government's revised 2025 budget and considers the updated figures broadly realistic. The upward revision of budget revenues is deemed plausible, despite some components being overestimated and others underestimated. Overall, the projection is seen as balanced. The more substantial upward adjustments to expenditures - particularly for interest payments and social spending - provide a credible basis for the new targets to be met, the Council noted.

The revised budget deficit target stands at 8.4% of GDP, up from the initially projected 7.04%, and only slightly below the 8.65% in 2024 (cash terms). The Council believes this new target is achievable and estimates that, without the implemented fiscal measures, the deficit could have reached 9% of GDP.

While the fiscal consolidation package has limited impact in 2025 due to its late implementation, it is expected to reduce the deficit to 6.5% of GDP by 2026 - a significant adjustment, according to the Council.

The Fiscal Council reiterates that Romania's budget revenue-to-GDP ratio remains critically low at 28.8%, compared to the EU average of 40.1%. It emphasizes that fiscal consolidation cannot rely solely on expenditure cuts and calls for greater discipline in public investment and accelerated reform implementation to ensure fiscal sustainability.

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Insurance market rises by 8% y/y in H1, mostly driven by general insurances
Romania | Oct 02, 10:02
  • General insurance rises, life insurance - more significantly
  • The main vulnerability of the insurance market in Romania is high concentration

The total value of subscribed insurance premiums increased by about 8% to RON 12.3bn (EUR 2.5bn) in H1, according to a report of the Financial Surveillance Authority (ASF). Both general and life insurances contributed to this increase, but mostly the general insurance segment, which has 79% share in total. The general insurance market rose by 6% y/y to RON 9.7bn and the life insurances one - by 21%. The most significant contributor to the general market insurance growth was the mandatory auto insurance, which represented 57% of total general insurance.

The report once more noted that the main vulnerability of Romania's insurance market is the high concentration ratio as market segments and market shares of local insurers. For example, the biggest five insurers control 73% of the total market. Local insurers are highly exposed to interest rate risk because most of their assets are investment in fixed-income instruments, chiefly government securities. At the same time, the overall solvency capital requirements and minimum capital requirements remained at comfortable levels, but below regional peers.

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Producer prices accelerate growth to 3.2% y/y in August
Romania | Oct 02, 07:36
  • Energy inflation increases costs in manufacturing; only refining prices keep falling
  • Speeding in producer price rise due to VAT rate hike may keep on for a while
  • Statistical effects, demand narrowing and high costs to influence PPI developments in following periods

Industrial prices increased by 3.2% y/y in August, faster than 2.7% y/y in July, according to data published by the state statistical office, the INSSE. The PPI was on a moderating rise trend since February, it dropped marginally in June and resumed rising in July, all backed chiefly by statistical effects in energy. Energy prices increased slightly in July, after a sharp 7.7% y/y fall in June and picked up in August.

Stronger rise of energy prices pushed up utility prices growth as well in August, despite falling consumption. Higher utility costs transferred into higher prices in water supply and most manufacturing segments, the most significant in beverages, tobacco, furniture, wood, computers and electronics. Prices in refining kept on falling in double digits, influenced by crude prices on international markets. Looking at mining, prices moderated growth to 0.8% y/y in August from 4.3% y/y in July, mainly due to deflation in oil and gas.

In the other breakdown, producers' prices in the non-durable goods group increased the most, once more, likely driven by a still resilient demand, but slightly moderated. The weakest price growth was in energy, but accelerated compared to July. Overall, statistical effects in energy, the weak demand and high production costs will probably continue to influence PPI developments in the following periods. The latest PMI index indicate another strong rise in prices, due to the VAT rate hike, but we think it will cool off gradually.

PPI, % y/y
Aug-24 May-25 Jun-25 Jul-25 Aug-25
Total2.7%0.9%-0.3%2.7%3.2%
Domestic 2.8% 0.3% -1.5% 2.5% 3.1%
External 2.3% 2.2% 2.7% 3.2% 3.4%
Mining and quarrying -3.4% 5.5% 5.0% 4.3% 0.8%
Manufacturing 1.4% 1.7% 2.2% 2.8% 3.3%
Utilities 6.3% -2.0% -7.4% 2.2% 2.9%
Water supply 13.6% 9.5% 9.3% 10.5% 10.8%
Intermediate goods -0.4% 2.9% 2.9% 3.5% 4.3%
Capital goods 6.6% 1.8% 2.3% 2.9% 2.4%
Durable consumer goods 1.6% 3.2% 3.0% 3.2% 4.4%
Non-durable consumer goods 3.5% 5.6% 5.7% 6.2% 6.1%
Energy 2.4% -4.1% -7.7% 0.3% 1.3%
Source: INSSE
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KEY STAT
ILO unemployment rate edges up m/m to 5.9% in August
Romania | Oct 02, 07:22
  • Govt fiscal tightening negatively impacts labour market later, particularly in construction
  • Labour market is still rather tight, economic activity is weakening, outlook is bleak

The ILO unemployment rate was 5.9% in August, marginally higher than 5.8% in July, according to data released by the state statistical office (INSSE). The rate was higher than 5.7% in August 2024, although still below the H1 average. The ILO jobless rate increased relatively sudden to 5.7% in H2 2024, after fluctuating around 5.2% in H1, probably the result of company restructuring after the implementation of government fiscal measures (reduction and elimination of some tax breaks). New measures were enforced as of January 2025, and their effects in the labour market pushed up the rate to around 6.0%. Minor fluctuations that followed are likely grounded on active population developments or occasional hiring.

The number of jobless persons increased stronger, by 3.5% y/y and by 2.1% m/m, staying well above the average in H2 2024. The male unemployment rate was still higher by 0.7pps than the female one, and the difference increased compared to previous periods. At the same time, the jobless rate among youth remained concerning high, at 23.5%, although it was lower than 24.8% in Q1.

Overall, the jobless rate was almost flat throughout H1, rising marginally from 5.9% in January to 6.1% in May. The government's first fiscal measures package, implemented as of January, had some impact on the labour market, especially in construction which no longer benefits from contributions exemptions for its employees and suffers from weaker public investment. Basically, the labour market remains tight and in a bad shape, employers are prudent and refrain from hiring. Labour supply is low as well, due to migration, demographic developments and lack of coordination with the education system. The most concerning is the big share of long-term jobless, resulting from low flexibility to relocate or career change. In addition, labour supply still suffers from specialised worker shortage, so employers have difficulties to find skilled staff.

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New car registrations jump 39% y/y in September, used ones pick up rise
Romania | Oct 02, 06:51
  • Backed by statistical effects and possible advance purchases ahead of VAT rate hike
  • Modest recovery may follow sustained by scrappage programme launch at end-September
  • Expected tax on polluting cars may dampen demand for used cars, but unlikely to revive demand for new cars

New passenger car registrations rose strongly once again in September, up 38.9% y/y to 12,463 units, according to data from the Association of Vehicle Manufacturers in Romania (ACAROM). However, the pace of growth slowed from 51.7% y/y in August, and monthly dynamics turned negative. The robust performance over the past three months was partly driven by statistical effects and likely front-loaded purchases ahead of the VAT rate increase implemented in August. Looking ahead, we expect the deceleration to persist, reflecting heightened consumer caution, eroding purchasing power, and rising fuel costs due to higher excise duties. The government's scrappage programme, launched at the end of September, may offer some support for registrations in the final months of the year.

Out of the total number of new car registrations, 38% were made by the two local car producers, Dacia and Ford, with Dacia holding the biggest share (88%). New car registrations improvement pushed up Dacia registrations by 93.6% y/y in September, while Ford reported an 40.3% y/y rise in the period. That should have some positive effects on production in the following period, as the two manufacturers will probably increase output to replace sold inventories.

Registrations of used cars increased by 12.8% y/y in September, speeding from 9.5% y/y in August. Registrations in that segment remained on a steady rise, as the government plans to introduce a new tax on polluting cars, which likely made potential buyers rush the purchase to avoid it. Registrations of old cars have had the highest share in total registrations for years, as consumers continue to prefer them due to lower prices. Their share was 72% in September, bigger than 67% in August.

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Treasury plans to raise nearly RON 8bn with local bond issues in October
Romania | Oct 02, 06:14
  • Biggest monthly target since March, bigger than in Oct 2024
  • Treasury raised above target in January-September, probably to keep on
  • Financing needs are 78% covered with bond issues, but we expect upward revision

The Treasury plans to issue government bonds and T-bills for raising almost RON 8.0bn from the local market in October, according to a finance ministry order. The amount is bigger than the monthly borrowing target set in September and than in October 2024. Iin fact, it's the biggest monthly borrowing target since March, although the Treasury generally raised above plan in almost all months except April. Hence, the borrowed amount through state securities is above target so far and we expect the same to happen in October, due to a higher-than projected budget deficit. The planned issues this month should raise RON 7.0bn in regular bids, and RON 990mn in non-competitive ones in the following days of each bond auction. One placement is for a 1-year T-bill on Oct 9, aiming to raise RON 400mn.

Overall, the Treasury raised nearly RON 122.7bn through local bonds (including retail), EUR 7.1bn and USD 5bn through foreign bonds so far, all covering 78% of borrowing needs are covered (without including loans and private placements), according to our calculation. The finance ministry plans to borrow RON 145-150bn from the local market and EUR 16-17bn from foreign markets in 2025. Borrowing should cover approximately RON 232bn gross financing needs, consisting of RON 135bn budget deficit (7% of GDP) and RON 97bn maturing debt. However, the government revised the gap upwards to 8.4% of GDP, which may require RON 25bn additional borrowing to initial estimation, so we think the borrowing needs will be revised upwards.

Government bond issues plan in October
Auction DateTypeCurrencyPeriodMaturityIssuance, mn
2-OctBondRON6 years27-Jul-31575
2-OctBondRON2 years28-Apr-27575
6-OctBondRON11 years31-Jul-34575
6-OctBondRON4 years26-Apr-28575
9-OctBondRON15 years30-Jul-40460
9-OctT-billRON1 year30-Sep-26400
13-OctBondRON10 years30-Oct-33575
13-OctBondRON6 years30-Oct-28345
16-OctBondRON11 years25-Apr-35575
20-OctBondRON8 years28-Apr-31575
20-OctBondRON15 years24-Feb-38345
23-OctBondRON10 years29-Sep-32575
27-OctBondRON8 years27-Jul-33690
27-OctBondRON5 years24-Apr-29575
30-OctBondRON6 years29-Jul-30575
Total RON    7,990
Source: Finance ministry
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PRESS
Press Mood of the Day
Romania | Oct 02, 05:43

President Nicusor Dan: Budget deficit can narrow to 6% of GDP in 2026. Economists say it's impossible (Ziarul Financiar)

Borrowed amount through Fidelis retail bonds scheme rises by more than 50% m/m in September (Ziarul Financiar)

FinMin Nazare sees measures in administration as priority (Adevarul)

Negotiations inside ruling coalition on package of measures in administration fail again (Adevarul)

Romania's natural gas deposits are almost filled ahead of winter (Adevarul)

Bolojan cabinet quickly approved budget revision (Bursa)

VAT to remain unchanged in 2026, possibly except in accommodation (Romania Libera)

Government assesses Romania's projects to be included in EU's SAFE scheme (Romania Libera)

Sources: Ruling coalition discusses 10% layoffs in administration, but decision is postponed until next week (G4media)

Top banks in Romania after six months: First ten players make 97% of RON 7.5bn profit in entire banking sector (Economica)

Fiscal Council confirms that previous cabinet intentionally overestimated budget revenue and underestimated expenditure (Economedia)

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Hidroelectrica cuts by 15% net profit estimation in 2025 due to drought
Romania | Oct 01, 15:42
  • Company has to buy high-priced electricity from free market to cover outstanding contracts
  • Hidroelectrica electricity purchases jump 64% y/y to cover 14% production fall
  • One of biggest contributors to state budget reduces dividend to energy ministry, taxes paid to finance ministry

Romania's biggest electricity generator, the state-controlled hydropower group Hidroelectrica, reduced its 2025 net profit forecast by 15% as unfabourable weather conditions diminished electricity output projection by 14%, according to a company release. Hidroelecrtrica estimates to make about EUR 600mn net profit this year, down from EUR 820mn in 2024, after seeing a 26% y/y drop in electricity output in H1, due to drought and lower demand. Nevertheless, Hidroelectrica had to cover contracted electricity with more purchases from day-ahead market, having to pay higher prices, which also contributed to lower profitability.

Therefore, the sold electricity is estimated to fall by 6% y/y to 13.9 TWh in 2025, while total revenue should be by 4% y/y lower this year. Purchased electricity from free market will reach 2.5 TWh, up from 1.5 TWh in 2024, triggering 34% y/y jump in spending on inventories and 5% higher overall expenses. Yet, tax expenses will be by 35% y/y lower this year.

Hidroelectrica is the most profitable state-controlled company which usually distributes more than 90% of net profit as dividend. It is one of the biggest contributors to the state budget with high dividends and additional taxes enforced in the energy sector in the past years. The company is also among the biggest investors in the local electricity field, planning to spend about EUR 340mn in green electricity generation capacities and upgrading its hydro plants.

Hidroelectrica has more than 6,444 MW installed capacity in 208 generation units. It has allotted RON 3.8bn for purchases of solar and wind energy projects until 2023, out of which RON 635.2mn was used to purchase a wind park in 2021. The energy ministry, which holds the 80% stake, cashed around EUR 1bn from Hidroelectrica in 2024 from the 2023 profit, as the shareholders' meeting recently decided. The remaining stake was in the Property Fund's portfolio, which sold it through a secondary IPO on the Bucharest Stock Exchange in July 2023.

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NBR’s reserves rise by 1.2% m/m in September, driven by rising gold prices
Romania | Oct 01, 14:55
  • Fx reserve edges down due to lower inflows and higher outflow
  • Reserves account for 20% of projected GDP, cover 6 months of import
  • State's external debt repayment peak at EUR 2.45bn in October

The central bank's international reserves increased by 1.2% m/m or about EUR 871mn to EUR 75.8bn at end-September, according to figures of the NBR. The rise was only driven by 10.7% m/m rise of the 103.6 tonnes of monetary gold value, sustained by price hikes on international markets. Meanwhile, the value of the fx reserve edged down by 0.3% m/m to EUR 65.0bn, because inflows halved to EUR 1.6bn and outflows increased to EUR 1.8bn from EUR 1.4bn, reflecting weak EU funds absorption and rising public debt repayments.

Overall, the NBR's international reserves increased by 7.5% in January-September, mainly backed by 4.6% rise of the fx reserve (EUR 2.9bn), while the value of monetary gold jumped by 28.9% ytd or EUR 2.4bn by end-September.

Reserves accounted for 20.0% of the projected GDP at end-September, more than 19.9% at the end of 2024. The import coverage ratio of foreign currency reserves was 6.0 months, less than 6.1 months in August, the same as at the end of 2024. The state must repay EUR 2.45bn external debt in October, notably more than EUR 902mn in September and the highest debt repayment in 2025.

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Russia
PRESS
Press Mood of the Day
Russia | Oct 02, 06:25

How authorities are trying to tackle the gasoline shortage (Forbes)

Russia may change requirements for localization of automobiles (Izvestiya)

What budget funds are allocated for government agencies (Vedomosti)

Russian shadow fleet tanker was detained in France (Meduza)

Moscow blocks Raiffeisenbank's exit from Russia - Reuters (The Bell)

Energy minister turns to early USSR experience for current challenges (Agentstvo)

118 countries, 50 agreements: World atomic week organizers summed up results (RBC)

Households posted sharp rise in consumption (Kommersant)

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KEY STAT
Household consumption and investment offset weak net exports in Q2
Russia | Oct 02, 06:21
  • Demand growth was financed by the private sector, while public spending supported investment

Rosstat confirmed that GDP increased by 1.1% y/y in Q2 and presented the breakdown by expenditures, as usual in recent years, omitting exports and imports. Consumption contributed 1.8pps to GDP growth with another 0.2pps coming from fixed capital investment. Based on this, we estimate the contribution of net exports at -0.8pps. Despite the higher fiscal deficit, public consumption gained the least in Q2 (+0.6% y/y). Consumption in turn was fueled by rebounding household consumption at 3.2% y/y in Q2 after 3.0% in Q1. Thus, we assume the stably negative net exports contribution this year reflects growing imports (due to higher consumption) and shrinking exports due to the sanctions. With fiscal authorities still having the similar expenditure patterns since the war has began and sanctions remain, we can expect the GDP growth structure to remain like this in 2025 and even 2026, meaning demand and investment contributing considerably to growth.

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KEY STAT
GDP grows modest 0.4% y/y in August, unchanged from July
Russia | Oct 02, 05:10
  • Unemployment falls further to 2.1%, while wage growth continues to accelerate
  • Agricultural output grows 6.1% y/y as wheat harvest is seen up by 7% this year
  • Retail sales growth accelerates to 2.8% y/y, driven by non-food
  • Figures give more reasons to CBR to hold the rate in October

GDP growth stayed at 0.4% y/y in August, the same as in July, according to the EconMin estimate, based on real sector data published by Rosstat on Wednesday evening. This time, the slowdown in the construction sector (0.1% vs 3.3%) was compensated by agricultural output acceleration to 6.1% after -0.4%, while performance of industry has not changed much (details here). We note that agriculture has a small weight in the economy (2.3% of value added in H1), but it becomes more important in Q3 when most of the harvest is collected. This year, despite poor weather conditions, a stronger harvest of 86-90 tons of wheat is expected. The decline in construction might be driven by deliberate slowdown in the pace of housing construction due to low sales of already built properties, while investment in real estate is declining due to the economic slowdown.

Real sector indicators (% y/y)
Mar-25 Apr-25 May-25 Jun-25 Jul-25 Aug-25
Retail sales 1.3% 1.9% 1.8% 1.2% 2.0% 2.8%
Real wage growth 0.1% 4.6% 4.2% 5.1% 6.6% -
Construction 2.6% 7.9% 0.1% 0.0% 3.3% 0.1%
Agriculture 1.6% 1.4% 1.3% 1.5% -0.4% 6.1%
Transport -1.0% 2.0% -0.8% 1.4% -1.8% -3.2%
Source: Rosstat

On the demand side, retail sales growth accelerated to 2.8% y/y, from 2.0% y/y in July. This confirms the gradual recovery of demand that the CBR noted recently in CA data, but this demand does not include industry products, judging from industrial output data and August's Industrial PMI reports. Monthly data also showed growth at 3.1% m/m. The breakdown shows annual growth was to a larger extent driven by non-food sales. At the same time, wage data (available with a lag) still point to high growth, fueled by labour shortages. Nominal wages were up by 16% y/y in July, the highest since January, while real wage growth hit 6.6% y/y. Unemployment deepened by 0.1pps to a new record low of 2.1% after three straight months at the previous "record".

Overall, we think the figures show that the economic slowdown remains in place, but it is far from recession. Combined with the acceleration in weekly CPI figures we see no reason for the CBR to change its cautious stance, which was most probably re-enforced by the high budget deficit and spending in both 2025 and 2026. The bias toward military sectors in industry, renewed acceleration in demand and lending, the VAT hike and the larger utility price hike next year will also add to concerns about inflation, suggesting that a hold decision in October looks even more likely.

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Consumer price growth accelerates to 0.13% during week of Sept 23-29
Russia | Oct 02, 04:49
  • Annual inflation rate rose marginally to 8.01%
  • Acceleration is driven primarily by gasoline and vegetable prices

Consumer prices increased by 0.13% w/w during Sept 23-29, accelerating from 0.08% w/w increase in the previous week, according to the regular weekly survey of Rosstat. As a result, the y/y inflation rate reached 8.01%, according to the EconMin estimate, after several weeks of decline. Prices are up by 0.48% in the entire month of September. The breakdown shows that food prices excluding fruits and vegetables grew at 0.15% weekly rate, fueled by egg and meat prices, and the seasonal decline of fruit and vegetable prices ended completely, leading to 0.24% w/w increase from 0.0% the previous week, which explains the overall acceleration. Non-food goods prices increased by 0.16% w/w, also faster than in the previous week. The largest contribution came from fuel prices, accelerating to 0.8% w/w for gasoline and 0.6% w/w for diesel. This crisis, driven by Ukrainian strikes on refineries and scheduled repairs, forced the state to impose an export ban and now it consider easing imports. So far, however, there are no signs of recovery. Elevated demand from agriculture should end in October and, in theory, ease the pressure, but it seems supply capacity has been damaged far more than officials admit, with some estimating losses of up to 20%. Services prices rose 0.08% w/w, slightly above the 0.06% increase last week. Tourist services, however, jumped 0.24%, an unusual seasonal pattern given that the so-called "velvet season" is normally over by now. This may reflect the impact of fuel prices or suggest that tourists postponed trips this year, waiting for lower costs.

Overall, the weekly figures confirm that inflation is likely to stay around 0.5% m/m in September, up from deflation in August, but still close to last year's level. For the CBR, this outcome is expected, but we believe it is driven mainly by fuel price concerns or other one-off effects, similar to the situation discussed at the September 12 meeting.

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Manufacturing PMI stays around 48 mark in September
Russia | Oct 02, 04:30
  • Output, orders and employment decline
  • Supply side problems also weigh on output, raise input cost inflation

Russia's manufacturing PMI fell slightly by 0.5 points to 48.2 in September, S&P Global reported on Wednesday. The decline was expected, as more signs point to a cooling economy, but the scale was far smaller after the 1.7-point growth recorded last month. The drop was driven by weaker domestic and export demand, which pushed output lower. S&P noted that this was the second-fastest decline in production in more than three years, only behind July 2025. The agency also highlighted that longer supplier delivery times and unfavorable exchange rates were adding to cost pressures. These same factors are likely to keep demand subdued. One possible reason for the weaker demand could be China's long holidays starting October 1, which may have reduced September purchases in anticipation of lower activity this month. Among notable shifts in September was a fall in employment, which may ease pressure on the tight labor market. On the downside, both input and output prices rose.

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First Russia-EU parliamentary meeting in 11 years was held
Russia | Oct 01, 17:17
  • Talks focus on Ukraine conflict and "root causes" discussion
  • Expert-level dialogues are again being pushed by Russia, but are unlikely to lead to peace

For the first time in 11 years, deputies from the Russian Duma and the European Parliament (EP) held a meeting, TASS reports. It was an online meeting and the Russian side was led by Leonid Slutsky, Chair of the International affairs committee, while the EP delegation was headed by independent MEP Fernand Cartiser, and included deputies from Austria, Germany, Bulgaria, and Luxembourg. The discussion included the issue of resolving the conflict in Ukraine, with Slutsky referring to the so-called "root causes." At the same time, the Foreign Ministry and the Kremlin renewed talks on the need for work at expert levels. In particular, deputy Foreign Minister Ryabkov said a third round of Moscow-Washington talks on irritants will "definitely" take place before the end of autumn. And Presidential spokesperson Peskov added that expert-level Russia-Ukraine talks can prepare the ground for high-level contacts. We doubt these expert dialogues will lead to any changes, but they may help Russia address specific, tactical issues. Moreover, they fit a new foreign policy narrative of denying the existence of "hostile states" while acknowledging "hostile elites." The strategic meaning of this approach, however, remains unclear. It could at most serve as a basis for restarting talks when governments change.

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FinMin borrows RUB 231.7bn at OFZ auction, three times more than last week
Russia | Oct 01, 16:24
  • First auction of the day reached the biggest placement this year
  • Yields rise on expanded borrowing plan
  • Q4 target is likely to be increased soon

The FinMin sold OFZ bonds for RUB 231.7bn at the two auctions today, which is way above the RUB 84.7bn placed last week. The first auction for 2037 fixed-rate bond led to the strongest placement this year at RUB 211.1bn, with RUB 273.0bn in bids received (second-largest in 2025). Yields were at 15.18%, which is 124bps higher than in late August. The remaining RUB 20.6bn was raised through the 2029 fixed-rate bond, with total bids reaching only RUB 33.2bn. The average yield came in at 14.62%, also above the yield from Jul 2 when this bond was previously offered (+30bps). The rise in yields and strong demand is linked to the increase in the OFZ borrowing plan for this year, to which major banks reacted positively. Ytd, the FinMin has borrowed RUB 4.3tn in the government debt market.

Recent OFZ bond auctions (RUB bn)
DateMaturityTypeSoldDemandYield (%)
Q1
Total in Q11.35tn
Q2
Total in Q21.32tn
Q3
Total in Q31.42tn
Q4
1-Oct-252037fixed-rate bond211.1273.015.18
1-Oct-252029fixed-rate bond20.633.214.62
Total in 20254.32tn
Source: FinMin

Yesterday, the Q4 2025 borrowing plan was announced, showing a target of RUB 1.5tn in OFZ at nominal value, the same as in Q3. This does not include the expected expansion of the program by RUB 2.2tn, planned in the updated 2025 Budget Law, which is likely to be approved by Duma soon. After the law is adopted, the total borrowing target for the quarter could rise to RUB 2.5tn. The FinMin's press release suggests this adjustment. This would mean raising about RUB 275bn at each auction day, which is a challenging target even with today's strong demand for fixed-rate bonds. As a result, part of the program will likely be concentrated toward the end of the year using floating-rate bonds, as it was done in 2024. We still see this approach as a positive sign for successful execution.

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Aeroflot bought eight Boeing cargo jets for spare parts
Russia | Oct 01, 15:19
  • Observers see strategic risks growing, but it can barely change the state stance

Aeroflot has bought eight Boeing cargo planes from a recently nationalized Russian carrier. They are to be taken apart for spare parts to keep the airline's fleet flying, the CEO said. The decision comes as the shortage of components grows, with parts from 15 and 20 year-old planes now used to support the country's largest carrier. This is the first time a Russian air company has openly admitted using this approach. Until now, companies have relied on parallel or even grey imports, but these schemes have become too difficult or expensive, we assume. In addition, Russian Telegram-channels report that one Airbus A350 has already been dismantled, and the rest of this model park is expected to be stored by the end of the year. Observers say this shows the crisis has become a strategic risk. Talks with the US have touched on lifting aviation sanctions upon Russian initiative, but there is no progress: ICAO has not restored Russia to full membership, leaving weaker safety rules or dismantling planes as the only options. Still, this is unlikely to make the authorities change course toward compromise. Even official polling in early 2024 showed that only 32% of Russians had flown at least once in the past three years, suggesting little risk of public discontent. The government seems to believe such cannibalization schemes are to continue to function until "victory arrives".

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Serbia
Flystar Flight Support gets licences for oil trade and storage
Serbia | Oct 02, 07:37
  • The measure comes ahead of US sanctions on oil company NIS that can severely impact aviation fuel supply

Flystar Flight Support, a subsidiary of UK-based Menzies, has received two 10-year licenses from the Energy Agency in late August and early September - one for oil and petroleum product trading and another for storage, www.magazinbiznis.rs reported. Flystar's new licenses may provide an alternative supply solution if US sanctions disrupt the operations of the oil company NIS. The sanctions that are expected to take effect on Oct 8 could severely impact aviation fuel supply at Belgrade Airport for Air Serbia and other airlines using NIS fuel, as payment complications would arise. The outlet notes that NIS plays a major role in Serbia's aviation fuel sector, producing jet fuel at its Pancevo oil refinery and supplying Belgrade Nikola Tesla airport and Nis Konstantin Veliki airport.

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PRESS
Press Mood of the Day
Serbia | Oct 02, 06:42

Fifty blockaders stopped traffic on the Gazelle Bridge (Politika)

An inspection of a large domestic retail chain is underway (Politika)

Grain accounted for 31.1% of crop production last year (Politika)

Commemorative walks for victims of the canopy collapse in Novi Sad: Candles, flowers and 16 minutes of silence (Blic)

"Serbia is at a crossroads": What was heard in Strasbourg about our crisis? (Danas)

Magazine Biznis: Flystar Flight Support company received licenses from the Serbian Energy Agency to store oil and trade derivatives due to NIS sanctions (Danas)

New taxes are being introduced: A public debate is starting on two laws that will come into force from next year (Danas)

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Oil company NIS confirms delay of US sanctions until Oct 8
Serbia | Oct 01, 12:55
  • Sanctions due to Russian ownership were supposed to take effect on Oc1

The oil and gas company NIS confirmed today that the US has postponed sanctions until Oct 8 at the latest. NIS reminded that it has also submitted an additional request for removal from the Specially Designated Nationals list, but noted this was a lengthy and complex process. The initial request was sent on Mar 14.

The sanctions were supposed to take effect on Oc1, but media reported that the US has delayed them after talks with President Aleksandar Vucic. Initially, the sanctions due to the Russian ownership were supposed to take effect on Feb 28. Earlier this month, Intelligence, a subsidiary of Russia's Gazprom, has become the owner of 11.304% of NIS shares. Gazprom retained one NIS share. Yet, the ownership structure of the company remained the same - Gazprom Neft's - 44.85%, Serbian government - 29.87%, and minority shareholders - 13.98%.

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FinMin Mali expects govt to adopt draft 2026 budget in first week of November
Serbia | Oct 01, 12:54
  • He thinks document will be included on parliament's agenda in last week of November

FinMin Sinisa Mali today voiced expectation that the government would adopt the draft 2026 budget in the first week of November, the news agency Tanjug reported. He added that the document should be included on the agenda of the parliament in the last week of November. Mali did not reveal any details of the draft. He was speaking at the presentation of a budget portal, a new platform aimed to get citizens acquainted with the budget preparations.

Note that the authorities have assured the IMF that they were committed to adhering to the 3% of GDP fiscal deficit ceiling over 2025-27 and to the fiscal rules on public wages and pensions.

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Ukraine
Government starts to prepare two banks for privatisation
Ukraine | Oct 02, 11:24
  • Ukrgasbank, Sense are among Ukraine's top ten largest banks
  • State share of banking sector is to be cut in line with agreement with IMF

The cabinet has decided to start preparations for the sale of state-owned stakes in the banks Ukrgasbank and Sense Bank, the FinMin announced today. The goal is to cut the state share of the banking sector, said the FinMin. This share is estimated at more than 50%, as there are seven state-owned banks, including the country's four largest ones. The FinMin added that by end-November it would start the process of choosing legal advisers to sell stakes in Sense Bank and Ukrgasbank. It did not specify how big the stakes might be.

Ukrgasbank was bailed out and nationalised in 2009, while Sense Bank (formerly Alfa Bank Ukraine) was seized from its Russian owners and nationalised in 2023. Ukraine has had to prepare the two banks for sale in line with the memorandum with the IMF which was published in February 2024. Ukrgasbank was the fifth largest Ukrainian bank by assets out of 61 and Sense was the ninth as of early this year.

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HIGH
Russian strikes temporarily black out Chernobyl
Ukraine | Oct 02, 05:53
  • Drones hit substation in Slavutych, causing power outage also in Chernihiv region
  • Zelensky says strike was deliberate, international nuclear watchdog weak

Russian drone strikes for several hours yesterday blacked out the Chernobyl confinement structure, which keeps radioactive waste from the 1986 nuclear disaster inside the stopped nuclear plant (NPP). Russia hit a substation in the town of Slavutych nearby, causing power outages also in Ukraine's northern Chernihiv region, the energy ministry said. Russia targeted Chernobyl NPP deliberately, using over 20 drones simultaneously in the attack, President Volodymyr Zelensky said. He said Russia was abusing 'the weak position' of the International Atomic Energy Agency (IAEA). Zelensky also accused Russia also of causing a long power outage at Europe's largest NPP in Zaporizhzhhya region, which Russian troops occupied in 2022. The IAEA issued a statement on Sep 30, urging 'both sides of the military conflict' to help restore power supply to the Zaporizhzhya NPP.

Ukraine accused Russia of attacking Chernobyl also last February, when the confinement structure was directly hit by a drone. In October 2023, Russia hit dangerously close to the Khmelnytsky nuclear plant in Western Ukraine. In 2022, Russian troops briefly occupied Chernobyl, and later the same year Ukraine's three functioning nuclear plants lived through an emergency shutdown caused by a massive Russian missile strike on substations and power lines. The IAEA, which has a mandate to promote the safe and secure use of nuclear technologies, was a helpless bystander in all those situations.

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PRESS
Press Mood of the Day
Ukraine | Oct 02, 04:54

Chernobyl nuclear plant blacked out: Enemy hits energy infrastructure in Slavutych (Delo)

Russia hits substation in Slavytych deliberately so as to black out Chernobyl - Zelensky (Glavcom)

Main news: Attack on energy infrastructure in Odesa and shelling of Kyiv region overnight (Glavcom)

[Parliament's budget committee chair] Pidlasa: We have to convince partners to issue funds for military wages (RBC-Ukraine)

Wages down in August compared to July across Ukraine, except one region (Strana)

Is it possible to find compromise in Ukraine-Poland agriculture dispute? (Ukrayinska Pravda)

Ukraine gets another EUR 4bn loan from EU at Russian assets' expense (Ukrayinska Pravda)

Taxi tariffs up in Kyiv. What pushes prices (Forbes.ua)

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New car registrations up 21% y/y in September
Ukraine | Oct 01, 16:38
  • Registrations down 10.5% m/m
  • BYD overtakes Toyota as market leader

New car registrations, after falling in August, jumped 21.1% y/y to 6,210 in September, the Automotive Market Research Institute has reported. The increase in annual terms was due to base effects, as new car registrations were down 10.5% in September compared to August. The share of corporate sales equalled 24.8%, down from 27.4% in August. Mid-size SUVs continued to dominate the market.

Among car brands, China's BYD with 805 new cars registered for the first time overtook Toyota (743). VW was third again, with 678 cars. Toyota has been the market leader for many years, while China's BYD entered the top three only this year on the back of electric vehicles, apparently as importers rushed to boost imports ahead of the phasing out of tax breaks for electric cars due next year.

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NBU business expectations index further up to 50.4 in September
Ukraine | Oct 01, 13:34
  • Trade most optimistic, industry most pessimistic
  • Businesses set to cut workforce

The NBU business activity expectations index was up to 50.4 in September from 49.0 in August and 48.3 in July, so it was back above the neutral level of 50.0. The index was also higher than 48.7 a year earlier, in September 2024. Among positive factors this past September, the NBU listed stable demand and energy supplies, disinflation, more government spending on infrastructure restoration, and a stable FX market. The negative factors included the intensified Russian missile and drone attacks, higher tariffs, and skilled labour shortage.

The trade sector was again the most optimistic, as the sub-index there jumped to 54.0 in September from 51.8 in August, remaining above-neutral for seven months in a row. Respondents there continued to expect higher trade volumes and were also upbeat on stocks this time. In industry, the sub-index inched up to 49.1 from 48.7, as businesses there for the first time in the last six months expected an increase in stocks of raw materials and supplies. In the service sector, the sub-index was up to 49.4 from 47.0, as businesses expected more orders. By contrast, the index was down to 50.0 from 54.0 in construction.

The NBU noted that businesses across the economy, except construction, were for another month set to cut workforce. The survey was conducted among 586 businesses on Sep 3-22.

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Naftogaz borrows EUR 300mn from EIB
Ukraine | Oct 01, 12:54
  • This is for gas imports
  • Loan is guaranteed by EC

The state oil and gas company Naftogaz Ukrainy has signed an agreement to borrow EUR 300mn from the European Investment Bank. It will be used to import gas, Naftogaz CEO Serhy Koretsky said on Facebook. The loan will be issued under Ukraine Energy Rescue Plan and is guaranteed by the European Commission, said Koretsky.

Naftogaz has had to boost gas imports after the devastating Russian missile and drone strikes on its gas reservoirs and production facilities early this year. For this, it borrowed UAH 2.45bn (USD 59mn) from Ukreximbank last month, EUR 500mn from the EBRD in August, and UAH 9.4bn from Privatbank and Ukrgasbank in July. Ukraine has been importing gas mainly from Hungary and Slovakia, both of which rely on Russian gas, while Ukraine has not been importing gas directly from Russia since 2015.

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EU issues EUR 4bn ERA tranche
Ukraine | Oct 01, 12:07
  • This is ninth tranche of G7's loan based on proceeds from Russian assets
  • Ukraine has thus far received USD 28bn under USD 50bn ERA loan

Ukraine has received the ninth tranche of the G7's USD 50bn ERA loan, equalling EUR 4bn, the FinMin said today. The previous ERA tranche arrived from the EU in September and equalled EUR 1bn. Ukraine has thus far received EUR 14bn under ERA from the EU, and a total of EUR 18bn was expected from the EU this year. ERA is based on proceeds from immobilised Russian assets. Since last year, G7 countries and the EU have provided USD 28bn under ERA. Since February 2022, Ukraine has received EUR 62.5bn for priority expenditures from the EU.

The EU is now considering a reparations loan, also to be based on Russian assets. It may amount to EUR 130bn-170bn, according to different reports. Germany is in favour of the new loan, while Belgium, which is home to Euroclear where most of the Russian assets frozen in the EU are kept, is against.

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Uzbekistan
KEY STAT
Gas production declines by 4.0% y/y over Jan-Aug
Uzbekistan | Oct 02, 09:07
  • Gas production amounted to 3.5bcm in Aug vs 3.6bcm in Jul

According to the Uzbekistan Statistical Agency, the country extracted 3.5bcm in Aug vs 3.5bcm in Jul and 3.8bcm in Aug last year. Cumulatively, gas production has declined from 30.1bcm in Jan-Aug 2024 to 28.9bcm in Jan-Aug 2025. This represents a 4.0% y/y decline.

In 2023 Uzbekistan for the first time imported more natural gas than it exported, which was necessitated by the shortfall of domestic production vs domestic consumption. Gas extraction has fallen by about 35% from its peak of 68.3bn cubic meters in 2008 to 44.6bn cubic meters in 2024.

Uzbekistan has been trying to resolve this issue by importing gas from Turkmenistan and Russia, and last year announced a program aimed at modernizing the gas infrastructure that would allow the import of much higher quantity of gas from Russia over the medium term.

Kazakhstan also confirmed its intention to facilitate higher gas transit shipment from Russia to Uzbekistan.

Uzbekistan currently imports gas from Russia and Turkmenistan.

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Total assets of Uzbek banks reach UZS 863trn, capital Grows by 21%
Uzbekistan | Oct 02, 08:57
  • State-owned institutions continue to hold the largest share of banking assets, accounting for 65% of the total

The Central Bank of Uzbekistan has published data on the state of the country's banking sector as of 1 September 2025, indicating steady growth in key financial indicators. According to the regulator, total banking assets rose from UZS 731.6trn at the beginning of September 2024 to UZS 863.1trn, reflecting nominal growth of 18% and real growth of 19% after adjusting for inflation.

Loan portfolios increased from UZS 509.7trn to UZS 581.1trn (a nominal rise of 14% and a real increase of 15%), while household and corporate deposits grew from UZS 283.1trn to UZS 363.7trn, up 28% in nominal terms and 29% in real terms.

Aggregate capital in the sector reached UZS 128.8trn, marking a 21% increase year-on-year.

The sector's leaders by assets are NBU with UZS 143.96trn (17% of total assets), Agrobank with UZS 100.51trn (12%), Uzpromstroybank with UZS 97.03trn (11%), Asaka Bank with UZS 60.15trn(7%), and Kapitalbank with UZS 52.28trn(6%).

In terms of capital, the leading institutions remain NBU with UZS 19.35trn (15% of total), Agrobank with UZS 13.72trn (11%), Uzpromstroybank with UZS 11.2trn (9%), People's Bank with UZS 10.12trn (8%), and Ipoteka Bank with UZS 7.13trn (6%).

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Estonia
Three opposition parties with strong lead ahead of ruling parties - poll
Estonia | Oct 02, 07:17
  • Support for Isamaa has stabilised around 28% in past few months, Centre Party firmly second with 19.8%
  • Total support for the two ruling parties Reform and Estonia 200 hits new record low level of only 13.7%
  • Centre Party gains 41.5% support in capital Tallinn before the Oct 18 elections

Three opposition parties - Isamaa, Centre Party and EKRE, hold the top three places in the latest Norstat poll with a significant lead ahead of the two ruling parties. Isamaa was the firm leader with 28.7%, followed by Centre Party with 19.8% and EKRE with 16.3%. Opposition SDE was fourth with 12.4%, ahead of ruling Reform with 11.7%, non-parliamentary Parempoolsed with 6.1% and the junior ruling partner Estonia 200 with only 2%. The total support for the two ruling parties was only 13.7%, hitting another new record low level, compared to 77.2% support for the opposition parties.

The pollster highlighted the stabilisation of Isamaa around 28% in the past three weeks, as well as the upward trend for Centre Party, although it somewhat stalled in recent weeks. Conversely, support for the third EKRE has been on a downward trend in recent weeks.

Norstat also surveyed the preferences before the Oct 18 local elections. In capital Tallinn, Centre Party received 41.5% support, followed by Isamaa with 15.9%, SDE with 14.5% and Reform with 9.8%. The survey showed that a Centre Party candidate would win the election in six of Tallinn's districts, with candidates from other parties leading in only two districts.

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Greece
Greek industry divided over possible adoption of “Italian model” in energy
Greece | Oct 02, 06:36
  • EVIKEN and SVE warn against bypassing competitive tenders and the risk of EU scrutiny for state aid
  • The announcement of a final package of measures will come on 7 October

A second interministerial committee chaired by Deputy Prime Minister Kostis Hatzidakis is meeting on Thursday to address industrial energy costs, local media reported. This is five days ahead of Prime Minister Kyriakos Mitsotakis' announcement of a final package of measures at SEV's General Assembly. The talks include SEV and the Northern Greece Industry Association (SVE), alongside government officials.

Industry representatives arrive divided over the proposed adoption of the Italian model. While SEV supports a mechanism whereby the Renewable Energy Sources Operator (DAPEEP) supplies energy to energy-intensive industries at EUR 60 per MWh for three years, with companies repaying this through 20-year renewable investments, EVIKEN (representing large medium-voltage consumers) and SVE warn against bypassing competitive tenders and the risk of EU scrutiny for state aid.

Despite differences, industry stakeholders oppose extending support beyond manufacturing to sectors such as hotels and supermarkets, as suggested by the government. Hatzidakis emphasised that measures must balance broad business needs with fiscal constraints, prioritising energy-intensive firms but mindful of budgetary limits. The debate occurs amid rising wholesale power costs, with average prices up 27% in September versus August. Yet households and most businesses will not face immediate increases. The PPC has frozen its "green tariff" at EUR 0.129 per KWh, while Protergia cut its green tariff by 7% to EUR 0.149 per KWh. Other providers were set to announce their October rates by late yesterday.

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PRESS
Press Mood of the Day
Greece | Oct 02, 06:36

Industrialists appear split on energy cost tackling (Kathimerini)

Bill clears migrant bottleneck (Kathimerini)

ATHEX: Healthy rise for majority of blue chips (Kathimerini)

IELKA: Food inflation in Greece lower than in the EU (Moneyreview)

Real Estate: The hidden stock of 5,000 homes in the centre of Athens (Moneyreview)

Fixed or reduced electricity tariffs in October for the majority of consumers (Amna)

Development Minister: Price reduction on 1,000 items on supermarket shelves - List until October 15 (Naftemporiki)

Three-month interest: 600 million were raised with a marginally increased yield (Naftemporiki)

What will we pay for electricity in October? (Euro2Day)

Cooperation between Greece and the European Public Prosecutor's Office to protect European resources (Euro2Day)

The positive streak in tourist traffic continues - October at +5% (Capital)

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Italy
KEY STAT
Unemployment rate edges up to 6.0% in August
Italy | Oct 02, 09:25
  • Labour force participation declines m/m for the third consecutive month
  • Employment rate heads lower after peaking at 62.8% in July
  • Labour market conditions remain favourable, but the expansion may have plateaued

Italy's LFS unemployment rate edged up to 6.0% in August from a downwardly revised 5.9% in July, Istat reported on Thursday. While the m/m increase in the number of unemployed was only marginal, labour force participation fell noticeably for the third consecutive month, and the economy lost some 57k jobs, which is the first m/m decline since April. Most notably, the number of employed Italians (excluding the self-employed) registered its first y/y decline since Mar 2021. While a robust 139k y/y increase in self-employment compensated for the latter, the latest Istat data gives further evidence of a plateauing labour market expansion. Even so, with unemployment near record lows and the employment rate of the population aged 15-64 hovering at long-term highs, labour market conditions remain favourable by historic standards.

Istat's business confidence surveys show that firms across all leading sectors expect to hire more employees in Q4, and the latest Manufacturing PMI survey signalled a reversal in the eleven-month job shedding trend in the sector. However, the employment outlook in the service sector, as evaluated by Istat, deteriorated for the third consecutive month in September, which signals a soft patch for job creation in the months ahead. Structurally, the Italian labour market looks sound, with permanent employment still growing y/y, albeit at a more moderate rate than previously. We note that strong labour markets remain a prerequisite for achieving the government's medium-term growth targets, which is why a prolonged stagnation in job creation could emerge as another headwind to GDP growth over the next several quarters.

Labour market data, seasonally-adjusted
Mar-25Apr-25May-25Jun-25Jul-25Aug-25
Unemployment rate, total6.3%6.1%6.5%6.2%5.9%6.0%
Employment rate 62.7% 62.6% 62.7% 62.7% 62.8% 62.6%
Activity rate 66.9% 66.7% 67.1% 67.0% 66.8% 66.7%
Youth unemployment rate, 15-24 years 20.9% 20.0% 21.5% 20.0% 18.6% 19.3%
m/m (thousands)
Labour force 63 -88 167 -42 -68 -50
Employed 12 -43 52 34 9 -57
Unemployed 52 -45 115 -77 -76 7
Source: Istat
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New car sales return to growth in September
Italy | Oct 02, 06:56
  • Extra working day boosts sales in September, ahead of Oct 15 incentives launch
  • Stellantis' market share is still near all-time lows, despite a stronger September
  • UNRAE says Italy needs a national charging infrastructure plan and structural e-transition incentives

New passenger car sales rose by 4.1% y/y to 126.7 thousand units in September, interrupting a four-month sequence of declines, according to the latest data released by the transport ministry. The improvement can be largely explained by the additional working day in Sep 2025, net of which the market would have stagnated. In cumulative terms, new car sales fell by 2.9% y/y to 1.17mn in Jan-Sep, while remaining about a fifth below their pre-pandemic levels.

The association of foreign car manufacturers (UNRAE) raised several issues in its comment on the monthly data, focusing on historically subdued domestic production, the "rapidly" ageing vehicle fleet, and the stalled energy transition. While the pending Oct 15 start of a new incentives package aimed at all-electric vehicles will certainly boost sales in Q4, the association argues for a structural approach towards the fleet's renovation, as the delayed launch of the incentives package has stifled demand in the relevant market segments, just as in 2024. UNRAE also requested a national charging infrastructure plan and a reform of company car taxation in line with EU best practices to help boost the corporate sales channel.

Stellantis's sales rose by 15.6% y/y to 33.9 thousand units, outperforming the market for the second consecutive month, even though mostly due to base effects (the automaker's sales plummeted by over 30% y/y in both Aug 2024 and Sep 2024). In cumulative terms, Stellantis' sales still contracted by 9.4% y/y and its market share remains close to all-time lows. Domestic production volumes are very low, and the trade unions have ramped up their opposition towards the new leadership of the group, requesting guarantees in the face of ongoing layoff extensions in several plants.

Passenger car sales
Apr-25 May-25 Jun-25 Jul-25 Aug-25 Sep-25
Monthly
New car registrations 139,084 139,390 132,191 118,493 67,272 126,679
Stellantis registrations 42,803 39,118 32,437 30,797 17,690 33,946
Stellantis share (%) 30.8% 28.1% 24.5% 26.0% 26.3% 26.8%
12-m rolling (thousands)1,5551,5551,5271,5201,5181,523
Source: Ministry of Transport
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PRESS
Press Mood of the Day
Italy | Oct 02, 06:28

PD, you don't win by saying your opponent is evil (HuffPost)

The government is betting on a 3% deficit in 2025 (HuffPost)

Flotilla: Several boats intercepted. Tajani: Italians will be taken to Israel and then expelled. CGIL and USB: General strike on Friday. (Il Sole 24 Ore)

Meloni in Copenhagen: "The flotilla is irresponsible. Helping Palestine is not their priority." (La Repubblica)

Schlein: "The government must act; we've lost contact with our people." (La Repubblica)

CGIL and the USB announce general strike for the Flotilla on Friday, Oct 3 (Ansa)

Israeli military still in action at dawn: At least 19 vessels boarded and 200 arrested, including 22 Italians (Il Fatto Quotidiano)

Protests across Italy: Thousands march in Rome. Naples train station occupied, with demonstrations in Bologna and Milan (Il Fatto Quotidiano)

Israel plans expulsions without special courts, Italy does not pay for flights (La Repubblica)

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KEY STAT
Central govt cash budget deficit narrows 0.4% y/y to EUR 110.3bn in Jan-Sep
Italy | Oct 01, 18:26
  • Cash budget deficit/GDP ratio declines slightly to 4.89% in Jan-Sep
  • Italy's monthly cash borrowing requirement stood at EUR 25.3bn in September
  • Bloomberg says DPFP estimates Maastricht GG deficit/GDP ratio of 3% in 2025

Italy's cumulative central government cash budget deficit narrowed by 0.4% y/y to EUR 110.3bn in Jan-Sep, according to preliminary data published by the Ministry of Finance on Wednesday. In relative terms, the cash budget deficit consolidated to 4.89% of projected nominal GDP from 5.05% in the same period of 2024, assuming nominal GDP growth of 2.9%. In September alone, the Treasury estimates a cash budget deficit of EUR 25.3bn, which is a 4.7% y/y increase, compensated by the relative overperformance earlier in Q3.

The government originally estimated a cash borrowing target of about EUR 128.0bn in 2025 (5.7% of GDP) and a general government deficit/GDP ratio of 3.3%, but there are several factors that should result in a fiscal overperformance. Among these are the advanced level of this year's funding activity (83% as of end-September), the relatively favourable cash position, lower redemptions in H2, and the improvement in the government's financing conditions, which could result in total interest savings of about EUR 13bn in 2025-26.

Economy Minister Giancarlo Giorgetti has all but confirmed that the government's fiscal results will be better than expected in 2025, and Fitch recently forecasted a reduction in the deficit to 3.1% of GDP, while upgrading the country's long-term sovereign credit rating to BBB+. According to a Wednesday Bloomberg report based on anonymous sources, the soon-to-be-presented Public Finance Planning Document (DPFP) will foresee a reduction in the general government deficit to 3% of GDP in 2025, which will allow the country to exit the excessive deficit procedure one year earlier than expected.


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Urso downplays chances of ex-Ilva nationalisation
Italy | Oct 01, 16:51
  • Steelmaking is not among the activities where nationalisation would be warranted
  • Urso's rhetoric has become increasingly pessimistic in recent weeks
  • We think ex-Ilva is headed towards a permanent shutdown

There are no conditions for the nationalisation of the Taranto steelmaker Acciaierie d'Italia (AdI, ex-Ilva), Business Minister Adolfo Urso said on Wednesday, during a visit to the Beko plant in Siena. Steel companies do not fall in the scope of possible public interventions, which is limited to energy companies, essential public services and monopolies. Ex-Ilva is just one of the nineteen steel-producing companies in Italy, even though it is the leading one in the sector [in terms of its capacity], the minister said.

Later the same day, Urso appeared in the lower chamber of Parliament, where he was asked questions on ex-Ilva's situation by MPs. The minister admitted that "the next steps will not be easy", while at the same time expressing satisfaction with some aspects of the two full offers received as a result of the relaunched tender for the sale of the company. Urso said that decarbonization is an "unavoidable" condition for the company's successful sale, which we read as a clear signal that maintaining employment will become a secondary concern, at some point, even though all interested parties have done their best to alleviate the fears of the trade unions. Over the course of the last several months, Urso's rhetoric has become increasingly and uncharacteristically pessimistic, which is another sign that the Ministry may be losing faith in a positive outcome.

Ongoing operational and legal issues, debts to suppliers, the opposition of local authorities and civic groups, and the unclear pathway towards decarbonisation pose a series of major hurdles that must be overcome shortly if the operation of the company is to continue. As things stand, ex-Ilva looks more likely to shut down permanently than successfully change hands, unless it is sold for a symbolic amount, in our view.

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Latvia
Latvia will need to borrow EUR 3.8bn on international markets in 2026
Latvia | Oct 01, 16:39
  • About EUR 2.0bn annually goes toward repaying earlier debt
  • Even with a balanced budget higher interest rates will drive servicing costs upwards

Latvia will need to borrow EUR 3.8bn on international financial markets in 2026, rising to EUR 4.3bn in 2027, Deputy State Treasury Manager Janis Rozenbergs told the Saeima's Budget and Finance Committee on Wednesday. About EUR 2.0bn annually goes toward repaying earlier debt, while the remainder finances the state deficit and builds cash reserves, according to Rozenbergs. Debt servicing costs are rising, with new loans exceeding 3% interest after years of near-zero borrowing rates. Even with a balanced budget, higher rates will drive servicing costs upwards, the government official warned.

Rozenbergs highlighted that Latvia's latest borrowing terms were better than Lithuania's, despite its stronger credit profile. The Treasury placed 10-year eurobonds worth EUR 1.25bn in September at a 3.583% yield and 3.5% coupon, attracting over EUR 2.5bn in demand from about 70 European investors, including from the UK, Germany, Spain, and the Benelux. This year's EUR 3.6bn borrowing plan is already 90% complete, with proceeds mainly used for debt repayment and deficit financing. Of the EUR 2.127bn due in 2025, EUR 1.795bn has been settled, including EUR 1.11bn in 10-year bonds issued in 2015. By end-2025, government debt is expected at EUR 20.5bn, or 49% of GDP, among the lowest ratios in the EU.

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Lithuania
Stats office raises its 2024 annual GDP growth estimate from 2.8% to 3.0%
Lithuania | Oct 02, 06:34
  • Nominal GDP revised higher from EUR 78.4bn to EUR 79.0bn in 2024
  • General govt debt/GDP ratio edges down to 37.9% at end-2024 from 38.2% previously

Lithuanian real GDP rose by 3.0% in 2024 rather than the previously estimated 2.8%, according to the statistics office's preliminary annual revision of the national accounts. Nominal GDP was also revised upward by EUR 600mn to EUR 79.0bn in 2024, reflecting slightly sharper-than-estimated government consumption and export growth, as well as stronger performance in ICT, manufacturing, trade, and professional and administrative activities, on the supply side. The national data agency also increased its 2023 nominal GDP estimate by EUR 520mn to EUR 74.3bn, raising the real GDP growth estimate to 0.7% from 0.3%, mostly due to more favourable investment dynamics.

The revised 2024 nominal GDP implies a slight improvement in Lithuania's general govt debt/GDP ratio, which is now estimated at 37.9% at end-2024 (down from 38.2%). The impact on fiscal balance is negligible, with the general govt budget deficit/GDP ratio remaining relatively unchanged at 1.3% at end-2024. Overall, the GDP revisions come as a welcome boost to the economic outlook, but are unlikely to materially alter the government's fiscal planning or medium-term debt forecasts, in our view. That said, most forecasts suggest slightly lower GDP growth of around 2.7% in 2025, before a return to stronger momentum in 2026.

Click here for our comprehensive database of macro forecasts.

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PM Ruginiene rules out Culture Ministry leadership change
Lithuania | Oct 01, 15:15
  • Ministry of Culture to remain under Nemunas Dawn oversight, despite public discontent
  • Ruginiene vows to quell criticism over Ignotas Adomavicius' appointment

The government will not be pursuing leadership changes in the Ministry of Culture, nor any other cabinet adjustments, despite mounting criticism over Ignotas Adomavicius' appointment as minister, PM Inga Ruginiene said in an interview on Wednesday. She dismissed concerns about his perceived lack of experience and reassured that the ministry will remain under scrutiny to ensure its work maintains high standards. Ruginiene also promised to set up a dedicated working group tasked with resolving ongoing disputes with the cultural community.

The decision to appoint Ignotas Adomavicius as Minister of Culture has sparked controversy, drawing criticism from various cultural organisations over his credentials. However, delegating the Ministry of Culture to Nemunas Dawn was arguably a key compromise in the broader cabinet reshuffle that ultimately ended the political deadlock. While tensions between the government and the cultural community are likely to persist in the short term, they are unlikely to provoke another coalition crisis, in our view.

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Portugal
HIGH
Local elections on 12 October are shaping up to be a very close contest
Portugal | Oct 02, 09:19
  • Races for Porto and Lisbon are very tight, the candidates of the ruling AD and the opposition PS are in a statistical tie
  • Chega is on track to perform much better compared to 2021, seems likely to come in third in Porto and Lisbon
  • Political fragmentation means many municipalities will likely end up with coalition governments or minority administrations

Portugal's upcoming local elections on 12 October are shaping up to be among the most competitive in recent history, with significant shifts in the political landscape compared to the 2021 cycle. The Democratic Alliance coalition, comprising PSD and CDS-PP, and in some municipalities, including IL, maintains a national lead in polling with support ranging between 29-34%, positioning them to win the largest number of municipalities across the country. However, their advantage over the Socialist Party, which polls consistently in the mid-20% range, is relatively narrow.

The races for Portugal's two largest cities present particularly tight contests. In Lisbon, incumbent mayor Carlos Moedas of the Democratic Alliance is locked in a statistical tie with Socialist challenger Alexandra Leitao, with both candidates polling around 28% in direct voting intention and 35-36% when undecided voters are allocated. Similarly, Porto shows a technical tie between Pedro Duarte of the Democratic Alliance and Socialist Manuel Pizarro, with neither candidate expected to achieve an absolute majority.

Maybe the most significant development in these elections is the continued surge of Chega, which has established itself as a major disruptive force in Portuguese politics after managing to finish second in the parliamentary election earlier this year. In Lisbon, Chega is polling around 13-16%, representing a dramatic increase from negligible support in 2021 and likely securing council representation for the first time. In Porto, the party is expected to finish third with 8-10% support.

This represents a fundamental shift in Portuguese electoral dynamics. The traditional left-wing parties, particularly Bloco de Esquerda (BE) and the Communist-led CDU, have seen their support collapse, while Chega has captured disillusioned voters across the political spectrum. The party's strongest performance is expected in southern regions and interior municipalities, where it could potentially win pluralities in some smaller councils.

The fragmentation of the political landscape means that many municipalities will likely face coalition governments or minority administrations after the elections. There is no clear frontrunner in overall municipal control throughout the country, according to the polls, making it likely that the results of the local elections mimic those of the last two parliamentary elections. Overall, Portugal appears to be moving away from the post-1974 era of stable two-party dominance, with these local elections serving as a crucial test of the trend strength of the country's evolving political realignment.

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PRESS
Press Mood of the Day
Portugal | Oct 02, 06:41

Moedas and Leitao tied in Lisbon in Porto, Duarte wants to be the voice of the North (Publico)

Foreigners' Law: To secure Chega's support, the PSD increases family income requirements and complicates deadlines (Publico)

Constitutional Court elects Judge Joao Carlos Loureiro as Vice President (Publico)

The Government's "moderate" value is up to 30 times higher than the median price (Publico)

The Azorean government expects to reduce the deficit to 155 million euros and increase tax revenue in 2026 (CMJornal)

Carneiro accuses the government of "going backwards" with labour law (CMJornal)

"I want to see Ventura": The absence of the Chega leader continues to not go unnoticed by the public (CMJornal)

Interest on Portugal's debt rises on two, five and 10-year maturities (CMJornal)

Without immigrants, the Portuguese population would fall to 6 million by the end of the century (Jornal de Negocios)

Carbon tax threatens to further increase fuel prices (Jornal de Negocios)

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Average interest rate on corporate loans falls by 11bps to 3.54% in August
Portugal | Oct 01, 15:23
  • Average rate on household loans fell by 3bps to 4.03%
  • Deposit interest rates also continued to fall across the board

The average interest rate on loans to non-financial corporations in Portugal declined to 3.54% in August from 3.65% in July, according to the latest data from the Bank of Portugal. The drop was mainly driven by a sharp fall in rates on large loans (over EUR 1mn), which decreased to 3.16% in August from 3.44% in July. Rates on smaller corporate loans (up to EUR 1mn) edged down more moderately to 3.81% in August from 3.83% in the previous month.

In the household sector, average loan rates also eased slightly, falling to 4.03% in August from 4.06% in July. Housing loan rates continued their downward trend, falling to 2.86% in August from 2.89% previously. Consumer credit costs also moderated, with rates declining to 8.77% in August from 8.83% in the previous month. Deposit rates continued to fall across the board. The average interest rate on household deposits with up to one-year maturity fell to 1.34% in August, down from 1.39% in July. Corporate deposit rates also declined, easing to 1.62% in August from 1.66% the month before.

Overall, the August figures show a broad-based decline in both lending and deposit rates, with corporate borrowing costs falling most sharply, particularly for large-scale loans. With the ECB maintaining a steady stance after recent cuts, Portuguese borrowing conditions are set to remain supportive, in our view, although the pace of declines in rates may gradually moderate in the coming months.

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KEY STAT
General government debt rises by 0.1% m/m to EUR 288.4bn in August
Portugal | Oct 01, 14:39
  • Loan debt rises by 0.7% m/m, while securities debt falls by 0.3% m/m
  • General government debt net of deposits was broadly unchanged in August

General government debt in Portugal edged up by 0.1% m/m to EUR 288.4bn in August, after a marginal 0.3% m/m increase in July, according to the latest data from the Bank of Portugal. Currency and deposits grew by 0.5% m/m in August, accelerating from a 0.3% m/m increase in July, indicating a further build-up of cash buffers. Loan debt also expanded, rising 0.7% m/m in August after a slight 0.2% m/m decline in the prior month. The increase was driven entirely by long-term loans, which rose by 0.7% m/m, while short-term loans contracted sharply by 4.2% m/m, extending July's 9.7% m/m fall.

On the other hand, securities debt declined 0.3% m/m in August, reversing the 0.5% m/m rise recorded in July. General government debt net of deposits was broadly unchanged in August, following a small 0.2% m/m increase in July. Overall, the August data shows that a build-up of deposits and higher reliance on long-term loans is offsetting a reduction in securities. While the overall debt stock remains stable, the composition shift suggests the government is managing near-term financing needs by diversifying its funding sources.

Maastricht Debt, EURmn
Mar-25 Apr-25 May-25 Jun-25 Jul-25 Aug-25
Total278,304.1280,903.9284,674.5287,133.0288,094.6288,360.6
Securities 160,313.3 162,568.5 166,057.4 168,203.1 168,967.6 168,533.0
Loans 69,473.2 69,383.5 69,323.8 69,497.5 69,366.3 69,841.4
Currency and deposits 48,517.7 48,951.9 49,293.3 49,432.4 49,760.6 49,986.3
GG debt net of deposits 259,465.3 260,442.0 260,392.5 258,929.6 259,268.5 259,205.7
Source: Banco de Portugal
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Slovakia
KDH head calls on PM Fico to reimburse self-employed for transaction tax paid
Slovakia | Oct 02, 11:05
  • KDH to propose abolishing transaction tax completely and for all

By abolishing the transaction tax for the self-employed, the government has admitted its mistake and should therefore return the tax which has already been paid, opposition party KDH chairperson Milan Majersky said on Thursday, calling on PM Robert Fico (Smer-SD) to take the necessary action. He added the transaction tax was also making life difficult for companies and other entrepreneurs - according to him, entrepreneurs should be supported and not punished by the state as they are the breadwinners of their families and give other people jobs. Majersky said that the KDH would propose abolishing the transaction tax completely and for all.

Recall that the parliament unanimously approved on Tuesday the proposed by the junior ruling party SNS amendment to the financial transaction tax law, according to which starting next year, sole proprietors and other natural persons entrepreneurs will not pay financial transaction tax. No estimate of the loss for the budget was provided. Note that the financial transaction tax, which entered into force as of April, was expected to bring EUR 574mn to state coffers - as of end-September, it was paid in the amount of EUR 207.9mn in April-September, up from EUR 168mn as of end-August, EUR 124.5mn at end-July, EUR 41.5mn at end-June, EUR 19.9mn at end-May. According to the September tax forecast of the Financial Policy Institute IFP, a think-tank to the finance ministry that advises the government on macroeconomic policies and sets its forecasts, in 2025 tax revenues will expand by 8.1% but are to be lower by almost EUR 1bn this year compared to plans, while, the financial transaction tax is expected to raise EUR 390mn this year vs. EUR 570mn worth of revenues planned in the budget.

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Opposition slams absence of targeted energy assistance
Slovakia | Oct 02, 05:42
  • Parliament approved in third, final reading energy aid bill on Wednesday
  • Economy minister Sakova assures government should approve energy aid regulation in few weeks

Several opposition lawmakers criticised the act law on energy assistance approved by the parliament on Wednesday, saying that instead of bringing targeted aid, the money would continue to be squandered on an across-the-board scale. The government's plan to use EU funds, which should be allocated for entirely different purposes, is also considered a mistake.

Opposition PS MPs pointed out that by this law, the government has admitted its view that 90-95% of people in Slovakia are poor and need energy assistance, underlining that in a time of consolidation, this is an unnecessary squandering of money. PS was also critical of a new register collecting data on all residents of Slovakia which will be set up to assess entitlement to energy assistance. The party recalled that PS proposed that the law should include the option for people to refuse such an extensive collection of data, as planned by the economy ministry as the register will contain very sensitive data on income and property, but the proposal was rejected. According to the party, a better solution would have been to introduce a housing allowance, which PS has long promoted and which would involve collecting data only from those who apply for assistance.

The opposition Christian Democrats (KDH) also criticised the intention to cover the planned costs of energy assistance, totalling EUR 435mn next year, from EU funds. The party underlined that the energy assistance should be targeted, thus not requiring such a large amount, but still helping those who are the most vulnerable. Instead, the government has decided to do it in a way that EU funds will literally be burned in boilers by helping 90% of people. According to KDH, this is not energy aid but rather an 'energy bribe' that almost everyone in Slovakia will get as a small compensation for the consolidation of public finances. The party believes that instead, the government could have used the money for the thermal insulation of buildings or for replacing boilers, and which would have secured much more savings.

Note that the parliament on Wednesday definitively approved a new law on targeted energy assistance. Households will receive targeted assistance starting next year, and the current across-the-board compensation for energy costs will end at the end of this year. The details concerning energy assistance will be laid down in a regulation to be approved by the government.

Economy minister Denisa Sakova (Voice-SD) stated on Wednesday that the government should approve a regulation that will set out the precise conditions for assistance with energy prices in the coming weeks. Households will then learn whether this assistance applies to them or not, adding that it may be set slightly differently for each type of energy in order for the aid to be as targeted as possible. According to the minister, some more calculations are needed in the near future, as well as intensive communication with sellers of individual energies. For electricity and gas supplies, the reduced price should be reflected directly in the invoice. The procedure will be different for heat supplies, as their prices vary significantly between suppliers and regions - in this case, state aid should be in the form of energy vouchers. The checks should be delivered to people via the Slovak Post at the beginning of next year.

Note that the government continues to count on the possibility of using EU funds to help with energy prices - so far, approximately EUR 17mn have been secured, which can be used for technical solutions for the energy assistance system, or for personnel expenses related to it. The remaining money is still being negotiated with the EC. Sakova explained that so far it seemed that Slovakia would not be able to get an exact allocation under the existing legal system of the Commission, or the government would not be able to transfer the money it has today to energy aid one by one. She noted that there was a plan that the government could put that money into dual projects that would be financed from this, which would free up money in the state budget that can go to energy aid. According to her, the government makes all the effort to burden the state budget as little as possible, and the EC, which has promised the country assistance, is also aware of Slovakia's problem with higher energy prices.

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PRESS
Press Mood of the Day
Slovakia | Oct 02, 05:37

Constitutional amendment: KDH may bring about its end in parliament, SaS may be the winner (SME)

The government should approve the energy aid regulation in a few weeks (SME)

Slovak households to receive energy aid also in 2026 (SME)

[Defence minister] Kalinak wants 'Made in Slovakia' for EUR 100mn. He may prefer a domestic arms company (SME)

Minister claims president plotting to topple Fico's government (SME)

The opposition is shattered after the constitutional amendment, the coalition is no better off (SME)

Slovaks are dependent on gas, they don't have money for other sources. The state will now help them with their bills in a new way (Pravda)

[Economy minister] Sakova: The government should approve the regulation on energy aid in a few weeks (Pravda)

[Voice-SD head] Sutaj Estok: Everything has its limits (Hospodarske Noviny)

The government should approve the energy aid in a few weeks, says Sakova. Only then will it be clear who will receive the aid (Hospodarske Noviny)

Transaction tax: Rules that have complicated business for some time will be adjusted (Hospodarske Noviny)

Igor Matovic: I am expecting a preferential Armageddon, next time I will not try for a common approach (Dennik N)

Slovakia was absent from the summit on Russian threats. We did not ask the Czech side for help this time (Dennik N)

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Another lawmaker leaves Slovakia, For the People, KU caucus
Slovakia | Oct 01, 14:43
  • Vasecka leaves caucus over disagreement with expulsion of MP Kratky who backed government-sponsored amendment to Constitution

MP Richard Vasecka announced that he was leaving the Slovakia, For the People, KU parliamentary caucus and will serve as an independent MP, TASR newswire reported. Vasecka is a member of the Christian Union (KU) party - the MP explained that he was not leaving the caucus on bad terms and that his decision is related to the vote on the amendment to the Constitution, in particular his disagreement with the expulsion of Rastislav Kratky from the caucus. He said that for the time being, he was not considering joining another parliamentary caucus. Vasecka considers the constitutional amendment a historic success, while the Christian Union was surprised that Kratky's and Krajci's decision caused a "huge explosion" within the 'Slovakia' party and disagreed with Kratky's expulsion.

Recall that Vasecka announced in advance that he would support the constitutional amendment, as the priorities of the Christian Democrats (KDH) and KU had been incorporated into the proposal. At the last minute, Krajci and Kratky also supported the amendment. Kratky was expelled from the caucus and the party, while the party praised Krajci's apology and explanation, and they want to keep him in the caucus.


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President's Office rejects Migal's claims about formation of caretaker cabinet
Slovakia | Oct 01, 14:18
  • Head of state has always respected, will continue to respect general election results

The statements made by investments, regional development and informatisation Samuel Migal (Independent) regarding alleged considerations by President Peter Pellegrini to form a caretaker government are completely false, the President Office's communications department stated on Wednesday. According to the office, the president has always respected and will continue to respect the results of the general election, which should also be reflected in the composition of the government. The Office said that the head of state was convinced that the government should be changed through elections and not by other means. Furthermore, under the Constitution, the President has no power to decide on the continuation or fall of the government, the Office said, adding that the government could only fall if its ministers argue with each other, as the cabinets with the participation of Igor Matovic have shown to Slovakia. The Office also said that Pellegrini calls on the politicians, who were unable to deliver results of their work, to stop covering up their incompetence by looking for an internal enemy that doesn't actually exist.

Migal's claims were also rejected by coalition MP Peter Kalivoda (Voice-SD), who said that Migal's statements were complete nonsense. Kalivoda underlined that the minister should focus on his work and stop conspiring, stressing that these were delusions and conspiracies in which Migal has involved Pellegrini, among others.

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State debt manager ARDAL to hold regular government bond auction on Oct 20
Slovakia | Oct 01, 14:07
  • Specific bond float to be announced on Oct 13
  • Gross debt issuance amounts to EUR 9.19bn at end-September, covering 76.6% of annual borrowing plan

The Debt and Liquidity Management Agency ARDAL will hold primary auction for government securities on Monday, Oct 20, according to its September monthly government debt report. The specific bond float for that auction will be announced seven days before the auction, i.e. on Oct 13.

According to the report, government debt, excluding state guarantees, amounted to EUR 79.14bn at end-September, up from EUR 78.6bn at end-August, whereas government bonds amounted to EUR 75.2bn (up from EUR 74.6mn at end-August as EUR 575.6mn worth of government bonds were sold on the domestic market in September), loans - to EUR 3.92bn (unchanged against end-August), while there was no T-bill debt at the end of the month. The share of non-residents in the total government debt stock inched down to 55% at end-September from 55.1% at end-August.

In 2025, the government plans to borrow EUR 12bn from capital markets - it plans to open three government bonds via syndicated sale or auction, with the maximum amount to be sold via syndicated sales set at EUR 5-7bn and to continue with domestic bond sales. With the auctions in Jan-Jun (as usual, no auctions were held in July and August) and in September, the sale of EUR 3bn in 15-year 3.75%-coupon Eurobond maturing on Feb 27, 2040 as well as the sale of EUR 500mn in retail government bonds, ARDAL has thus already covered 76.6% of the annual borrowing plan since the beginning of the year. Note that two Eurobonds mature this year - EUR 3bn in 5-year 0.25%-coupon bond matured on May 14 and EUR 3bn in 15-year 4.35%-coupon is due on Oct 14.

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Spain
Treasury places EUR 5.93bn in medium-long-term bonds
Spain | Oct 02, 11:58
  • New 7-y benchmark bond yields 2.922%
  • Treasury places EUR 1.05bn in off-the-run green bonds

The Treasury placed EUR 5.93bn in medium-long-term bonds at the regular auction on Thursday (Oct 2). The amount raised was close to the upper end of the maximum issuance target of EUR 6.25bn for the day and breaks into EUR 1.45bn in 5-y bonds, EUR 2.83bn in 7-y bonds (new benchmark due Jan 31, 2033), as well as EUR 1.06bn in Jul 2024 off-the-run green bonds and EUR 591mn in 1.15% coupon inflation-linked bonds maturing in Nov 2036.

The gross average yield on the new 7-y benchmark bonds settled at 2.922% with a bid-to-cover ratio of 1.6. The yields on the 5-y and inflation-linked bonds remained relatively stable, whereas the yield on the green bond fell slightly in comparison to the previous auction in May. Demand was strong with all securities comfortably oversubscribed, likely influenced by the Treasury's decision to reduce its annual net issuance target by EUR 5.0bn.

Government securities auction, Oct 2
Maturity31-Jan-3031-Jan-33*30-Jul-42**30-Nov-36 (I/L)
Coupon2.70%3.00%1.00%1.15%
Allotted, EUR mn1,4472,8341,058591
Average yield2.483%2.922%3.739%1.490%
Bid-to-cover ratio1.911.632.332.16
Previous auction17-Jul-2504-Sep-2522-May-2503-Jul-25
Average yield2.479%2.734%3.847%1.470%
Bid-to-cover ratio1.942.081.742.14
Note: *new benchmark; **Green Bonds
Source: Treasury
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KEY STAT
Registered unemployment rate edges down to 10.0% in September
Spain | Oct 02, 10:59
  • Unemployment declines by 4.8k m/m, against market expectations for an increase
  • Seasonally adjusted employment marks new record highs
  • Labour market outlook remains favourable, supporting prospects for solid economic growth

Spain's registered unemployment rate declined slightly by 0.1pps m/m to 10.0% in September, according to the latest data published by the Labour Ministry and the Social Security Ministry on Thursday. Unemployment fell by 4.8k m/m to 2.42mn in September, the lowest figure for this particular month since 2007 and contrary to a consensus forecast for an increase. The latest data confirm the resilience of the Spanish labour market, which continues to expand steadily despite external headwinds. This robust performance has resulted in higher social security contributions and a wider social security surplus, with revenues up by 6.8% y/y in Jan-Aug. With record-high employment and unemployment near record lows, we expect the labour market to maintain its strength going forward, boding well for solid economic growth.

Monthly average employment rose by 31.4k m/m, rebounding after a sharp drop in August. Employment rose by a sharper 56.7k m/m in the seasonally-adjusted series to new record highs of 21.72mn. The improvement remained broad-based, with services remaining central to job creation in the month. Employment in industry and construction rose at a relatively stable pace m/m, offsetting another drop in agricultural employment. A total of 1.53mn new labour contracts were signed in the month, with the relative share of permanent labour contracts rising to 43.3% from 37.1% in August.

Registered labour market, % y/y
Apr-25 May-25 Jun-25 Jul-25 Aug-25 Sep-25
Registered unemployment rate (%)10.4%10.1%9.9%9.9%10.1%10.0%
Employed2.3%2.2%2.2%2.3%2.3%1.8%
Unemployed-5.8%-5.9%-6.1%-11.8%-9.0%-7.1%
Without previous employment -5.0% -4.3% -4.6% -10.5% -9.9% -6.0%
under 25 years -5.7% -4.5% -4.8% -19.9% -10.9% 2.6%
New contracts-10.0%12.1%31.6%41.4%-17.9%14.5%
Permanent -9.2% 9.1% 12.3% 20.8% -31.0% 15.2%
Temporary -10.6% 14.3% 48.1% 58.3% -7.6% 13.9%
Source: Ministry Social Security, Ministry of Labour
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Foreign tourist arrivals rise by 2.9% y/y to 11.2mn in August
Spain | Oct 02, 09:26
  • Improvement is broad-based, led by sharper non-market arrival gains
  • Overall tourism slowdown continues, but year-end prospects remain positive

Foreign tourist arrivals increased by 2.9% y/y to 11.2mn in August, the INE reported on Thursday. The improvement was broad-based and led by a solid double-digit increase in the non-market segment. Meanwhile, market arrivals growth decelerated to 1.4% y/y, despite a strong recovery in rented accommodation. In cumulative terms, foreign tourist arrivals rose by a softer 3.9% y/y to 66.8mn in Jan-Aug, bolstering expectations that total arrivals could reach the 100mn milestone by year-end, with resilient foreign demand remaining supportive of the outlook.

Despite the overall slowdown, rising prices led to a 6.7% y/y increase in total tourist spending to EUR 16.4bn in August. The cumulative data showed a 7.1% y/y increase in ytd spending to EUR 92.5bn, with the overall trend pointing to another record spending year, which should provide a meaningful contribution to services exports and GDP growth. In 12-month rolling terms, tourist spending rose by 8.8% y/y, decelerating from a 9.6% y/y increase in the prior month.

Foreign tourism data
Aug-24 Mar-25 Apr-25 May-25 Jun-25 Jul-25 Aug-25
Total spending (EUR mn)15,3649,11410,82612,25413,03516,45216,390
12-m rolling (EUR mn) 121,564 127,725 129,063 129,630 130,309 131,248 132,273
Total spending (y/y) 13.0% 5.6% 14.1% 4.9% 5.5% 6.1% 6.7%
12-m rolling (y/y) 19.6% 12.6% 12.7% 11.3% 10.3% 9.6% 8.8%
Total arrivals10,929.66,593.68,568.19,395.69,476.211,023.311,251.6
12-m rolling 91,587.8 94,675.8 95,460.2 95,599.8 95,776.5 95,947.4 96,269.4
Total arrivals (y/y) 7.3% 3.8% 10.1% 1.5% 1.9% 1.6% 2.9%
12-m rolling (y/y) 12.7% 8.1% 8.3% 7.3% 6.3% 5.6% 5.1%
Source: INE
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PRESS
Press Mood of the Day
Spain | Oct 02, 06:23

PM Sanchez to Israel on the humanitarian flotilla: "It does not represent danger" (El Pais)

Defence of Gaza flotilla causes split between PSOE and Sumar (El Nacional)

PP majority rejects labelling Israel's Gaza offensive as "genocide" (La Vanguardia)

Sanchez's wife appeals judge's order in embezzlement case, accuses him of using "stereotypes" (ABC)

Far-left Podemos rejects budget negotiations due to unmet demands (Europa Press)

Spanish risk premium falls to its lowest level since end-2009 (Europa Press)

Govt to boost network security oversight to reassure the EC amid Huawei case (El Mundo)

Ryanair reports over 6mn passenger delays in 2025 due to AENA's management (La Razon)

Golden visa applications surge following the government's decision to scrap the scheme (Publico)

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New passenger car sales rise by 16.4% y/y to 85.2k in September
Spain | Oct 01, 13:07
  • Cumulative car sales rise by 14.8% y/y to 854.7k in Jan-Sep, but remain below pre-pandemic levels
  • Car association maintains year-end sales target of 1.1mn, which we view as attainable

New passenger car sales rose by 16.4% y/y to 85.2k in September, with the rate of increase remaining above the ytd average growth rate, the latest data published by the car producers' association ANFAC showed. Sales to individuals rose at a sharper double-digit pace, while sales growth in the corporate channel eased, but remained solid overall. Meanwhile, the rent-a-car segment continued to underperform, with the decline intensifying to 33.8% y/y. However, this comes on the back of relatively good performance earlier in the year due to frontloading.

The cumulative data showed a sharper 14.8% y/y increase in car sales to 854.7k in Jan-Sep, supported by robust gains in the corporate and private segments. While the recovery has been gaining traction, cumulative sales are still some 11% below their pre-pandemic levels. Provided the current demand conditions hold, a complete market recovery is likely to materialise as early as next year, in our view. Commenting on the data, car association representatives confirmed their year-end target of 1.1mn sold units, which we continue to view as well within reach.

New passenger car sales
Apr-25 May-25 Jun-25 Jul-25 Aug-25 Sep-25
Total98,522112,820119,12598,33761,31585,167
Private persons 39,669 45,749 48,836 50,696 35,578 45,566
Companies 30,707 34,277 42,208 37,322 24,019 36,441
Rent-a-car-companies 28,146 32,794 28,081 10,319 1,718 3,160
Total (12-m ma) 88,170 89,642 90,954 92,150 92,900 93,901
Change, y/y (%)
Total7.1%18.6%15.2%17.1%17.2%16.4%
Private persons 5.6% 22.3% 28.8% 23.6% 16.1% 24.4%
Companies 5.1% 13.7% 14.2% 18.1% 22.0% 14.8%
Rent-a-car-companies 11.5% 18.8% -1.5% -9.4% -13.7% -33.8%
Total (12-m ma) 8.7% 10.1% 11.5% 12.6% 13.9% 14.7%
Source: ANFAC
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Chile
PRESS
Press Mood of the Day
Chile | Oct 02, 03:57

Government admits larger fiscal target miss this year as opposition and experts question figures in the 2026 budget (La Tercera)

"Republican appropriation": ruling coalition increases pressure to restore fund for the next government and Grau signals openness to talk (La Tercera)

[Housing Minister] Montes confirms audit in Metropolitan Housing and Urbanization Service after complaints of payment delays (La Tercera)

Tren de Aragua members extradited from the US to Chile enter maximum-security prison (La Tercera)

Record since the creation of the Environmental Assessment Service: Environmental Evaluation Commissions approve nearly USD 9bn in investment projects in September (DF)

The budget implies further fiscal deterioration this year and reaffirms commitment to reduce the deficit to 1.1% of GDP in 2026 (DF)

Chilean fruit exporters seek to recover ground in Europe as the impact of Trump's tariffs deepens (DF)

Chilean timber industry warns of impact from US tariff, says sector "is already hit by a structural crisis" (DF)

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KEY STAT
Unemployment with seasonal adjustment falls to 14-month low 8.4% in August
Chile | Oct 01, 18:57
  • Unemployment declines sharply m/m a second print in a row after trending up through H1
  • Number of employed up 0.45% m/m for two readings in a row
  • Unemployment remains above pre-pandemic levels, likely to remain high as several reforms raise labor costs for years to come

The unemployment rate with seasonal adjustment fell to 8.4% for the Jun-Aug moving quarter, hitting a 14-month low after two prints showing strong job creation, according to data released Tues. by the stat office Ine. While the unemployment rate remained above the pre-pandemic normal, this was the second reading in a row in which the rate declined sharply m/m after trending upward in a concerning manner throughout the first half of the year. The series of jobs adjusted for seasonal effects increased 0.45% m/m in these two prints, which shows the decline in unemployment is due to actual hirings and not tied to labor force fluctuations.

Overall, unemployment has been high in the post-pandemic, but this can be explained by the introduction of reforms that increased labor costs, such as big minimum wage hikes, the reduction of the standard workweek, and most recently the approval of a pension reform that raises the social security contributions charged on employers. Because of this, the degree to which unemployment changes can be expected to influence the evolution of wages and private consumption is harder than usual to tell, and the BCCh itself has been struggling a little with this. The basics still hold though, and the recovery in hirings boosts private consumption prospects, even if on the margins.

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Trump’s lumber tariff hits USD 1.1bn of Chilean exports with 10% surcharge
Chile | Oct 01, 17:37
  • Chile exports USD 1.1bn worth of wood continuously shaped, fiber boards, and plywood to the US

US President Donald Trump announced Tues. the imposition of new tariffs on lumber and wood manufactures, which hits Chile with a 10% tariff on about USD 1.1bn worth of wood exports, according to information shared by the International Economics Relations secretary office to the local press. The new tariffs are 10% for lumber and 25% on wood furniture, which would come into effect in two weeks. In Chile's case, about 98% of the exports to the US are wood continuously shaped, fiber boards, and plywood, so the 10% surcharge is the one that applies.

The daily El Mercurio reported that the local wood industry had a measured response. On the one hand, the sector was expecting to see a tariff surcharge at some point, and the 10% is apparently lower than anticipated. However, the two biggest wood companies, CMPC and Arauco, have production in the US and it's not clear if they would be replacing some of their exports from Chile for output obtained directly in the US.

Main Chilean exports to the US, USD mn
2024Exempted?Surcharge?
Refined copper cathodes5,884YesNo
Fresh salmon filets1,566NoNo
Fresh grapes666NoNo
Frozen salmon filets500NoNo
Tires356NoNo
Wood continuously shaped259No10%
Silver unwrought247No10%
Plywood241No10%
Fiber board226No10%
Iodine199YesNo
Note: Updated as tariff news change
Source: Foreign Ministry, EmergingMarketWatch
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CBW
MPC to hold at 4.75% in October, wait for more disinflation before final cuts
Chile | Oct 01, 15:45
  • Next MPC meeting: Oct 28
  • Current policy rate: 4.75%
  • EmergingMarketWatch forecast: hold

The BCCh's Monetary Policy Council will have its next rate-decision sitting on Oct 28, and it is widely expected to hold at 4.75% without giving much consideration to a cut in that meeting. It is expected to foreshadow that a cut in December would be an option if the CPI reading for September doesn't provide a surprise to the upside.

The basic story of the current monetary policy environment is this. CPI inflation is at 4.0% y/y, and is expected to converge to the 3.0% monetary policy target over the next 12-15 months. However, both headline and core inflation have been stubbornly hovering close but above the target for two full years now, not quite completing the disinflation process. The monetary policy rate, nominal and real, has been declining over that time though. With the policy rate at 4.75%, if we compare to current inflation, we can say that the monetary policy is already neutral, since the real neutral interest rate is officially estimated by the BCCh to be 1.00%.

Since inflation is expected to decline over the next 12 months, and the BCCh itself sees headline CPI inflation getting to 3.0% by Q4 2026, the consensus is that rate cuts will continue over the next six months. However, the MPC took a slightly hawkish turn in its last monetary policy sitting. It said there was a string of core inflation surprises to the upside, that this increased the risk of inflation persistence at above-target levels, so it requires more information before resuming the rate cut process. We believe the MPC is basically saying that it needs to see headline and core inflation decline before it considers another rate cut, or in other words, that it won't cut on the basis of well-behaved inflation expectations.

The latest poll of traders shows a 92% majority expects a hold in October, and a 60% majority expects one 25bps rate cut in the next two monetary policy sittings. The BCCh's own interest rate corridor (the lame local attempt to replicate the Fed's dot plot) shows that a hold is the most likely outcome for October, and that both a second hold or a 25bps cut are the plausible options for December.

Given our interpretation of the MPC's verbal guidance, we believe the December sitting is more likely to end with a hold than a cut, but the story can certainly change considering there will be three more CPI releases before then. The story may be already changing a little to favor a cut. The economic activity release for August was a considerable disappointment, and this matters because an upward revision to the estimated output gap for 2025 and early 2026 was one of the drivers behind the MPC being more concerned about core inflation persistence. On the other hand, the latest two jobs report showed strong hirings.

Overall, we see no reason to believe that the Oct 28 monetary policy sitting will result in anything other than a hold with little and neutral guidance of what comes next. Looking further ahead, for these last steps of the rate cut cycle it seems that the MPC wants to see inflation, both headline and core, get closer to the 3.0% target before moving. The consensus for now is that the next cut arrives in December, but we believe a cut before January is unlikely.

Traders' MPR forecast
Answers per option
RateOct-25Dec-25Jan-26Mar-26Apr-26
4.75%55241433
4.50%535393126
4.25%-172429
4.00%---22
Source: BCCh poll

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KEY STAT
Economic activity contracts 0.7% m/m and rises below-expected 0.5% y/y in August
Chile | Oct 01, 14:45
  • Copper mining struggles push activity down in the entire Jun-Aug moving quarter
  • August weakness goes beyond mining, commerce and services growth losses momentum
  • Weak activity print should ease BCCh's core inflation concerns, helps case for December MPR cut

Economic activity contracted 0.7% m/m and increased 0.5% y/y in August, performing well below consensus forecasts of a 1.7% y/y expansion, according to data released Wed. by the BCCh. For the Jun-Aug moving quarter, activity contracted 0.3% q/q, which is the first contraction on record for any moving quarter since May-Jul of 2024.

The key driver of the weak August performance was the mining sector, but the issues during the month were fairly broad based. In mining, a deadly tunnel collapse affected activities in Codelco's El Teniente copper mine, one of the country's most productive. This added to a few other issues that have keeping the copper industry at output lows since early 2024 during this moving quarter. While the copper industry expects copper output to recover to normal levels over the next month or two, output growth forecasts for 2025 have been getting trimmed.

Commerce and services have been sustaining growth as mining swings wildly, but both have been losing momentum. Commerce expanded 3.9% y/y in August, and seems now driven by domestic demand forces after a strong start to the year that was clearly underpinned by shopping tourism from neighboring countries. Services grew 2.4% y/y, helped by the expansion of public education and healthcare services, but the general growth of services has been losing momentum for the last five months.

Overall, this weak reading for economic activity has some monetary policy implications. The BCCh recently turned a little more hawkish due to expecting core inflation to take longer to converge from 4.0% to 3.0%, and one of the factors behind that turn was an upward revision to the output gap estimate. With economic activity disappointing by a fair margin in August, concerns about core inflation being stubborn at 4.0% y/y should ease a little. We believe this economic activity reading helps solidify the monetary policy rate path that was outlined in the latest trader consensus poll, specially in opening up room for a potential rate cut in December.

Economic activity q/q change
Nov-24 Feb-25 May-25 Aug-25
Economic activity 0.7% 1.1% 0.7% -0.3%
Goods 0.1% 0.6% 0.8% -1.8%
Mining -2.3% -1.6% 3.7% -6.5%
Manufacturing 0.6% 2.3% -0.7% 1.4%
Other goods 1.8% 1.5% -0.7% 0.1%
Commerce 0.9% 5.1% -0.7% 0.2%
Services 1.3% 0.7% 0.7% 0.3%
Non-mining 1.0% 1.5% 0.2% 0.5%
Source: BCCh

Economic activity, y/y change
Aug-24 Jun-25 Jul-25 Aug-25
Economic activity 1.9% 3.0% 1.8% 0.5%
Goods 2.4% -0.2% -0.9% -3.4%
Mining 9.0% -8.9% -3.3% -8.6%
Manufacturing 3.3% 8.4% 1.7% 0.5%
Other goods -2.9% 2.3% -0.3% -0.8%
Commerce 2.8% 5.7% 6.6% 3.9%
Services 1.3% 4.2% 2.6% 2.4%
Non-mining 1.1% 4.6% 2.5% 1.7%
Source: BCCh
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Colombia
Manufacturing PMI eases to 52.0 in Sep; signals cooling momentum
Colombia | Oct 02, 03:27
  • PMI falls from 55.3 reading in August
  • New orders expand at weakest pace since April; production slows
  • Input cost inflation at 17-month low; firms raise selling prices for first time since Oct 2023
  • Despite cooling, Q3 marks sector's strongest since Q2 2022

The manufacturing sector expanded at a slower pace in September, with the Davivienda/S&P Global Manufacturing PMI easing to 52.0 from 55.3 in August. The index, based on monthly surveys of purchasing managers, stayed above the 50.0 mark that separates expansion from contraction but indicated a cooling of momentum.

The September survey indicated that the recovery is losing some momentum. While new orders increased at the slowest pace since April and production growth decelerated, input costs dropped to a 17-month low. For the first time since Oct 2023, firms raised selling prices, the report underscored. Employment continued to grow but at a softer rate, while backlogs shrank for the first time in five months. Likewise, inventories of inputs increased for a third consecutive month, though only marginally, as finished-goods stocks declined. Business confidence for the year ahead weakened to its lowest since April, highlighting signs of a more cautious outlook. Lower prices for metals, polyethylene, and resin contributed to the decline in input cost inflation. Despite the slowdown, the sector saw its strongest quarter since Q2 2022, the report highlighted.

Overall, in our view, the numbers suggest Colombia's manufacturers are still in expansion mode, but the cycle looks fragile. Slowing orders, softer hiring, and waning optimism hint at a sector that may be past the peak of its rebound. With the PMI comfortably above 50.0, growth remains in place. Still, the cooling trend points to a more vulnerable phase ahead.

Manufacturing PMI
Sep-24 Dec-24 Jul-25 Aug-25 Sep-25
Headline PMI48.149.951.955.352.0
y/y chg, pts 0.3 -2.1 1.9 5.5 3.9
m/m chg, pts -1.7 -3.5 0.9 3.4 -3.3
Note: 50 = no change
Source: Davivienda, S&P Global
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PRESS
Press Mood of the Day
Colombia | Oct 02, 03:21

Petro orders Israeli diplomats to leave Colombia [he instructed Israel's entire diplomatic mission to depart after reports that two Colombian women were detained in international waters by Israeli forces] (Valora Analitik)

Petro expels Israel's delegation and moves to end trade pact [the president ordered the expulsion of Israel's diplomats and called for the immediate rebuke of the countries' free-trade agreement, which he had already urged be cancelled] (La República)

Petro expels Israeli envoys over Gaza flotilla incident [he instructed the ForeignMin to file complaints with international organizations and ordered the departure of Israeli diplomats after Colombians were detained on a Gaza-bound flotilla] (Portafolio)

Defense minister signals readiness on Gaza [Pedro Sánchez, DefenseMin, said the armed forces would comply with any order from Petro to intervene in Gaza] (Semana)

Timeline: Colombia-US tensions deepen [strains began in January, when Petro blocked the arrival of two US deportation flights. Relations with Washington have since worsened] (Portafolio)

Petro considers potential break with Washington [the president has kept open the prospect of severing ties with the United States as friction with Donald Trump's administration escalates] (Semana)

Businesses warn against steep 2026 wage hike [firms argue next year's minimum-wage increase should be limited to 7%, citing a study that shows average pay rose 7.1% in 2025] (Portafolio)

Health ministry downplays drug shortage worries [officials said measures are in place to ensure supply of critical medicines after concerns of possible shortages] (Valora Analitik)

Colpensiones sparks controversy over pension savings [The state fund urged that more than COP 9tb held in private schemes be transferred to its management, reigniting debate over retirement savings] (Portafolio)

Colombia's coffee exports reach record high [shipments over the past 12 months exceeded USD 5.4bn, with the harvest valued at COP 22tn across 610 coffee-producing municipalities, according to the growers' federation] (Portafolio)

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August tax revenues up 16.2% y/y, but miss monthly target of COP 19.3tn
Colombia | Oct 01, 17:48
  • DIAN reports gross tax collection at COP 18.7tn; year-to-date COP 197.3tn
  • Revenues climb y/y vs -30.9% a year earlier; above 2025 average growth of 11.2%
  • Still, an undiversified revenue base suggests risks to collection ahead

Colombia's gross tax receipts in August reached COP 18.7tn, bringing the total for the year to COP 197.3tn, according to the monthly collection report by the tax agency DIAN. Overall collections increased by 16.2% y/y, a sharp contrast to the 30.9% contraction recorded a year earlier and well above the 11.2% average growth rate so far in 2025. Even so, the total amounted to just 97% of the month's revenue target -- a ratio that has remained steady throughout the year, despite a minimum of 84% recorded in May. The filing season for individual income tax began in August, providing a seasonal boost.

Nearly half of August's revenue (49.4%) came from income-withholding taxes, while customs duties made up an additional 24.1%. In sum, taxes related to domestic economic activity accounted for over three-quarters of the month's total. Further, cumulative revenue through August increased by 10.7% compared to the same period in 2024. DIAN also credited targeted enforcement efforts by its main operational units with generating COP 37.5tn in revenue.

Overall, the country's tax revenue is recovering, but vulnerabilities persist. Despite a slow start to the year, collections have improved compared to 2024; however, the revenue base remains heavily reliant on domestic taxes, as noted in the August report. Another source of concern is that gross receipts fell short of monthly targets in February, May, June, and August. Further, for the year to date, 83.2% of revenue has come from domestic activity, with foreign trade taxes accounting for just 16.8%. Such dependence on internal levies, in our view, renders the tax system vulnerable to fluctuations in the local economy and underscores the lack of diversification in the country's tax structure.

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Costa Rica
PRESS
Press Mood of the Day
Costa Rica | Oct 02, 01:43

[Opposition] PLN buries Eurobonds (La Nación)

Chaves: I will hand over power on May 8, 2026, to whoever the people of Costa Rica choose (El Mundo)

Electoral Court [officially] calls for 2026 elections (Delfino)

2026 Elections: Presidential ballot could feature 20 candidates, the second largest in history (El Observador)

For the first time, women would occupy 25% of the presidential ballot in Costa Rica (El Observador)

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World Bank approves USD 300mn loan for Costa Rica to support fiscal accounts
Costa Rica | Oct 01, 13:55
  • Loan aims to strengthen tax collection, results-based budgeting, and debt management
  • Loan is also expected to support environmental programs, including Payment for Environmental Services and livestock traceability

The World Bank's Executive Board approved a USD 300mn Development Policy Loan to Costa Rica to improve fiscal efficiency and support green economic growth, according to a statement. On the fiscal side, the program is expected to tighten control of tax exemptions, enhance efficiency through results-based budgeting, and reinforce debt management by deepening capital markets. On the environmental front, resources will expand conservation programs to cover biodiversity, water, and marine ecosystems, while supporting sustainable sectors such as agriculture and ecotourism. The loan is also designed to promote sustainable job creation in rural and coastal areas, with a focus on women and indigenous peoples, the World Bank added.

Overall, Finance Minister Rudolf Lücke emphasized that the operation would modernize fiscal and environmental policies, supporting the government's efforts to strengthen fiscal balances. We believe it may also help mitigate financing pressures following Congress's rejection of the Eurobonds issuance bill, which limits Costa Rica's access to international markets. The loan carries a variable rate with a 33.5-year maturity and a six-year grace period.

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HIGH
Assembly rejects extension of Eurobond issuances
Costa Rica | Oct 01, 13:37
  • Bill postponing Eurobond issuance authorization to 2025-2026 received only 24 votes in favor, below the 38 required for approval
  • PLN maintained its opposition after FinMin switch obstructed proposed negotiations
  • IMF appealed to lawmakers for approval of the measure ahead of the vote

Costa Rica's Legislative Assembly rejected late Tues. a government bill looking to postpone the authorization to issue USD 1.0bn in Eurobonds into 2025-2026 from 2024-2025, which could not be used because the government failed to meet the requirements for issuance last year. In addition, the proposal eased requirements for future eurobond issuances, which became the focus of heated debate among lawmakers, with the opposition National Liberation Party (PLN), which holds 18 seats, opposing the relaxation. Although approved in first reading in early June, the bill required 38 votes in favor to pass the second reading, but only 24 lawmakers voted for the extension.

The PLN, which remained in opposition from the start, proposed changes to issuance requirements (shifting from GDP-based percentages to fixed nominal amounts and more flexible rules for the interest-payment-to-GDP ratio) and extending issuances through 2030, a position supported by former Finance Minister Nogui Acosta, who had launched the negotiations. The story changed with Acosta's departure to run for Congress in 2026. New Finance Minister Rudolf Lucke did not back the prior arrangement and defended the government's original version.

The International Monetary Fund (IMF) met with lawmakers ahead of the vote and recommended that the bill be approved to help reduce the country's debt costs. The IMF also highlighted the importance of the BCCR autonomy bill, still under review in the Assembly. With the rejection, the government should rely on a combination of instruments to manage external debt, such as active reserve management, operations with multilateral institutions, and dollar purchases/sales through the market and BCCR operations.

Overall, Costa Rica's access to international issuance markets remains one of the main fiscal challenges, as internal account control allows for frequent primary surpluses and public debt reduction. With delays in approval, the government had already increased the share of domestic debt in its 2025 financing plan. The IMF also approved a Flexible Credit Line for the country, which eases access to external financing, but political gridlock over greater flexibility in Eurobond issuances remains an obstacle to achieving investment-grade ratings. It is worth noting that a proposed constitutional amendment would link Eurobond issuance authorizations to annual budget approval, though it is unlikely to pass in the months following the February 2026 presidential and legislative elections.

The Assembly's rules stipulate that a bill rejected during ordinary sessions in the same legislative period may not be reintroduced unless it undergoes substantial modifications or is declared urgent by the Assembly. Thus, it is likely that the next government will present a new bill to authorize Eurobond issuance in the coming years (something we expect regardless of the election outcome) or else seek approval of the already-introduced amendment. This scenario underscores the current government and its successor Laura Fernandez's push for a larger congressional caucus to strengthen governability, though it seems unlikely that the Sovereign People's Party (PPSO), under which Fernandez is running, will reach an absolute majority (38) of deputies. Nevertheless, according to a September Opol poll, the PPSO would hold 31 seats if the elections were held today, which would give a better starting point for her term.

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Dominican Republic
PRESS
Press Mood of the Day
Dominican Republic | Oct 02, 02:45

Government to unveil 2025-2038 Energy Plan (El Caribe)

President Abinader says informal labor remains high in the region (Diario Libre)

Lawmakers urge stronger border and migration controls amid UN mission in Haiti (Diario Libre)

US ends textile program for Haiti, raising concern for Dominican Republic (Diario Libre)

US calls for rapid deployment of new UN mission in Haiti (Diario Libre)

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Govt will launch new Energy Strategic Plan to 2050
Dominican Republic | Oct 02, 02:45
  • Plan will update current 2025-2038 Energy Plan, ensure long-term energy security amid rising demand
  • Govt targets 2,600 MW in renewable capacity by 2028, energy minister says

Energy and Mines Minister Joel Santos said Wed. the government will present a new Strategic Energy Plan this year with a long-term outlook to 2050, according to comments cited by local daily El Caribe. He explained that the initiative is an update of the current 2025-2038 Energy Plan. The revised plan will seek to ensure long-term energy security and meet the rise in electricity demand expected from economic growth under the Meta 2036 program. Santos made the remarks during his participation in the Energyyear Caribe 2025 forum.

Santos also said that among the immediate plans the goal is to exceed 2,600 MW of installed capacity in renewable energy generation by 2028. To achieve this, he said there are 70 projects under development, of which 20 are already under construction and 39 will include storage capacity. The objective, the minister added, is for the country to reach between 500 MW and 600 MW of storage capacity over the next three years to ensure system stability.

Overall, the new plan is important for economic growth since storage, along with the expansion of transmission networks, is one of the main constraints the industry faces for short-term growth. These measures are also key to supporting the government's plans for economic development and private investment expansion in the coming years. Still, these were only initial comments and more information should be released going forward to better ground a judgement of how effective the plan might be.

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President Abinader praises new UN force to support Haiti
Dominican Republic | Oct 01, 17:16
  • UN Security Council creates a new gang-suppression force in Haiti
  • President praises the decision, says it is an important step toward Haiti's stability

President Luis Abinader praised the recent UN Security Council decision to create a new criminal gang-suppression force in Haiti, according to a statement released by the presidency late Tues. He said the resolution responds to the Dominican Republic's frequent requests to the international community for stronger measures to help address the crisis in Haiti. President Abinader also thanked former Presidents Fernández, Medina, and Mejía, who, together with him, signed a letter addressed to the leaders of the countries on the UN Security Council. He said the new measure is an important step toward social, political, and economic stability in Haiti, as well as in the region.

The UN Security Council approved a new resolution creating a new force in Haiti in response to the ineffectiveness of the current UN Security Mission in Haiti (MSS). The new force will include a contingent of 5,500 personnel and will be given a broad and robust mandate. The UN will manage the logistical and operational aspects, which will be funded through the UN budget, aiming to provide greater stability and effectiveness to the force's operations.

Overall, the UN Security Council's decision has been welcomed both in the Dominican Republic and internationally. The current MSS has faced several challenges, such as limited funding, poor equipment, and staff shortages. This is important for the Dominican Republic, as the country is dealing with rising migration pressures from Haiti and has also strengthened border security to prevent gangs in Haiti from crossing the border. The situation in Haiti requires further measures given the severity of its internal crisis, as gangs control much of the capital and some 1.3mn people have been forced to flee their homes amid rising violence, as per IOM data.

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Ecuador
PRESS
Press Mood of the Day
Ecuador | Oct 01, 23:06

Ecuadorian government prepares compensation for commercial transportation (Primicias)

During the tenth day of the strike, roadblocks were reported in five provinces, mostly in Imbabura (La República)

Military personnel held during the protests are now in the custody of the Armed Forces and receiving medical attention (El Comercio)

Pres Noboa meets with his ministers in Latacunga, while the Ecuador Church calls for dialogue (Primicias)

More than 100 employees have been dismissed so far following the government reshuffle (Primicias)

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Pres Noboa sends urgent bill to strengthen Armed Forces and National Police
Ecuador | Oct 01, 19:50
  • The bill proposes an economic regime of tax incentives and donation facilitation exclusively to strengthen the police and the Armed Forces
  • Noboa's proposal came after the Constitutional Court declared the Solidarity Law unconstitutional, which also addressed donations and tax incentives

President Daniel Noboa sent Wed. an urgent bill to strengthen the Armed Forces and the National Police at a time when Ecuador's authorities are facing protests against the end of the diesel subsidy. The bill proposes an economic regime of tax incentives and donation facilitation exclusively to strengthen the police and the Armed Forces. The donations can include buildings, vehicles, equipment, or supplies in optimal conditions for use. In the case of domestic taxpayers, they will see a reduction in their income tax due to the respective fiscal period, according to the current law and regulations.

Overall, as the bill was classified as urgent, the Assembly will have to discuss it within 30 days. Pres Noboa's proposal came after the Constitutional Court declared the Solidarity Law unconstitutional, which also addressed donations and tax incentives. It remains to be seen if the current situation of protests and the fact security forces are now on the streets allows the National Assembly to pass it, and whether this will have the Court's approval.

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Indigenous movement in Northern region announces temporary protests' truce
Ecuador | Oct 01, 16:30
  • It is open to dialogue with the federal government within a framework of mutual respect and transparency
  • This decision could suggest that the protests called by the CONAIE may be losing momentum since the indigenous movement is divided

The Federation of Kichwa People of the Northern Sierra of Ecuador announced Wed. a temporary truce in protests called by the Confederation of Indigenous Nationalities of Ecuador (CONAIE). The federation said it is a gesture of faith and willingness to engage in dialogue with the national government. It is open to dialogue with the federal government within a framework of mutual respect and transparency, demanding respect for collective rights, no criminalization, and the presence of observers.

Overall, this decision came after a first failed attempt at dialogue in Imbabura on Tues. evening, the province where demonstrations are centered. The federation brings together the Karanki, Natabuela, Imantag, and Kayambi indigenous communities in the North region of Ecuador. These communities have been mobilizing since Sep 22, especially in Imbabura. This decision could suggest that the protests called by the CONAIE may be losing momentum since the indigenous movement is divided, although the federation said it would be a temporary truce.

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RC leader González gives formal support for protests called by CONAIE
Ecuador | Oct 01, 15:52
  • González points out that party members are free to join the demonstration
  • RC's decision does not surprise, considering the CONAIE endorsed González during the runoff for the presidential elections held on Apr 13

Citizen Revolution (RC) party leader Luisa González gave Tues. evening formal support for the protests called by the Confederation of Indigenous Nationalities of Ecuador (CONAIE), according to comments made during a press conference. She said the party will provide resources and logistical assistance, including legal advice. González pointed out that party members are free to join the demonstrations. If the party considers necessary, it will call on its members to take to the streets, she added. Finally, González highlighted that the party will keep a firm posture against possible political persecuting.

Overall, the RC's decision does not surprise, considering the CONAIE endorsed González during the runoff for the presidential elections held on Apr 13. The RC party is the main opposition to the government and the ruling National Democratic Action (ADN) party. Still, it has lost some power since the presidential election and recently, as some deputies in the National Assembly have resigned or have been expelled by the party due to their relationship and support with the Daniel Noboa administration.

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El Salvador
PRESS
Press Mood of the Day
El Salvador | Oct 02, 03:57

Assembly approves two new loans for USD 100mn (La Prensa Gráfica)

According to the Treasury, public investment in 2026 would exceed USD 2.2bn (El Mundo)

US Embassy to continue processing "as the situation allows" amid partial government shutdown (El Mundo)

Armed Forces to continue security mission in Haiti for another year (La Prensa Gráfica)

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HIGH
FinMin submits USD 10.5bn 2026 budget, promises no debt for current spending
El Salvador | Oct 01, 19:44
  • Budget spending set at USD 10.5bn, up 9.2% y/y
  • Govt insists that current spending will be fully covered by revenues
  • FinMin says education, health, security, and defense to absorb 36.8% of total allocations

Finance Minister Jerson Posada submitted the 2026 budget proposal draft to Congress, with proposed spending of USD 10.5bn, 9.2% above the previous year. Posada assured that the plan is "balanced", stressing that all current spending will be financed by revenues, and no debt will be used for recurrent costs such as wages, subsidies, or public services.The proposal allocates USD 2.2bn for public investment, of which about 70% will be financed through multilateral loans from the World Bank, the IDB, and other external partners. Posada also highlighted improvements in tax collection and anti-evasion efforts, while confirming that the 2026 rules will maintain a freeze on salary increases, new hiring, and additional employee benefits.

While the draft budget has yet to be published, Min Posada outlined preliminary allocations totaling USD 3.89bn for education, health, security, and defense. Education is set at USD 1.52bn, which the minister highlighted as a 6.9% increase; however, the figure is actually below the USD 1.54bn approved in 2025. Health will receive USD 1.33bn, up 12.3% y/y from USD 1.18bn, reflecting one of the strongest increases. Meanwhile, security and defense combined are allocated USD 1.03bn, USD 131mn higher than last year, marking a 14.8% rise, the steepest growth among major portfolios.

Overall, this is the second year that the government has announced that it will not resort to debt to pay for current spending, though credibility remains in question after last year's USD 400mn in loans were diverted to recurrent needs. The draft is the first framed under the IMF agreement, but the Medium-Term Fiscal Framework, intended to provide clarity on the adjustment path, has yet to be published. While the plan underscores discipline through a wage and hiring freeze and highlights progress in tax administration, reliance on multilateral financing, inconsistencies in allocations, and a history of broken commitments expose the fragility of the fiscal stance and leave some uncertainties over the medium-term outlook.

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Tax revenues up 8.1% y/y in Jan–Aug, led by VAT and income tax
El Salvador | Oct 01, 15:22
  • Compared to budget projections, tax collection increased 3.6%
  • VAT and income tax, the two main categories, continue to outperform budget projections

The Treasury reported that tax collection increased by 8.1% y/y in the Jan-Aug period, reaching USD 5.5bn, according to the tax office (ISR)on Wednesday. The pace is in line with July's performance and continues to outpace budget projections. As in previous months, the main drivers were VAT and income tax, which together accounted for roughly 90% of total receipts. VAT collections grew 9.0% y/y to USD 2.5bn, with monthly inflows at USD 310.1mn, while income tax revenues increased 7.0% y/y to USD 2.2bn. On a monthly basis, however, momentum softened slightly, with August receipts at USD 599.7mn, down from USD 638.3mn in July, though broadly consistent with levels seen earlier in the year.

Overall, revenues continue on a firm upward path, outperforming targets on the back of VAT and income tax. The latest figures suggest collections are holding steady despite a modest monthly dip, pointing to resilient domestic demand. However, external headwinds such as slower global growth and looming US remittance tax changes could weigh on the pace in the future months.

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Panama
PRESS
Press Mood of the Day
Panama | Oct 01, 23:10

National Assembly's trade committee members summon Commerce Minister Moltó on mining issues (La Prensa)

The US and China test their strength in the National Assembly, while the US Congress restores debate over the Panama Canal (La Prensa)

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Cabinet Council ratifies tax agreement between Panama and Ecuador
Panama | Oct 01, 19:46
  • It will improve the detection of tax evasion practices, optimize tax collection, and guarantee confidentiality in the handling of the data
  • It will have a direct impact on Panama's regional and international perception

The Cabinet Council ratified Tues. an agreement on tax information between Panama and Ecuador. It is the result of the negotiations between Panama's General Revenue Directorate and Ecuador's Internal Revenue Service. The agreement will strengthen tax cooperation and tax transparency through the exchange of information. It will improve the detection of tax evasion practices, optimize tax collection, and guarantee confidentiality in the handling of data. Panama's government said this is part of an effort to take Panama off from high-risk money laundering list. Panama has been on Ecuador's list since 2008.

Overall, this should have a direct impact on Panama's regional and international perception. It will also improve conditions for trade, investment, and access to financing. The removal from the list is also part of the process of joining the Organization for Economic Cooperation and Development (OECD). The European Union officially took Panama off its high-risk money laundering list in early July. The decision was approved by the European Parliament, closing a cycle after the country was previously removed from the Financial Action Task Force (FATF) Grey List announced in October 2023. Panama was added to this list in 2020.

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Peru
PRESS
Press Mood of the Day
Peru | Oct 02, 04:23

President Boluarte urges concrete global action to protect the planet (El Peruano)

Cabinet reviews new steps to dismantle criminal organizations (El Peruano)

Prime minister vows security guarantees for transport drivers (El Peruano)

Court orders Congress to grant lifetime pension to former President Castillo (Gestión)

Construction chamber sees slower growth for the industry in 2026 (Gestión)

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KEY STAT
Lima CPI inflation rises 1.36% y/y in September
Peru | Oct 01, 16:45
  • Prices rises 0.01% m/m in Sept. driven by higher restaurant and hotel prices
  • Print rises less than expected, with consensus having anticipated a 0.07% m/m rise
  • CPI y/y inflation could rise slightly in the coming months due to lower comparison base
  • BCRP may still hold rates at the Oct 9 meeting amid well-anchored inflation expectations and real interest rate close to neutral level

Consumer prices in Metropolitan Lima increased by 1.36% y/y in September, with the pace quickening from the 1.11% rise in August, according to INEI statistics published on Wed. In one-month terms, prices rose 0.01% m/m in September, following a 0.29% decline in August. The print performed slightly better than expected by the consensus forecast, which had anticipated a 0.07% m/m increase for the month. CPI inflation accumulated a 1.25 y/y increase as of September.

Restaurant and hotel prices rose 0.11% m/m in September, driven by higher food service costs. Miscellaneous goods and services increased 0.13% m/m, reflecting higher prices for personal care services and gold jewelry amid rising international gold prices. On the other hand, food and beverage prices fell 0.07% m/m, in line with lower dairy and meat prices. Housing, water, and fuel costs declined 0.13% m/m, mainly due to a reduction in residential electricity tariffs and lower household fuel expenses. Other categories, including clothing, communications, education, and recreation and culture, had little to no impact on the overall monthly price change.

Core inflation, which excludes food and energy prices, slowed to 0.06% m/m in September from 0.08% in August, leading to 1.81% y/y rise in annual terms.

Overall, CPI annual inflation accelerated in Sep. helped by a base effect, though it remained within the central bank's 1.0% to 3.0% target range. The low comparison base in fact, and the recently approved pension fund withdrawal could add some pressure to prices going forward, through stronger domestic demand. However, the strength of the local currency and well anchored inflation expectations suggest these effects should be moderate, keeping inflation comfortably within the target range. The central bank indeed forecasts inflation at 1.7% by year-end. That said, the chances of another rate cut by the BCRP at the upcoming October 9 board meeting seem low, in our view, given the good pace of economic activity growth, low inflationary pressures, and the reference rate being close to its neutral level.

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Construction business chamber foresees 3.0% y/y rise in activity in August
Peru | Oct 01, 14:43
  • Chamber sees 4.9% y/y construction growth as of Aug, with 4.4% rise expected for 2025
  • Growth driven mainly by higher cement consumption tied to self-construction demand
  • Construction activity is likely to slow in 2026, with BCRP forecasting a 2.0% rise amid weaker public investment and rising electoral uncertainty

The Construction Chamber (Capeco) forecast that the construction industry grew 3.0% y/y in August, following the 5.0% growth reported by statistics agency INEI in July, according to comments from Executive Director Guido Valdivia cited by local daily Gestión on Wed. This would bring average growth for January-August to 4.9% y/y, marking the best performance for this period since 2018, excluding the post-pandemic rebound in 2021.

The good performance so far this year has been driven by growth in public works and cement consumption. Capeco estimated that public works expanded by 5.4% y/y in Jan-Aug, while cement consumption rose 4.7%. However, its estimate for August indicates that the public works component fell 1.4% y/y, reflecting a high base of comparison from last year's investment rebound and weaker government execution this year. Cement consumption grew 4.4% y/y in August, consistent with stronger private investment supported by public-private partnerships, works for taxes projects, and mining investment.

Overall, stronger private investment led the central bank to revise upward its growth projection for the construction sector to 4.3% this year, from 3.8%. This is in line with the 4.4% growth projected by Capeco. Even so, the industry's performance should still slow next year, reflecting lower public investment (BCRP forecasts a modest 1.0% y/y increase in 2026) and weaker private investment amid rising electoral uncertainty. The chamber, in fact, projects the industry will grow by 2.9% in 2026, while the BCRP forecasts a 2.0% increase.

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Bahrain
Country raises USD 2.5bn in dual-tranche bond sale
Bahrain | Oct 02, 07:49
  • Kingdom issues USD 1.5bn sukuk and USD 1bn conventional bond amid strong USD 8.4bn investor demand

Bahrain raised USD 2.5bn through a dual-tranche dollar-denominated benchmark offering, combining an 8-year sukuk with a 12-year conventional bond, making it the latest Gulf state to tap international debt markets. The sukuk, issued under the central bank's International Sukuk Programme Company, raised USD 1.5bn with a coupon rate of 5.875%, tightened from initial price thoughts in the 6.25% area. The conventional bond, issued via the finance and economy ministry, secured USD 1bn at 6.625%, narrowed from initial price thoughts near 7%.

Investor demand was strong, with combined order books above USD 8.4bn. The sukuk matures in February 2034 and the conventional bond in October 2037. Both are rated B+ by S&P and Fitch and will be listed on the London Stock Exchange. The sukuk falls under Bahrain's Trust Certificate Issuance Programme, while the conventional notes come under the Global Medium Term Note Programme. Joint bookrunners included Abu Dhabi Commercial Bank, Bank ABC, Citi, First Abu Dhabi Bank, GIB Capital, JP Morgan, and Standard Chartered, with Sharjah Islamic Bank participating on the sukuk.

The deal aligns with Moody's projection that Bahrain would raise between USD 2bn and USD 3bn in international bonds this year to refinance debt amid lower oil revenues. It is the kingdom's second major international issuance in 2025, coming as GCC peers Kuwait, Abu Dhabi and Saudi Arabia also launched large debt sales in recent weeks.

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Israel
Public’s financial asset portfolio rises by 5.5% in Q2
Israel | Oct 01, 16:44
  • Only investment abroad decline due to NIS appreciation
  • Shares of foreign assets and foreign currency assets continue declining

The balance of the public's financial assets portfolio rose by NIS 343bn or 5.5% to NIS 6.6tn at the end of June, according to latest data of the Bank of Israel (BoI). The share of the portfolio in GDP rose by some 13.8pps to about 323.5% of GDP because of a larger increase in the portfolio than the nominal GDP.

Most of the increase in the portfolio came from tradable equities in the country that added almost NIS 200bn to the portfolio in Q2. This was due to price increases that were partly offset by net realizations. Cash and deposits (up by NIS 94.1bn), other assets (up by NIS 42.8bn), government bonds (up by NIS 20.7bn) and tradable corporate bonds (up by 15.2bn due to price increases and net investment) were the other components that had positive contribution for the increase. Investments abroad were the only component to mark a decline in the period (down by NIS 26.2bn) and this was on the back of the shekel appreciation. The balance of the asset portfolio managed by institutional investors rose by some NIS 176bn or 6.1% q/q to NIS 3.06tn at the end of June and this was about 46% of the total portfolio. There was a decline in the share of foreign currency assets of around 1.3pps (from 26.4% to 25.1%) and in the share of foreign assets of 1.5pps (from 20.2% to 18.7%), confirming trends from previous periods.

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CBW
MPC will most likely remain prudent in last rate decision for 2025
Israel | Oct 01, 15:55
  • Current policy rate: 4.50%
  • Next monetary policy meeting: Nov 24, 2025
  • Expected decision: Hold, 25bps cut possible

The MPC left the policy rate unchanged at 4.50% on Sep 29, which was largely expected. The decision seems to be mainly driven by the still high geopolitical uncertainties but volatility of inflation has likely contributed too even if it eventually entered the 1-3 target range in August. The next policy rate decision would be on Nov 24 and we think that the rate-setters will most likely remain prudent and wait for inflation to step on a more convincing downward trend. If the Gaza was has not ended by that time, we think that an on-hold decision would be a sure result.

Inflation continued easing and eventually entered the 1-3% target band in August as it hit 2.9% y/y after exceeding 3% for more than a year. However, it came in higher than expected and some of its components are very volatile, which makes projections difficult, while other components, mainly from the non-tradable sector, continue to record relatively high price increases. Most of the volatility is due to flight tickets after a change in methodology. Still existing supply side shortages that might not close fast enough to respond to potential surge in demand are another factor that can drive inflation higher. The draft of reservists is a major supply shortage. Some upward impact might come also from rental prices after the damages to buildings by Iranian rockets, which is already seen in Jun-Aug prints. On the other hand, the shekel appreciation has been offsetting some of the upward pressure but it is not clear if the appreciation forces would continue and what forces would prevail in shaping inflation developments, we think. The latest inflation expectations, one of the major considerations the MPC is looking at when deciding on the policy rate, pointed to continued moderation in the inflation environment. The latest BoI forecast released in September sees inflation at 3.0% y/y this year and to start easing in early 2026 to 2.4% y/y on average in Q3 2026 and to 2.2% in 2026.

GDP data point to a fall in GDP in Q2 but the BoI explained that this was the sole result of the Iran war and when excluded, GDP has continued increasing in Q2. It also said that high frequency indicators point to a strong recovery in the period since the hostilities with Iran ended and some indicators are at a higher level compared to the pre-Iran war position while others are still catching up. The BoI downgraded its growth forecast for this year in its July and September updates but increased it twice for 2026 as recovery after the wars is expected to be faster. BoI governor Yaron said that there are no indications for difficulties to obtain credit so no need for easing on this part. Thus, we think that the BoI might continue the cautious approach and make sure that inflation has been entrenched within the target interval and risks to geopolitical stability have decreased further before making any move, in our opinion. Yet, we do not rule out the MPC making a bold move with a 25bps cut in the last decision for the year. The research department expects the policy rate to reach 3.75% in Q3 2026. This is not a forecast of the MPC but has likely been endorsed and if fulfilled, this means three rate cuts in the next one year.

Board statements, press briefings, minutes from MPC meetings

Calendar of MPC meetings

Latest BoI macroeconomic forecasts

Monetary policy reports

Bank of Israel Law

The Monetary Committee

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Jordan
Foreign direct investment rise by 36.4% y/y to USD 1.05bn in H1 of 2025
Jordan | Oct 02, 08:53
  • FDI inflows were driven mainly by GCC countries
  • Finance, insurance, and real estate attract largest share of foreign investment in Jordan

Jordan saw a significant increase in foreign direct investment (FDI) during the first half of 2025, with inflows reaching around USD 1.05bn, which is equivalent to 4% of the kingdom's GDP, according to preliminary balance of payments data as cited by local media reports. The figure represents a 36.4% y/y rise from USD 769.8mn, or 3.1% of GDP, recorded in the same period in 2024.

The breakdown points that Arab countries accounted for 61.8% of total FDI, led by GCC nations at 35.6%. Saudi Arabia contributed 26%, followed by Bahrain at 4.8% and the UAE at 2.8%, while Iraq provided 12.1% from other Arab states. Europe contributed 16.9%, including 13.4% from EU members, 2.6% from the UK, and 2.1% from the US. Non-Arab Asian countries added 2.5%, led by India at 1.3% and China at 0.8%, with other nations making up 16.7%.

Finance and insurance attracted the largest share at 37.5%, followed by real estate (11.5%), transport and storage (6.9%), manufacturing and mining (6.7% each), quarrying (6.6%), and construction (4.1%). Investments in land and property by Jordanians represented 12.2% of total FDI. The strong inflows highlight growing confidence in Jordan's investment climate and sustained interest from regional and international investors.

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Regulator hikes fuel prices in October adjustment
Jordan | Oct 02, 08:30
  • 90-octane gasoline and 95-octane gasoline prices were raised by 0.6% and 0.5%, respectively
  • Kerosene prices remained unchanged

The energy ministry's fuel pricing committee has decided to raise the gasoline prices across the country as the move came into effect at the start of October. The regulator meets monthly to determine the fuel prices in the country. The committee argued that price adjustments are based on the global oil prices and other costs such as shipping and taxes. However, kerosene prices remained unchanged and will be sold at JOD 0.620 per liter.

During its meeting, the committee decided to raise the price of 90-octane gasoline by 0.6%% m/m (JOD 0.005) to JOD 0.855 per liter and the price of 95-octane gasoline by 0.5% m/m (JOD 0.005) to JOD 1.080 per liter. Meanwhile, diesel prices increased by 0.7% m/m (JOD 0.010) and stood at JOD 0.685 per liter.

We remind that the country's fuel pricing has previously sparked unrest. Around two years ago, violent protests and strikes erupted among truck, bus, and taxi drivers after the government removed the remaining fuel subsidies. Local authorities responded with mass arrests, and four police officers, including the deputy police director of Maan governorate, were killed during demonstrations that began in the southern governorate of Maan and later spread nationwide.

The energy ministry's monthly pricing adjustments aim to reflect global market movements while maintaining domestic supply stability.

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Govt sells JOD 221mn in 5-year T-bonds
Jordan | Oct 01, 16:03
  • Yield remains unchanged at 5.75%

Jordan's central bank sold 5-year T-bonds worth JOD 221mn at an auction that was held on Oct 1, according to a statement by the institution. The bids submitted for the 5-year T-bonds reached JOD 221mn, of which all were retained, signaling strong investor interest. The weighted average yield on the accepted bids printed at 5.75%, the same compared to the previous issue of the same instrument on Sep 18.

We remind that the country's central bank has cut its main interest rates four times since September 2024 in line with similar moves by the US Federal Reserve due to the peg of the local currency to the US dollar. Furthermore, the kingdom's CPI inflation slowed down to 1.3% y/y in August, down from 1.7% y/y in the preceding month

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Kuwait
FX reserves decrease 10% y/y to USD 42.9bn at end-August
Kuwait | Oct 02, 09:51
  • Similarly, reserves decrease 2% m/m

The total reserve assets held by the Central Bank of Kuwait decreased 10% y/y to KWD 13.0bn (USD 42.9bn) at the end of August. Similarly, official reserves decreased 2% m/m and reached the lowest level since April 2020. We remind that total reserves assets reached a record high of USD 52.8bn in February 2023.

It should be noted that total reserve assets have decreased m/m for two consecutive months and have decreased y/y for nine consecutive months.

Total reserve assets do not include external assets held by Kuwait Investment Authority, the country's sovereign wealth fund. We think the central bank has more than enough money to defend the currency peg. The dinar is pegged to a basket of currencies dominated by the US dollar. The central bank allows some flexibility compared with a traditional currency peg.

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Lebanon
President and PM reaffirm commitment to May 2026 parliamentary elections
Lebanon | Oct 02, 08:39
  • Preparations proceed despite political tensions and disputes over expatriate voting

President Aoun and Interior Minister Ahmad al-Hajjar met to discuss preparations for Lebanon's upcoming parliamentary elections, stressing the need to hold them on schedule in May 2026. PM Salam echoed this commitment, vowing to guarantee fair and transparent voting for all Lebanese, including expatriates, and to ensure a safe electoral environment, particularly for residents in the south who lost homes and villages during the Hezbollah-Israel war.

We recall that Interior minister Hajjar has recently said the elections will proceed under the current law, with expatriate voter registration closing on Nov 20. Coordination with foreign minister Youssef Rajji is underway to launch registration once Rajji returns, allowing approximately 40 days for expats to sign up.

Earlier this week, the parliamentary session reviewing the process quickly turned contentious. Parliament speaker Nabih Berri threatened adjournment after a clash between MPs over alleged opposition to elections. Discussions focused on whether expatriates should vote for all 128 parliamentary seats or be limited to the six seats allocated under the current law, with Hezbollah expressing concern about confessional imbalances and campaigning limitations abroad. The session ended with walkouts, highlighting persistent political tensions ahead of the vote.

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UN human rights chief calls for permanent halt of hostilities in country
Lebanon | Oct 02, 08:12
  • His call comes amid continued Israeli strikes on Lebanon's south despite November ceasefire deal
  • UN reports 103 deaths in 10 months and urges independent investigations into recent attacks

The UN's human rights chief Volker Turk called for renewed efforts to secure a lasting end to hostilities in Lebanon, noting that civilians continue to suffer from Israeli air strikes despite a ceasefire. Turk reported that 103 civilians have been killed in the past ten months, with jet and drone strikes causing significant damage in residential areas and near UN peacekeepers in the country's south.

We remind that Israel has continued strikes against positions it says belong to Hezbollah in southern Lebanon despite a US-brokered truce in effect since November following more than a year of conflict triggered by the Gaza war. One of the deadliest incidents occurred on Sep 21, when an Israeli drone struck a vehicle and a motorcycle in Bint Jbeil, killing five people, including three children. The Israeli military said it targeted a Hezbollah member but acknowledged that several uninvolved civilians were killed and the incident is under review. Therefore, Turk has called for independent investigations into this and other attacks.

The UN rights office reported no civilian deaths from projectiles fired from Lebanon into Israel since the ceasefire, but displacement remains high, with more than 80,000 people uprooted in Lebanon and 30,000 in northern Israel.

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Morocco
KEY STAT
Foreign trade deficit expands 15.5% y/y in Jan-Aug to MAD 225.9bn
Morocco | Oct 02, 05:48
  • Imports outpace exports as coverage ratio slips in Jan-Aug
  • Phosphates exports rises at double-digits, autos and textiles lag
  • Strong FDI and tourism inflows sustain external accounts balance

Foreign trade deficit expanded by 15.5% y/y in Jan-Aug to reach MAD 225.9bn, according to the monthly data by the Foreign Exchange Office. Imports growth of 8.4% y/y continues to outpace export increase of 3.8% and the export/import coverage ration worsened to 57.6% in the period, down from 60.2% in the same period of 2024.

Import growth was driven by finished equipment (+13%), consumer goods (+13.4%) and raw materials (+31.5%), while energy imports declined 6.2% due to lower oil prices. On the export side, phosphate products surged 21.1% and aeronautics grew 5.6%, partly offsetting declines in automobiles (-2.9%), textiles (-4.2%) and electronics (-6.8%).

Foreign trade, MAD bn
 Jan-Aug 25Jan-Aug 24% y/y
Imports, CIF, o/w533.4492.08.4%
Consumer goods130.3114.913.4%
Intermediate goods113.8106.37.1%
Capital goods124.7110.313.0%
Foods62.561.12.2%
Energy goods72.677.4-6.2%
Raw materials28.221.531.5%
Exports, FOB, o/w307.5296.43.8%
Automotive98.7101.6-2.9%
Phosphates65.053.721.1%
Aeronautics18.417.45.6%
Agriculture and food59.757.53.8%
Electronic and electricity11.312.1-6.8%
Textile and leather30.531.8-4.2%
Other industries20.718.710.8%
Goods trade balance-225.9-195.615.5%
Source: Office des Changes

Services trade remained a strong cushion, with exports up 9.2% and imports up 8.1%, pushing the services surplus to MAD 102bn (+10.3%). Travel receipts surged 14.3% to MAD 87.6bn, while Moroccans' spending on trips abroad also increased by9.0% to MAD 19.7bn. Remittances from Moroccans abroad moderated this year and dipped slightly to MAD 81.7bn (-0.6%), though still remaining a significant source of fx income. FDI inflows accelerated sharply, with net flows reaching MAD 23bn, up by impressive 47.6%. Conversely, Moroccan investments abroad contracted, generating a small net inflow of MAD 2.9bn.

Foreign Trade Dashboard, MAD bn
Jan-Aug 2025Jan-Aug 2024% y/y
Imports566.979518.7129.3%
 -- Goods466.735425.9679.6%
 --Services100.24492.7458.1%
Exports467.9436.57.2%
 -- Goods265.656251.1755.8%
 --Services202.3185.39.2%
 
Trade balance, net-201.079-174.79215.0%
Services, net102.04492.53410.3%
Balance of goods and services, net-99.0-82.320.4%
    
Remittances, net81.70882.198-0.6%
    
Tourism receipts, net66.13256.93116.2%
Receipts87.59876.62114.3%
Payments21.46619.6909.0%
    
FDI, net flows22.95815.55147.6%
Inflows39.27227.37743.4%
Outflows16.31411.82638.0%
Direct investment abroad, net flows2.9141.083169.1%
Outflows12.85713.327-3.5%
Inflows9.94312.244-18.8%
Source: Office des Changes

Overall, the external position highlights a widening goods deficit offset by services, tourism, and FDI resilience. Looking forward, the pressure from weak industrial exports and growing import dependence may weigh on the current account, though sustained FDI and strong travel inflows could partly mitigate risks. For now, data imply no pressure on Morroco's fx peg, though the central bank remains very cautions on country's readiness for the free float transition. Bank Al-Magrib Governor Abdellatif Jouahri said last week that stability for businesses remains paramount, and any premature liberalization could expose the economy to disruptive volatility.

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HIGH
Morocco’s GenZ protests turn deadly as unrest spreads nationwide
Morocco | Oct 02, 05:29
  • High youth unemployment and online mobilization are fueling the largest unrest since the 2016-2017
  • Govt pledges restraint but any further escalation poses threat to tourism and investment

Two people were killed in Lqliaa, near Agadir, after security forces opened fire when protesters tried to seize weapons from a gendarmerie post, marking the first fatalities in the rapidly escalating youth protests that started Saturday, local police confirmed. The movement, led by an anonymous online group called "GenZ 212," has spread from demands for healthcare and education reforms into widespread unrest across multiple cities, including Rabat, Tangier, Marrakech, and smaller towns in the Souss region.

Clashes intensified on Tuesday and Wednesday with shops looted, banks set ablaze, and police stations attacked, though some cities like Casablanca and Oujda saw peaceful marches calling for Prime Minister Aziz Akhannouch's resignation. The Interior Ministry reported over 280 injured (263 security forces and 23 civilians), while 409 arrests have been made, with nearly half facing trial. Youth unemployment at 35.8% has fueled the protests, which echo the Rif unrest of 2016-2017.

The government has pledged restraint but the lethal use of firearms and growing online mobilization-GenZ 212's Discord server surged from 3,000 to 130,000 members in a week-suggests Morocco may be entering a more volatile phase. If violence escalates, risks to tourism, investment, and political stability could grow, with the government under rising pressure to offer tangible social and economic concessions.

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Qatar
HIGH
Trump promises to protect Qatar
Qatar | Oct 01, 21:29
  • Qatar receives NATO-like security guarantee from US

US President Donald Trump has signed an executive order officially promising to protect Qatar, according to the White House. Below is part of the exact text of the executive order:

(a) The United States shall regard any armed attack on the territory, sovereignty, or critical infrastructure of the State of Qatar as a threat to the peace and security of the United States.

(b) In the event of such an attack, the United States shall take all lawful and appropriate measures - including diplomatic, economic, and, if necessary, military - to defend the interests of the United States and of the State of Qatar and to restore peace and stability.

(c) The Secretary of War, in coordination with the Secretary of State and the Director of National Intelligence, shall maintain joint contingency planning with the State of Qatar to ensure a rapid and coordinated response to any foreign aggression against the State of Qatar.

This commitment comes after Israel carried out an airstrike on Hamas leadership in Doha on Sep 9. The strike targeted Hamas leaders but also killed a Qatari security officer and lower level Hamas members. Israel's PM Benjamin Netanyahu expressed regret for violating Qatari sovereignty and assured that Israel would not conduct such an attack again in the future.

Netanyahu made the apology during a phone call organized by Trump, who was present during the call. This apology was a condition for Qatar to resume its mediation efforts regarding a deal to end the war in Gaza and free hostages.

Naturally, Qatari officials welcomed Trump's executive order. Qatari media outlets and influential voices have welcomed the unprecedented US security guarantee as a historic move. Domestic media is portraying the executive order as a deterrent against further attacks and a diplomatic gain for Qatar, which has never before received such a sweeping protection pledge from the United States.

We note that this executive order is a rare and strong security guarantee to an Arab Gulf country that is not a NATO member, effectively elevating Qatar's strategic partnership with the US to a level similar to a NATO-style mutual defense commitment, but without the full legal obligations of NATO membership.

Qatar hosts the largest American military base in the region and plays a key role as a mediator in Middle East conflicts, including the Gaza war. The Al Udeid Air Base serves as the forward headquarters for US Central Command and hosts about 10,000 US military personnel.

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Saudi Arabia
Personal transfer payments drop 15.6% m/m to USD 4.8bn in August
Saudi Arabia | Oct 02, 11:57
  • Large remittance outflows are structural feature of kingdom's Current Account
  • Remittance outflows rose by sharp 18% y/y to USD 43bn in Jan-Aug

The personal transfer payments fell by sharp 15.6% m/m to USD 4.8bn in August, following a strong 7.1% m/m increase in the preceding month, according to figures released by SAMA. Remittances from expats living in Saudi Arabia account for two thirds of the payments, the rest are payments made by Saudi nationals. Coming off a high base, the monthly payment in August is the second lowest this year and probably reflects some seasonal effects. While the weaker oil prices are likely to cool some of the large investment projects, which rely heavily on expat construction workers, there are plenty of massive infrastructure projects that will keep demand for this type of labour strong. The large remittance outflows are a structural feature of Saudi Arabia's Current Account as the country relies heavily on foreign workers, especially in the construction sector. The government has deployed measures to encourage the employment of Saudis and to reduce the reliance of foreign workers, and these measures are gradually having effect on the labour market, but we do not expect a significant decline in foreign employment at least over the medium term.

Remittance outflows rose by a strong 18% y/y to USD 42.5bn in Jan-Aug. This sharp increase came on top of the 13% y/y growth recorded in 2024, which pushed remittance outflows to USD 57bn last year, accounting for 13% of SAMA's foreign reserves and for about 2% of full-year GDP. The personal transfer payments account for about 45% of Saudi banks' sales of hard currency for specific purposes, with the remaining sales allocated to import financing (around 25%) and foreign contractors (around 30%). The share of personal transfer payments in the total sales of hard currency (including third parties such as foreign banks and other Saudi customers), is around 7%.

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PRESS
Press Mood of the Day
Saudi Arabia | Oct 02, 08:03

Saudi handicrafts sector valued at USD 405mln, new paper shows (Zawya)

Saudis seek feedback on plan to open stock market to foreigners (AGBI)

Bahri places USD 200mn order with Mena's largest shipyard (AGBI)

Europe's Investindustrial buys Saudi food producer (AGBI)

QNB's Ezbank granted licence in Saudi Arabia (AGBI)

Saudi POS transactions climb 3% to USD 3.4bn on strong consumer spending (Arab News)

Saudi Arabia enforces new Saudization and worker registration rules for tourism sector (Arabian News)

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Q&A
NFAs and interbank liquidity
Saudi Arabia | Oct 01, 13:04

Question:

Where in the financial system are reserves parked, how and at what rate are they remunerated, and does rising reserves have any implications for banking system liquidity? Thank you.

The question was asked in relation to the following story: FX reserves rise 2.8% m/m to USD 457bn as of end-August

Answer:

This is a very interesting question. A large chunk of SAMA's foreign assets is invested in foreign securities (accounting for about 58% of total reserves) and foreign currencies and deposits (around 37%), which should explain why the movement in NFAs has a rather muted impact on money supply. The categories that make up the Foreign Assets of SAMA hold relatively stable, except for the foreign currencies, which are quite volatile because of the quarterly dividend payments by Saudi Aramco. Overall, foreign assets have remained relatively stable, though, averaging USD 447bn in Jan-Aug 2025, USD 451bn in 2024, and USD 438bn in 2023.

While SAMA does not disclose exact remuneration rates, we think we can get a rough estimate based on the large portion of US securities in SAMA's portfolio. According to the US Treasury, Saudi Arabia held USD 132bn worth of US treasuries as of end-July, so the return on these investments should be around 4-5%. We would assume the average return on SAMA's foreign assets is somewhere in the 3-4% range. That's an interesting issue, and we will look further into it in the coming days.

There has been some volatility in the interbank market over the past two years (we cover the interbank offer rates on monthly basis, here is our article for July), but the main reason is the tight domestic liquidity because of a double-digit credit growth and slower growth in the deposit base. According to the IMF, SAMA has injected liquidity, but the demand for loans and trade finance activity remains quite strong, hence liquidity remains tight. The ratio of Bank claims on the private sector to Total deposits was 106.8% as of end August 2025 and this ratio has been above 100% since Q3 2023.

In the latest IMF Article IV report there is a section on the liquidity condition in Saudi Arabia (page 23). There is a chart on page 24 that shows the contribution from NDA and NFA on M3, and you can see that the impact of changes in NFAs has been rather weak since 2021.

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KEY STAT
Bank claims on private sector grow 13.2% y/y to SAR 3.1tn as of end-August
Saudi Arabia | Oct 01, 13:01
  • Saudi commercial banks hit record profits in 2024 and H1 2025
  • Bank claims driven by personal bank loans, as well as lending to real estate and trade
  • Saudi's non-economy grows robustly supported by consumption, investments, and massive spending on infrastructure
  • Banks are also actively financing government and non-financial state-owned enterprises
  • Credit growth continues to outpace deposit growth, leading to tighter liquidity

The credit extended by the banking system to the private sector continued to grow robustly, rising by strong 13.2% y/y to SAR 3.1tn as of end-July (USD 815bn or 70% of GDP), edging down from a 13.7% y/y expansion recorded in the preceding month, according to the central bank (SAMA). The bank claims on the private sector, which are almost entirely bank loans, are driven by personal loans (up 8% y/y to SAR 1.4tn), real estate activities (up 25% y/y to SAR 0.38tn), and trade (up 6% y/y to SAR 0.21tn). Lending to the private sector is expected to remain strong in 2025, although it's likely to moderate from 2024's levels because of the falling oil revenues, elevated regional and global uncertainty, and the government's increased demand for funds to cover the larger fiscal gap. Saudi's non-economy has been growing robustly supported by consumption, investments, and looser fiscal policy and is set to remain the main driver of the overall economy as oil production caps drag on GDP growth. Overall bank lending is also expected to remain strong, supported by Saudi Arabia's ambitious Vision 2030 economic transformation program.

Nearly half of the banks' credit to the private sector is classified as long-term, while medium-term loans accounted for 15% and short-term loans are slightly above 35% of the total. However, loan growth has outpaced the increase in deposits, leading to tighter liquidity. The ratio of bank claims on the private sector to total deposits edged down from an all-time high to 106.8% compared to 106.1% as of end-December. The ratio averaged 102% in 2024 and is expected to remain elevated in 2025 as well, reflecting the rising demand for loanable funds and banks' lending activities to private and state-owned companies.

Bank Claims on Private Sector vs Deposits (SAR bn)
May-25Jun-25Jul-25Aug-25
Bank Claims on Private Sector 3,049 3,057 3,092 3,109
Personal Loans 1,414 1,399 1,408 1,417
Real Estate 374 384 378 379
Wholesale and Retail Trade 214 213 213 214
Total Deposits in Commercial Banks 2,845 2,876 2,867 2,912
Loans-to-deposits107.2%106.3%107.8%106.8%
Source: SAMA

The banks' Capital & Reserves edged down to 18.9% of total deposits, and also fell to 11.2% of total assets. NPLs net of provisions edged down to 1.7% of capital during Q2 and the overall banking system remains profitable, efficient and fairly competitive. The banks' profits rose by strong 20% y/y to SAR 76bn in H1 on top of a 15% increase in 2024. The spread between lending and deposit interest rates has been on a declining trend in recent years and the banks' operating costs have also been declining. The banks are expected to see stable earnings this year, as higher volumes make up for narrower interest rate margins.

Overall, the private sector receives about 80% of all bank lending. Bank credit to the public sector and non-financial state-owned companies has remained strong so far and is set to remain strong over the medium term, which may crowd out the market. Bank claims on the government, including investments in international bonds and Sukuks, rose by 11.8% y/y to SAR 637bn at the end of the month. The government has direct or indirect ownership stakes in local banks, and there are large government funds that perform some activities like those of banks. In addition, the large and increasing reliance of banks on deposits of government-related entities may also raise concerns about fair and competitive allocation of these resources. The recent launch of an auction mechanism to place public deposits in banks should ease some of these concerns.

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Angola
Timetable for next stock exchange privatization still unclear
Angola | Oct 02, 06:11
  • BFA shares surge 50% in two sessions after IPO

The timetable for the next privatization to be carried out though the stock exchange is still unclear, Álvaro Fernão, president of the Institute for the Management of State Assets and Shareholdings (IGAPE), speaking to reporters on the sidelines of the "Ring the Bell" ceremony marking the listing of Banco de Fomento Angola (BFA). There are two to three more privatizations soon to be announced, though the final calendar is pending approval, he said. The privatisation program, PROPRIV, runs until 2026 and includes the divestment of dozens of strategic assets through IPOs, tenders, and auctions. Major companies slated for privatization include Sonangol, Unitel, Standard Bank, and TAAG. Sonangol's privatization, deemed the most complex, is planned for 2026.

Last week, a 29.75% stake was successfully floated on Bodiva for AOA 220.9bn (USD 240mn). The offer was oversubscribed five times, while share prices jumped 50% once the office trade on the stock market started. Strong investor appetite in BFA boosts confidence for upcoming sales. To date, 115 privatizations worth AOA 1.149tn (USD 1.25bn) have been contracted under PROPRIV, of which the state has received AOA 641.5bn (USD 700mn), or only 50%. However, only AOA 245.1bn came in direct cash, while AOA 508.4bn.

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Ethiopia
ECMA licenses three new firms to expand capital market
Ethiopia | Oct 02, 08:56
  • Licensing expands pool of intermediaries to 11 from 8 in September
  • New entrants expected to boost transparency and market activity
  • Formal securities trading continues to gain momentum since July

The Ethiopian Capital Market Authority (ECMA) granted three new licences on Oct 1, to service providers in the country's emerging securities sector, marking another step in the development of Ethiopia's nascent capital market. First Addis Investment Bank received an investment banking licence, while Ignite Capital and Zuri Capital were approved as securities investment advisers. The approvals raised the total number of licensed capital market service providers to 11, up from eight in September. The move followed the launch of government securities trading on the Ethiopian Securities Exchange (ESX) in Jul, which marked the start of formal securities trading in the country. ECMA Director General Hana Tehelku said the licences reflected the authority's commitment to an inclusive, transparent, and resilient financial system, urging the new entrants to play an active role in developing the market. Since March 2024, ECMA gradually opened the sector by licensing investment advisers, brokers, dealers, and investment banks.

Licensed providers are required to meet capital adequacy, governance, and compliance standards under ECMA's 2024 directive on capital market service providers. Only licensed firms can apply for ESX membership, enabling them to conduct trading, brokerage, and underwriting activities. Major banks, including Commercial Bank of Ethiopia and Wegagen Bank, already secured investment banking licences through subsidiaries, with other institutions preparing applications for exchange membership. Established in 2021 as part of financial sector liberalisation, ECMA licensed ESX in December 2024, and Prime Minister Abiy Ahmed inaugurated the exchange in January 2025. We note that while corporate bonds and equities were expected to be listed in the coming years, low private-sector participation and limited investor awareness remained hurdles to market depth and liquidity.

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Treasury plans ETB 243.5bn T-Bill auctions in Q2 of FY 2025/26
Ethiopia | Oct 02, 08:48
  • Finance ministry released second-quarter Treasury Bills auction calendar worth ETB 243.5bn
  • Weighted average 90-day T-bill yield fell to 15.0% in August, improving market liquidity
  • Auctions open to commercial banks, insurance firms, and pension funds via Ethiopian Securities Exchange

The Ministry of Finance announced a new Treasury Bills auction calendar covering the second quarter of the 2025/26 financial year, marking a key step in ongoing public finance reforms aimed at modernizing debt management and promoting market-based deficit financing. The calendar provides clear visibility of upcoming Treasury Bills auctions and enhances predictability for market participants, supporting investor confidence in Ethiopia's domestic debt market. The calendar outlined plans to offer ETB 243.5bn in Treasury Bills through biweekly auctions scheduled from Oct 1 to Dec 24. The auctions remained open to a broad range of local investors, including commercial banks, insurance companies, and pension funds, through the Ethiopian Securities Exchange (ECX). By widening access, the Ministry aimed to encourage efficient resource allocation while creating secure investment opportunities that support economic development.

Treasury Bills, short-term government securities with maturities under one year, continued to serve as a primary source of domestic financing. In Aug, the weighted average yield on 90-day T-bills fell to 15.0% from 17.6% in July, reflecting improved liquidity conditions in the domestic market, according to the National Bank of Ethiopia's Monetary Policy Committee. The decline in yields indicated growing investor confidence and the effectiveness of ongoing debt management reforms. The new T-Bill calendar included maturities of 28, 91, 182, and 364 days, offering flexibility for different investor needs. This initiative aligned with Ethiopia's broader strategy to deepen its domestic debt market, reduce reliance on central bank financing, and support macroeconomic stability.

We recall that the Ministry of Finance reported that Ethiopia's public-sector domestic debt stock stood at ETB 2.5tn at end-June, according to its inaugural domestic debt bulletin. Long-term Treasury bonds accounted for the largest share at 80%, while medium-term bonds and Treasury bills represented about 8% and 10% respectively. The government raised ETB 111.1bn through four Treasury-bill auctions during Jul-Aug against a plan of ETB 103.4bn. Gross issuance refinanced ETB 78.2bn of maturing bills and rolled over ETB 9.0bn, leaving net issuance at ETB 23.9bn (14% of the ETB 172.9bn annual net target). Investor appetite remained firm with total bids of ETB 164.7bn (159% of offer), producing an average subscription of 107%.

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Jet fuel price rises 9.62% to ETB 120.10 in October, diesel price unchanged
Ethiopia | Oct 02, 08:48
  • Govt leaves pump prices unchanged while jet fuel rose to ETB 120.10/l, up 9.62% from ETB 109.56
  • Combined 30% VAT + excise duty continues to apply to petroleum in FY2025/26, keeping upward pressure on consumer prices

The Ministry of Trade and Regional Integration announced that retail prices for gasoline, white diesel, kerosene, light black diesel and heavy black diesel remained unchanged for the review period, while it set jet fuel in Addis Ababa at ETB 120.10 per litre, effective from the date of the directive. Publicly available data showed that the last publicly listed jet fuel price was ETB 109.56 per litre, making the ETB 120.10 revision a ETB 10.54 (9.62%) increase from that level. This comparison used the most recent ministry-listed retail figure before the adjustment. As of Mar 23, the government set diesel at ETB 112.67 per liter and kerosene at ETB 107.93 per liter amid widespread shortages, following a previous increase in January when diesel surpassed ETB 100 per liter.

We recall that according to local media reports, the Ministry of Finance recently implemented a combined 30% tax on petroleum for FY2025/26 (15% VAT + 15% excise), which analysts said had already contributed to large retail rises since mid-2022 and continued to amplify consumer price pressures. Headline inflation stood at about 13.7% in August, placing the government's pricing choices squarely in a fiscal-inflation trade-off. Ethiopia operates a routine monthly pricing mechanism since 2022 that linked domestic retail rates to international benchmarks and exchange-rate movements. The ministry said the review formed part of that framework. Policymakers earlier phased down subsidies to reduce the fiscal burden, which analysts said had pushed diesel and gasoline prices materially higher since mid-2022. Transport operators have seen no immediate pump-fuel cost change, which supports short-term fare stability. Fuel accounts for part of the "Housing and utilities" component within the non-food CPI category, which has a 16.8% weight in Ethiopia's overall consumer price index. Rising black-market prices remain a significant risk which requires further policy interventions.

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Gabon
ExxonMobil to return to Gabon with offshore exploration deal – S&P
Gabon | Oct 02, 08:55
  • ExxonMobil is expected to sign an exploration agreement in October
  • Deal could cover up to six offshore blocks near the Republic of Congo
  • Gabon's oil minister confirmed international partners' renewed interest

ExxonMobil is set to return to Gabon's oil sector with an exploration agreement expected to be signed this month, according to a recent S&P report that cited three anonymous sources familiar with the matter. The deal could involve up to six offshore exploration blocks near the Republic of Congo, but is still under negotiation and will take the form of a memorandum of understanding. Gabon's oil minister Sosthene Nguema Nguema confirmed at the ongoing Africa Energy Week in Cape Town that international partners are showing renewed interest in the country. He said a major deal would be concluded within two weeks. One S&P source said the Gabonese government is pushing for an aggressive exploration program, starting with seismic studies and leading to the drilling of a first well within 18 months.

ExxonMobil's reentry will mark a potential boost for Gabon, which has struggled with declining crude production. Output fell from a peak of 370,000 bpd in 1997 to around 240,000 bpd in Aug 2025, according to S&P Global data. In the meantime, the state-owned Gabon Oil Company (GOC) has expanded its role by acquiring key assets including Assala Energy and holdings from UK-based Tullow Oil. At the Cape Town conference, senior Gabonese officials outlined their strategy to acquire producing assets being sold by private owners while promoting offshore exploration. They noted that 72% of Gabon's oil acreage remains unexplored.

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Nguema’s ruling party leads in first round of legislative elections
Gabon | Oct 02, 08:41
  • Democratic Union of Builders (UDB) won 55 of 145 seats
  • Former ruling PDG secured only three seats, plus four jointly with UDB

Gabon's ruling party, the Democratic Union of Builders (UDB), secured the most seats in the first round of legislative elections that took place on Saturday (Sep 27). This is according to provisional results on Wednesday from the Interior Ministry. Founded in July by president Brice Clotaire Oligui Nguema, the UDB won 55 of 145 seats in the national assembly. In practice, the national assembly holds limited powers after a new constitution was adopted last year by referendum. Under Gabon's new presidential system, parliament cannot dismiss the government. The former ruling Gabonese Democratic Party (PDG) took only three seats during the elections, though the two parties ran on a joint ticket in some constituencies and managed to secure four more seats. A second round of elections is scheduled for Oct 11 in 77 constituencies where no candidate gained an outright majority.

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Ghana
President Mahama says govt is in talks with US on tariffs, AGOA
Ghana | Oct 02, 08:40
  • Mahama says outcome of talks is important for Ghana's trade prospects
  • President says lifting of US visa restrictions was achieved through diplomatic engagement and at no financing cost
  • President assures deal with US will not turn country into "dumping ground" for deportees

President John Mahama said that the government is in talks with the US on the 15% tariff imposed on Ghanaian imports, as well as the renewal of the African Growth and Opportunity Act (AGOA). Speaking to reporters on Oct 1, he said the outcome of the talks will be key for the country's trade prospects and urged Ghana's envoys to check on the progress.

Commenting on the recent US decision to lift visa restrictions for Ghanaian nationals, Mahama said it was achieved solely through diplomatic engagement and at no financial cost, thus rejecting recent speculation. He also urged Ghanaians travelling abroad to respect the conditions of their visas so as not to affect the broader population.

As for the deal to receive US deportees, Mahama assured that it would not undermine Ghana's security and stability and would not turn in into "a dumping ground" for deportees. He reiterated that the deal was motivated by humanitarian reasons as the government wanted to make sure the West Africans can return safely to their home countries.

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PRESS
Press Mood of the Day
Ghana | Oct 02, 08:11

CSOs ready to press Mahama for definition of success in galamsey fight - Ken Ashigbey (Joy FM)

Virtual Asset Service Providers Bill makes progress towards parliament - BoG (Joy FM)

Next NPP gov't will complete Agenda 111 - Bawumia (Citi Newsroom)

Ghana won't become a dumping ground for deportees - Mahama (Citi Newsroom)

Mahama clarifies: U.S. Visa restrictions reversal came at no financial cost (Citi Newsroom)

Ken Ofori-Atta who has been placed on Interpol red notice by OSP as a wanted man spotted in Washington DC (Daily Graphic)

TEWU suspends strike after progress in negotiations (Starr FM)

Mahama inaugurates 18-member joint cyber security committee to strengthen digital safety (Starr FM)

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KEY STAT
Inflation enters single-digit territory at 9.4% y/y in September
Ghana | Oct 01, 15:55
  • Continued disinflation driven mainly by slower food inflation
  • On the other hand, higher charcoal and fuel prices have upward effect
  • Disinflation expected to continue but possibly at slower pace

The CPI inflation slowed down to 9.4% y/y in September from 11.5% y/y August, entering the single-digit territory for the first time in four years and hitting the lowest level since July 2021. The deceleration was mainly driven by the food category where prices rose by 11.0% y/y after 14.8% y/y in August. Alcoholic beverages and tobacco, and clothing and footwear also had a more pronounced downward impact on the headline print. At the same time, housing and utilities prices grew at a faster pace and transport prices decreased at a slower pace, which is due to the rise in charcoal and automotive fuel prices. The latter came as a result of the increase in energy levies in July, as well as the recent cedi weakening. In m/m terms, the headline CPI rose by 0.9% after decreasing by 1.3% m/m in August with both food and non-food prices picking up, driven by the rise in prices of some fresh foods, fuels, charcoal and secondary education fees.

The disinflation process is expected to continue in the months ahead although it might slow as a result of the recent pressure on the cedi and the easing of the monetary policy. The central bank has cut the policy rate by a total of 650bps this year and said after the MPC meeting last month that expects inflation to continue to ease in the near term and enter the target range of 6-10% by the end of the year. This has already happened. The central bank admitted that there are some upside risks from the potential hike in utility tariffs (the regulator hiked tariffs by just 1% as of October), but noted that the maintenance of an appropriate monetary policy stance, strong sterilisation efforts, ongoing fiscal consolidation, and adequate reserve buffers should help sustain the disinflation process.

Inflation (% y/y, base 2021)
WeightJul-25Aug-25Sep-25
Food & non-alcoholic beverages42.715.114.811.0
Alcoholic beverages & tobacco3.918.319.415.4
Clothing & footwear8.014.812.911.0
Housing & utilities10.219.014.215.8
Household equipment & maintenance3.29.211.08.7
Health0.79.59.97.8
Transport 10.5-7.7-5.2-3.9
Information and communication3.67.35.23.1
Recreation, sport & culture3.518.316.416.6
Education6.64.54.24.5
Restaurants & accommodation4.38.06.07.8
Insurance and financial services0.48.87.06.6
Personal care and miscellaneous goods2.510.511.99.6
All Items100.012.111.59.4
Source: Ghana Statistical Service
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Ivory Coast
Government announces USD 440mn development plan for palm oil sector
Ivory Coast | Oct 02, 08:54
  • Investment will be spread over ten years
  • Strategy aims to make sector more competitive, sustainable and inclusive

The agriculture ministry announced a new development strategy for the palm oil sector, which envisages investment of XOF 245.9bn (USD 440mn) over the next 10 years. The plan was developed by the Rubber-Palm Oil-Coconut Council (CHPC) and has five strategic pillars. Of the planned investment, 61% will go toward improving productivity in village plantations. The other priorities include strengthening competitiveness, improving marketing, promoting sustainability and developing financing mechanisms for farmers. The challenges facing the sector were said to include aging plantations, tougher international standards on traceability and sustainability, and competition from Asian imports, and the strategy aims to make it more competitive, sustainable and inclusive.

The country produces over 500,000 tonnes of palm oil annually which makes it the second largest producer in Africa and the seventh largest in the world. About 25% of the crude palm oil is exported to regional markets such as Mali, Burkina Faso, Niger, Ghana, and Nigeria.


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Government approves draft 2026 budget
Ivory Coast | Oct 02, 08:26
  • Balanced resources and expenses raised by 13.1% to XOF 15,229bn
  • Budget is based on GDP growth projection of 6.7% for 2026

The government approved the draft 2026 budget with balanced resources and expenses of XOF 17,350.2bn, up 13.1% from the XOF 15,229.2bn in 2025. A statement released after the cabinet meeting on Oct 1 read that the budget is based on a GDP growth projection of 6.7% for 2026, which is more optimistic than the IMF and EBRD which forecast growth of 6.4% for 2026.

The government said the budget was prepared in a "dynamic" economic context marked by the successful implementation of the National Development Plan (NDP) 2021-2025 and the implementation of structural reforms under the IMF programme. The statement read further that the fiscal policy in 2026 would be focused on improved mobilisation of domestic resources, control of operating costs and consolidation of capital expenditure, as well as strengthening social and environmental protection spending. No more details were revealed but more will probably be known when the budget is debated in parliament.

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Government launches new cocoa season, raises farm-gate cocoa price by 27.3%
Ivory Coast | Oct 02, 06:58
  • Price is set at XOF 2,800 per kg equivalent to about USD 5
  • Price is now higher than price offered in Ghana

President Alassane Ouattara officially launched the new cocoa season on Oct 1 and announced an increase in the farm-gate cocoa price to XOF 2,800 per kg, higher than expected XOF 2,500. The new price is the highest paid on record and is 27.3% higher than the XOF 2,200 for the mid-crop of the 2024/25 season as well as 55.6% higher than the XOF 1,800 for the main crop of 2024/25. We note that the season starts with the main crop which runs from October to March while the smaller crop (the mid-crop) runs from April to September.

Previously sources had told Reuters that the price would be raised to XOF 2,500 as this was the best price that can be offered given the difficult sales in recent months. According to exporters, the CCC has sold 1.15mn tonnes of cocoa export contracts so far, based on a forecast of 1.2mn tonnes, and down by 11.5% y/y. The cocoa crop is expected to drop again in the coming season due to unfavourable weather and plant diseases. Smuggling has also been a factor fuelled by the differences in prices in countries in the region. The new Ivorian price is equivalent to about USD 5.0 per kg which is higher than the USD 4.2 price in Ghana and will hopefully discourage smuggling. However, prices in other regional producers such as Cameroon, where the market is liberalised, remain higher.

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Govt, Eni sign deal for new exploration block CI-707
Ivory Coast | Oct 01, 13:15
  • Deal allows maximum exploration period of nine years
  • Eni to invest at least USD 20mn in exploration

Eni said it signed an exploration contract for the CI-707 offshore block in Ivory Coast with the mines' ministry. The deal allows for a maximum exploration period of nine years. The area it covers is next to the CI-205 block which is operated by Eni and where the Calao discovery was made in March 2024. CI-707 deal was approved by the Ivorian government in July. Back then, the government said that the first exploration period is expected to last three years and Eni committed to a minimum investment of USD 20mn.

Eni is present in Ivory Coast since 2015 and aside from the CI-707, it operates 10 blocks (CI-101, CI-205, CI-401, CI-501, CI-801, CI-802, CI-504, CI-526, CI-706, CI-708) in partnership with state-owned Petroci Holding. The company's current equity production is over 62,000 barrels of oil and more than 75mn cubic feet of gas per day, and it plans to raise it 150,000 barrels of oil and 200mn cubic feet of gas with the start of phase 3 of its Baleine project located across blocks CI-101 and CI-802.

Ivorian oil production grew by 50% y/y to 16.16mn barrels in 2024, translating into daily output of about 44,000bpd. This has increased markedly this year and the government expects it to grow to at least 500,000bpd by 2035 thanks to new discoveries and projects.

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Kenya
PRESS
Press Mood of the Day
Kenya | Oct 02, 08:58

Three-quarters of firms fail to pay corporate tax (Business Daily)

Eight banks defy CBK in push to lower cost of loans (Business Daily)

Milking Kenyans dry: Sh17bn payout for shady deals (Nation)

Haiti's deadly gamble: Little to show as Kenyan-led mission is replaced by UN (The Standard)

ICPAK claims auditors targeted for exposing financial malpractices (The Star)

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Senegal
Govt to prioritize local financing for major projects
Senegal | Oct 02, 08:56
  • to redirect recovery plan resources toward priority projects
  • envisages greater reliance on PPPs, diaspora funds, sukuk and crowdfunding to reduce external borrowing
  • meeting also highlights education, agriculture, health and investment promotion initiatives

The cabinet has endorsed a new approach to financing national projects, emphasizing the use of domestic resources and innovative funding mechanisms, according to the communique from the latest cabinet meeting. Under the plan, resources generated through the Economic and Social Recovery Plan will be redirected toward priority programs, with budget allocations decided through tighter arbitration and programming.

The government will also increase reliance on public-private partnerships, diaspora investment, and local savings mobilization through existing structures such as FONSIS, CDC, FONGIP, and IPRES. Additional tools like sukuk, waqf, and crowdfunding platforms are expected to be deployed to finance infrastructure and social initiatives in education, health, and territorial development. The prime minister highlighted that these measures are designed to reduce dependence on external borrowing while ensuring that funds are directed to projects with strong economic returns.

The cabinet session also reviewed preparations for the new school year, stressing investments in modern classrooms and the regulation of school fees. In agriculture, authorities pledged to strengthen seed production, revive community farming programs, and promote local consumption campaigns.

Other topics included Senegal's recent participation in the UN General Assembly, health measures against Rift Valley fever, and initiatives for breast cancer awareness. The president further announced the upcoming "Invest in Senegal" forum, which will bring together government representatives and investors next week in Dakar.

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South Africa
October marks shift from fuel price deflation to inflation
South Africa | Oct 02, 08:26
  • Fuel prices will rise only modestly in October
  • Low base will support fuel price inflation until year-end

The retail prices of both grades of petrol will rise marginally in October and diesel prices will decline, according to the new regulated prices effective on Wednesday (Oct 1). In our estimates, the average petrol price will rise by only 0.2% this month to just over ZAR 21/l. Diesel prices, meanwhile have been cut by ZAR 8-10c/l depending on the grade. Even so, we forecast that the marginal price hike in petrol prices will translate to a 3.5% y/y increase in the petrol price index largely attributable to the low base from last year. This means that fuel prices will start to exert upside pressure on the headline CPI index in October following more than a year of easing. We expect to see fuel prices adding 1pps to headline CPI in September and 2pps in October. The renewed pressure from food prices will also persist until the end of the year and the combination of food and fuel inflation is likely to push the CPI print closer to 4.0% y/y at the end of the year. These pressures will likely tie the hands of the central bank which has already paused the easing cycle at its rate meeting in September in pursuit of a lower 3.0% inflation target.

Petrol prices, ZAR c/l
ULP & LRP 93ULP 95Diesel 0.05 %IP
2025Coast c/lGauteng c/lCoast c/lGauteng c/lCoast c/lGauteng c/lGauteng c/lCoast c/l
January2,0552,1342,0802,1591,8501,9291,3261,227
February2,1442,2162,1692,2411,9552,033.551,423.321,324
March2,1312,2092,1552,2341,9372,0161,4171,318
April2,0692,1512,0792,1621,8491,9321,3361,234
May2,0472,1292,0572,1401,8071,8901,3051,203
June2,0412,1242,0522,1351,7701,8531,2491,147
July2,0962,1792,1042,1871,8521,9351,3161,214
August2,0682,1512,0762,1591,9172,0001,3481,246
September2,0642,1472,0722,1551,8611,9441,3111,209
October2,0652,1482,0802,1631,8511,9341,3001,198
Source: Department of Energy
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PRESS
Press Mood of the Day
South Africa | Oct 02, 06:56

The enemy within: Eskom fleeced of R20bn in three years (Business Day)

Industrial users warn high Eskom tariffs threaten recovery (Business Day)

Afrikaner leaders' private US dinner raises trade diplomacy concerns (Business Day)

SA's big four poultry giants face antitrust probe (Business Day)

PA withdraws threat to pull out of GNU (Business Day)

DA blames ANC for loss of formal jobs (Business Day)

Some SA exports to US take strain as hope grows for better trade terms (News24)

Rand hits best level in a year after US jobs shocker (News24)

eFiling profile hijackings report urges Sarb to look at specific banks (Moneyweb)

Madlanga Commission to resume hearings on 13 October (Eyewitness News)

DA ahead of ANC in internal party polls as Zille declares water a top Joburg priority (Daily Maverick)

Julius Malema's firearm verdict and the EFF's fork in the road (Daily Maverick)

Whistleblower sparks police raids as investigations into Cape Town's R1.6 billion tender fraud intensify (Daily Maverick)

Ford retrenchments in South Africa tied to UK tax shift, lower volumes (Daily Maverick)

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Malema found guilty in firearm case which could put him behind bars
South Africa | Oct 01, 14:04
  • Sentencing has been set for Jan 23, 2026
  • EFF leader vowed to appeal before the High Court and the Constitutional Court if needed

EFF leader Julius Malema has been found guilty in the East London Magistrate's Court of discharging a rifle at a 2018 rally. Addressing supporters outside court, Malema said he would appeal "all the way to the Constitutional Court," insisting the judgment was politically and racially motivated. While his co-accused, security head Adriaan Snyman, was acquitted on all charges, Malema argued the case was targeted at him personally. The court will pronounce the sentencing has been on Jan 23, 2026. The crime carries a maximum penalty of 15 years in prison. If Malema is sentenced to more than 12 months in jail, he risks losing his seat in parliament. Malema appealed to EFF members not to be discouraged by the attempts to undermine the party and urged them to focus on strengthening branches ahead of local elections in 2026. The judgement comes weeks after the Malema was found guilty of hate speech in a separate case, adding further pressure on the outspoken opposition leader.

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ABSA PMI signals manufacturing sector expansion in Q3
South Africa | Oct 01, 13:53
  • PMI rises to 52.2 in September, best reading in nearly a year
  • Quarterly average climbs to 50.8, first sustained expansion in 2025
  • Strong domestic demand offsets weak exports and tariff headwinds

The ABSA Manufacturing PMI delivered a very positive surprise by printing into expansion territory in September following 10 months of subdued readings, the data publishedby the Bureau for Economic Research (BER) on Wednesday (Oct 1) indicated. The manufacturing sector PMI rose 2.7 points in September to 52.2, the best reading since October last year. The rebound lifted the quarterly average to 50.8 in Q3, well above 45.4 and 46.2 registered in Q2 and Q1, respectively. The third quarter with two months in expansion territory suggests the first sustained return to growth so far this year.

A sharp recovery in business activity drove the improvement, with the index jumping 12.1 points to 57.9 which is the highest level seen since last October. New sales orders also surged, rising 8.8 points to 56.1 in September, reversing the slump in August and pointing to stronger domestic demand. Export demand, however, remained weak amid sluggish global trade, US tariff headwinds, and continued logistical bottlenecks at South African ports, according to the respondents in the survey. The supplier deliveries index edged higher to 54.8, reflecting longer lead times as new orders surprised to the upside, the BER said. However, inventories slipped back into contraction after two unusually strong months.

On the downside, the employment index fell sharply by 6.1 points to 42.8, undoing previous gains in August. Manufacturers remain hesitant to expand payrolls given the combination of volatile demand, high labour costs, and lingering cost pressures. The purchasing price index climbed to 61.7, signalling renewed upside for input costs despite stable fuel prices and a relatively firm rand.

Looking ahead, expected business conditions in 6-months' time slipped into negative territory for the first time in six months. Interestingly, the BER did not provide any explanation or the details of respondents' comments. Clearly, weaker confidence is indicative of the manufacturers' concerns about the sustainability of the rebound amid ongoing external risks and supply challenges. Overall, although the rebound in September is a welcome development, the uneven recovery underscores the vulnerability of the growth momentum.

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Uganda
Government sells bonds above target again amid strong demand
Uganda | Oct 01, 16:09
  • Amount sold exceeds target by 176%
  • Yields on 2-year, 15-year bonds flat, yield on 5-year bond rises
  • With this auction, treasuries sold this FY reach 42% of plan

The government sold UGX 2,737bn T-bonds at an auction on Oct 1, exceeding significantly the UGX 990bn target as the demand strengthened with bids totalling UGX 3,174bn, translating into a subscription rate of 3.2, up from 2.1 a month earlier. The 2-year and 15-year bonds were sold at unchanged yields but the yield on the 5-year bond rose by 70bps compared to the previous auction of these tenors in August.

With the latest auction, the total issuance this fiscal year so far (Jul 1-Jun 30) reached UGX 9.0tn, which is 42% of the issuance plan which is UGX 21.4tn. This suggests that the issuance plan might be revised up similarly to 2024/25. The initial issuance plan for 2024/25 was UGX 12.6tn before it was raised to UGX 21.3tn, only to be exceeded as the total issuance reached UGX 25.5tn, with the government resorting mainly to domestic borrowing to compensate for lower-than-expected external funding. The government expects more external financing this fiscal year following the WB's decision to unfreeze lending to the country.

T-bond auction results
Oct 01
2-year5-year15-year
Offer (UGX bn)230.0330.0430.0
Bids (UGX bn)299.3391.02,483.7
Allocated (UGX bn)152.0170.62,414.0
Coupon rate, %14.12515.50015.800
Cut-off yield, %15.75016.20017.650
Source: Bank of Uganda
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Zambia
PRESS
Press Mood of the Day
Zambia | Oct 02, 08:41

Conference of Catholic Bishops urges lawmakers to reject reintroduction of (Amendment) Bill No. 7 of 2025 (Zambia Monitor)

Nakacinda petitions High Court to strike down sedition law as unconstitutional (Zambia Monitor)

PACRA waives one-year outstanding Annual Returns in 61-day compliance campaign (Zambia Monitor)

2026 Budget: WWF Zambia warns of underinvestment in environmental protection (Zambia Monitor)

ZIPAR backs 2026 growth target, warns on energy bottlenecks (Zambia Monitor)

Government pledges full support to Chinese company in USD 1.4bn TAZARA revitalization deal (Zambia Monitor)

Confusion hits Tonse as Sean Tembo-faction names shadow cabinet (News Diggers)

Mine blast injures 18 at Chinese Quarry in Chilanga (News Diggers)

Lubinda rubbishes Zumani's list of names to be included in the expanded Tonse structure (News Diggers)

Catholic Bishops urge MPs to reject Bill 7 (News Diggers)

Chambishi police caution German journalist found interviewing residents at NFC Mining (News Diggers)

ACC nabs Kalabo Health Director for corruption (News Diggers)

Quarterly fuel price reviews will require stabilisation funds - ERB (News Diggers)

2026 Budget has left critical gaps unaddressed - Economics Association of Zambia (News Diggers)

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Govt, SCO-China sign multi-sector MoUs to unlock USD 1bn investment
Zambia | Oct 02, 07:59
  • ZDA targets transformative investments across agriculture, mining, energy, manufacturing, and services

Zambia Development Agency (ZDA) signed two memoranda of understanding (MoUs) with the Shanghai Cooperation Organisation (SCO) Guangdong-Hong Kong-Macao Development Committee and the Southern African Institute for Policy and Research (SAIPAR), aimed at boosting trade, investment, and evidence-based policymaking. ZDA Director General Albert Halwampa said the partnerships could unlock projects exceeding USD 1bn, supporting job creation, food security, and sustainable economic growth. The MoU with SCO Guangdong-Hong Kong-Macao Development Committee focused on agriculture, mining, energy, manufacturing, services, and cultural, scientific, and tourism exchanges. Halwampa highlighted Zambia's strategic role as a regional hub, citing key trade corridors such as the Lobito Corridor that enhance connectivity to global markets. SCO Director Wang Ruicai pledged strong support, noting that Zambia offers opportunities for innovation and sustainable development through advanced technology, investment, and expertise. A joint working group and annual high-level consultation mechanism were established to ensure follow-through on commitments. The second MoU with SAIPAR emphasized evidence-based policymaking as a driver of economic transformation. Joint initiatives focus on research, investment promotion, agricultural development, and business growth, particularly for small and medium enterprises (SMEs).

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IDC launches digital marketplace to boost ZMW 10bn intra-group trade
Zambia | Oct 02, 07:58
  • Platform aims to increase intra-group trade from 5% to 25% of total transactions
  • IDC subsidiaries generated ZMW 40bn in annual revenues in 2024, potential ZMW 10bn retained internally

State-owned investment arm, the Industrial Development Corporation (IDC) launched the IDC Intra-Group Marketplace, a digital platform designed to boost trade, transparency, and collaboration among its 36 subsidiaries and investee companies. IDC Chief Executive Officer Cornwell Muleya said the platform enabled real-time transactions, listing of goods and services, and quotation requests. Muleya noted that IDC subsidiaries generated ZMW 45bn in annual revenues in 2023 and ZMW 40bn in 2024, yet intra-group trade accounted for less than five percent of total transactions. He projected that increasing this share to 25% could retain ZMW 10bn within the group. Muleya highlighted past challenges including low competitiveness, quality issues, pricing inefficiencies, and delays, which had limited internal trade and value creation. The platform aims to strengthen domestic value chains, enhance enterprise competitiveness, and ensure subsidiaries grew together.

Finance and National Planning Minister Situmbeko Musokotwane, represented by Director Mordsen Chibuye, described the initiative as a strategic milestone to reinforce state-owned enterprises, promote intergroup trade, and expand IDC's economic impact. He noted that the IDC group managed assets exceeding ZMW 300bn and received over ZMW 1bn in dividends since inception. The launch featured exhibitions by subsidiaries and participation from sponsors including ZICB, Zamtel, ZSIC Life, Zanaco, Infratel, and Zambia Daily Mail.

We recall that in July, IDC unveiled a strategic plan spanning 2024 to 2033 targeting significant industrial growth and economic expansion. The institution announced that the goal is to establish a ZMW 200mn Wealth Fund within this period while increasing subsidiary dividends to ZMW 7bn by 2033. IDC is a government-owned investment holding company incorporated in January 2014 to catalyze Zambia's industrialisation and co-invest alongside the private sector to lower project risk. Fully owned by the Government through the Ministry of Finance and National Planning, IDC manages assets across energy, agriculture, mining, manufacturing, tourism, and media. IDC supported over 20,000 jobs, and through its financial services arm, Indo Zambia Bank, total assets rose 22.97% to ZMW 20.85bn with net profit after tax up 19.82% to ZMW 724mn in 2024.

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World Bank warns of 2026 budget risks from ZMW 21.62bn domestic borrowing plan
Zambia | Oct 02, 06:58
  • Govt targets ZMW 21.62bn net domestic borrowing in 2026 (2.3% of GDP)
  • Banks were already heavily exposed, non-residents held 25% of domestic debt in 2024
  • Public investment currently relies on 2.6% of GDP in foreign financing

World Bank Senior Country Economist for Zambia, Albert Pijuan Sala, warned that Zambia's 2026 budget faced risks if domestic debt financing did not materialise. Speaking during the PwC Budget Bulletin following the Finance Minister's presentation of the 2026 national budget, Sala pointed to the government's plan to raise ZMW 21.62bn (2.3% of GDP) through net domestic borrowing. He noted that in 2024 financing conditions were tight and auctions were undersubscribed. Banks were already significantly exposed, while non-resident investors accounted for 25% of domestic debt holdings, their likely limit given risk-adjusted returns.

Sala commended the government's intention to raise public investment as a share of GDP in 2026. However, he stressed that allocations were skewed by transfers to the Food Reserve Agency (FRA), which did not qualify as investment. Excluding FRA, foreign-financed investment accounted for just 2.6% of GDP. He warned that revenue shortfalls or financing constraints could quickly erode capital spending. This, he said, would weaken future growth prospects and undermine domestic revenue mobilisation. He emphasised that the credibility of Zambia's 2026 budget depended on sustaining investor appetite for domestic securities and securing projected external disbursements. He underlined that shocks to financing or weaker-than-expected revenue performance would compromise investment execution and threaten fiscal stability. Sala concluded that unresolved domestic debt financing presented the most immediate risk to the 2026 budget, reinforcing concerns over Zambia's medium-term growth outlook.

We recall that recently, Finance Minister Situmbeko Musokotwane presented the draft 2026 national budget to parliament. In the FY 2026, the budget proposes total expenditure of ZMW 253.1bn (27.4% of GDP), a notable increase from the 2025 budget of ZMW 217.1bn, financed by improved domestic revenues and controlled borrowing. The minister noted that the budget would be financed by domestic revenues of ZMW 206.5bn (81.6% of the budget or 22.3% of GDP) and grants of ZMW 12.1bn (4.8% of the budget). The resulting deficit of ZMW 34.5bn (3.7% of GDP) will be financed through ZMW 21.6bn in domestic borrowing (2.3% of GDP) and ZMW 12.9bn in external borrowing (1.4% of GDP) although no new external loans will be contracted during the FY with external funds to be received as disbursements from existing loans, according to the recently released annual borrowing plan for FY 2026.

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Malaysia
Govt raises MYR 1bn in rare 61-day Sukuk T-bills auction
Malaysia | Oct 02, 09:46
  • Demand was strong; bond yielded 2.83%
  • Gross bond issuance falls 11.2% year-to-date

The government raised MYR 1bn through a rare issuance of 61-day Sukuk T-bills in a scheduled auction on Thursday, according to the FAST BNM website. Appetite for the security was strong, as bids reached MYR 3.1bn. This translated into a bid-to-cover ratio of 3.1, the highest in the past eight auctions. The bond was sold at an average yield of 2.83%. As no 61-day T-bills, whether Islamic or conventional, have been issued in recent years - at least since 2019 - there is no directly comparable yield available for this maturity.

So far in 2025, the government has raised MYR 124.5bn through bond sales, compared to MYR 140.2bn during the same period last year. The reduced issuance is in line with lower borrowing needs as fiscal deficit is targeted at 3.8% of GDP, down from 4.1% in 2024.

Recent government bond auctions
auction datetypematurity dateamount sold, MYR bn demand, MYR bnbid-to-coveraverage yield yield change, bps*coupon
28-Aug-25Sukuk bond31-May-453,0005,5231.83.775%03.775%
8-Sep-25Fixed-rate bond20-Apr-285,0009,6401.93.036%-43.13.519%
16-Sep-25Sukuk bond23-Mar-543,0005,7851.93.927%-8.34.280%
18-Sep-25Sukuk T-bill19-Jun-261,0002,9603.02.80%-2.0discount
22-Sep-25Fixed-rate bond18-Apr-393,5005,3201.53.638%-7.44.054%
25-Sep-25T-bill25-Sep-261,0002,3402.32.90%-0.3discount
29-Sep-25Sukuk bond31-Jul-285,00014,3802.93.162%-39.93.599%
2-Oct-25Sukuk T-bill2-Dec-251,0003,1003.12.830%-discount
Note: compared to previous auction of same bonds
Source: FAST BNM
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PRESS
Press Mood of the Day
Malaysia | Oct 02, 06:46

E-hailing drivers, boat owners to get additional RON95 subsidy benefits by mid-October - MOF (The Edge Malaysia)

Malaysia, China in talks on rare earths refinery project, says report (Free Malaysia Today)

EPF contributions for foreign workers begin (The Star)

Malaysia slams Israeli flotilla raid as 'criminal and cowardly', demands release of detained activists (Malay Mail)

Malaysian legal team arrives in Jordan to negotiate release of GSF volunteers (www.thevibes.com)

Malaysia secures RM376 million export sales at China-ASEAN Expo (The Sun Daily)

MOH studying proposal to regulate third-party administrators in health insurance - Dzulkefly (The Edge Malaysia)

Japan's Mizuho Bank to boost JS-SEZ investments, says Amir (Free Malaysia Today)

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Mongolia
FX reserves rise to USD 5.68bn in August
Mongolia | Oct 01, 15:40
  • Gold reserves slightly higher, expansion mostly in central bank's foreign exchange assets
  • FX reserves exceed end-2024 outcome, can move closer to medium-term target

Mongolia's FX reserves grew to USD 5.68bn in August after USD 5.38bn in July, according to data published by the central bank. The increase reflects another small rise of gold reserves, which have expanded throughout most of the year due to favourable price dynamics. Yet, the decisive increase was in the bank's foreign exchange assets (USD 296mn m/m). In the other categories, there was no significant change again.

Overall, the central bank's foreign exchange assets amounted to USD 4.8bn in August. Gold reserves added USD 790mn. As expected, FX reserves have now exceeded the end-2024 outcome (USD 5.5bn). In the absence of sharp volatility, the year-end total can move closer to the bank's medium-term target (USD 6.5bn). In the long term, the goal is to bring reserves to USD 10bn.

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South Korea
KEY STAT
CPI inflation rises back above 2% y/y in September
South Korea | Oct 02, 06:43
  • Communication prices stay flat y/y after one-off 13.3% y/y decline in August
  • Food, restaurants and hotels, miscellaneous goods remain primary inflation drivers

CPI inflation accelerated to 2.1% y/y in September after it temporarily eased to 1.7% y/y in August, data from the stat office Kostat showed. In particular, communications prices rose marginally by 0.1% y/y in September after recording a one-off decline by 13.3% y/y in August due to the impact of 50% discount on mobile services fees in August by SK Telecom. Core inflation also recovered to 2.0% y/y from 1.3% y/y in August.

The main drivers of inflation were food prices (up by 3.3% y/y), restaurants and hotels prices (up by 3.3% y/y) and miscellaneous goods and services prices (up by 6.1% y/y). Transport prices remained contained, rising by just 1.2% y/y, whereas housing and utilities prices also rose relatively tepidly by 1.2% y/y.

Overall, headline inflation remained close to the 2% level yet again after the temporary dip below 2% in August. This gives BOK flexibility to either stand pat or support the economy with more rate cuts depending on other economic conditions.

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PRESS
Press Mood of the Day
South Korea | Oct 02, 05:48

Construction CEOs Summoned for National Assembly Audit on Accidents (Chosun)

Hyundai Motor cuts Ioniq 5 prices by $9,800 in U.S. (Chosun)

Editorial: Ride the Tsunami of Chinese Industry (Chosun)

One in Four Subscribers Miss 25% Communication Discount (Chosun)

KOSPI tops 3,560 on foreign, institutional buying (Chosun)

Living Costs Surge 1.0% as Telecom, Restaurant Discounts End (Chosun)

President Lee Pledges to Better Support Overseas South Koreans (KBS)

Consumer Prices Rise 2.1% in September (KBS)

N. Korean Defense Minister Expresses 'Full Support' for Russia (KBS)

Part 27. Korea rewrites its shipbuilding history with construction of LNG carriers (KBS)

Lee apologizes for rights abuses in past intercountry adoption cases (Korea Herald)

Kospi tops 3,500 for first time on chip-led rally (Korea Herald)

Foreign ministry scrambles to contain anti-China protests ahead of APEC (Korea Times)

Lee pledges to review lowering age threshold for dual citizenship of overseas Koreans (Korea Times)

Pro-autonomy bloc raises voice ahead of APEC (Donga )

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OpenAI to build 2 data centres rated 20MW in South Korea
South Korea | Oct 01, 16:51
  • Government mulls over regulatory incentives to spur AI investments

OpenAI will build 2 data centres with capacity of 20MW in South Korea, the government announced on Wednesday after a meeting between President Lee Jae-myung OpenAI CEP Sam Altman. The announcement follows another commitment made by AWS in June to build a datacentre together with SK to meet AI demand. The government managed to persuade OpenAI to build the data centres in remote locations such as North Gyeongsang Province and South Jeolla Province. One of the datacentres will be jointly constructed with Samsung, while the other with SK Hynix. Data centre construction remains key priority for the government as President Lee has set a target to make South Korea a "top 3 AI powerhouse."

Meanwhile, the government also announced plans to ease regulatory burden to spur AI investments. President Lee Jae-myung stated that SK Hynix and Samsung may need to build new plants to meet soaring AI demand, which would require "astronomical" investments. In particular, the government may ease regulations on cross-ownership between financial and industrial firms to support large-scale investments. The government also noted that the envisioned KRW 150tn strategic industry fund, which is set to be launched in December, will also become a potential source of funds for investments into semiconductor fabs and energy plants.

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Government launches KRW 16.4tn debt relief fund for vulnerable borrowers
South Korea | Oct 01, 16:17
  • Government to contribute KRW 400bn to fund, private sector - KRW 440bn
  • Scheme expected to benefit some 1.13mn people

The government launched a KRW 16.4tn (USD 11.7bn) debt relief fund called New Leap Fund aimed at buying up and writing off delinquent debt held by vulnerable borrowers such as low-income households and small business owners, local media reported on Wednesday. Debts up to KRW 50mn (USD 35,600) will be eligible for forgiveness subject to certain conditions.

The government will directly contribute KRW 400bn (USD 290mn) to the fund, whereas KRW 440bn (USD 310mn) will come from the private sector. The fund will buy bad debts up to KRW 16.4tn, affecting an estimated 1.13mn people. Once the debt has been purchased by the New Leap Fund, collection efforts will be halted, and borrowers will receive relief.

The fund is part of President Yoon's pre-election pledge to reduce debts by vulnerable people. To note, South Korea has the second-highest household debt-to-GDP among developed nations, standing at 91.7% of GDP as Q2 2025, according to data from the IIF.

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KEY STAT
Exports increase by 12.7% y/y in September on working days difference
South Korea | Oct 01, 13:07
  • Trade surplus increases by 48.8% y/y to USD 9.6bn
  • Semiconductor exports once again lead growth, jump by 22.0% y/y
  • Exports rise despite negative contribution from US market, marginal growth in Chinese demand

Merchandise exports increased by 12.7% y/y to USD 66.0bn in September, reaching the highest level ever for the month of September, according to data released by the ministry of industry. Imports, meanwhile, rose by 8.2% y/y to USD 56.4bn. As a result, the trade surplus widened by 48.8% y/y to USD 9.6bn.

The main driver of growth was working day differences as Sep 2025 had 22 working days compared to 18 in Sep 2024 due to the different timing of the Chuseok holiday. The picture will change dramatically in October when the same calendar effects will weigh on the downside as October will have much fewer working days compared to last year. Thus, the actual external demand situation may be worse than the headline number suggests.

By sector, the biggest contribution to growth came from the semiconductor sector which saw exports rising by 22.0% y/y to USD 16.6bn amid high-flying HBM and DDR5 demand. In addition, automotive exports rose by 16.8% y/y to USD 6.4bn, while ship exports rose by 21.9% y/y to USD 2.9bn. Biohealth exports increased at an even faster pace by 35.8% y/y to USD 1.7bn.

By trading partner, exports to China and the US both underperformed, up by 0.5% y/y and down by 1.4% y/y, respectively. However, exports to ASEAN countries rose by 17.8% y/y, exports to EU surged by 19.3% y/y, showing that Korea has managed to successfully diversify its export destination despite the impact on growth from US tariffs.

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Sri Lanka
Tourist arrivals touch 158,971 in September
Sri Lanka | Oct 02, 06:58
  • India led as top source market
  • Target of 2.6mn arrivals over-ambitious
  • Sri Lanka is benefiting from organic publicity

The tourism sector reached a historic milestone in September 2025, welcoming 158,971 tourists, the highest ever for the month, surpassing the previous benchmark of 149,087 in 2018. The performance marks a 30.2% y/y increase and highlights a sharp rebound in arrivals despite the absence of a major global promotion campaign.

The surge was overwhelmingly driven by India, which accounted for nearly a third of the month's arrivals. A total of 49,697 Indian tourists visited in September, up from 27,884 a year earlier, cementing India's position as Sri Lanka's top source market. The UK (10,752 arrivals, 6.8% share) and China (10,527, 6.6% share) followed. In Jan-Sep, arrivals totalled 1.72mn, with India leading at 375,292, followed by the UK (161,893) and Russia (122,144).

With nine months complete, the industry now faces the challenge of achieving the revised 2025 target of 2.6mn arrivals. To meet this goal, Sri Lanka must attract an additional 874,506 tourists in Q4, requiring a monthly average of 291,500 arrivals - well above the year's best month so far (252,761 in January) and historic Q4 averages (about 200,000 in 2018 and 190,000 in 2024). We continue to maintain the view that the target remains over-ambitious and is unlikely to be met.

Despite these hurdles, Sri Lanka continues to benefit from strong organic publicity. The island was recently ranked the top global destination for October by Time Out and secured honours at the South Asian Travel Awards 2025 as the region's Leading MICE and Leading Wellness Destination. These accolades, while boosting visibility, may not fully offset the lack of a global branding campaign this year.

The September record underscores Sri Lanka's tourism recovery momentum, but sustaining it at the scale required for the annual target will depend on market diversification, higher-value tourist segments, and policy support to capture peak-season demand.

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PRESS
Press Mood of the Day
Sri Lanka | Oct 02, 06:46

Sri Lanka rupee weaker against dollar, bond yields up (Economy Next)

Sri Lanka should mandate 2-pct inflation ceiling to avert next economic crisis (Economy Next)

Fitch confirms Sri Lanka CCC+ sovereign rating (Economy Next)

Current account surplus hits new peak at $ 2 b YTD (Daily FT)

Vehicle imports near $ 1 b mark (Daily FT)

Tourist arrivals in September top 150,000 (Ada Derana)

Govt taking steps towards establishing an Independent Prosecutor's Office (Ada Derana)

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Government places LKR 43bn T-bills
Sri Lanka | Oct 02, 06:08
  • Issuance in line with target
  • Broadly stable yields seen
  • Bid to auction ratio was 1.88

The government raised raised LKR 43bn at its Treasury bill auction held on Oct 1, according to a press release from the Central Bank of Sri Lanka. The issuance fully met its target amid strong investor demand. Total bids reached LKR 80.8bn, producing a healthy bid-to-cover ratio of 1.88, reflecting sustained appetite for government securities.

The 6-month bill remained the most preferred tenor, attracting LKR 55.8bn in bids, of which LKR 35.9bn was accepted at an unchanged yield of 7.89%. The 3-month bill received LKR 12.3bn in bids, with LKR 5.0bn accepted, and the yield easing slightly to 7.53%, down from 7.57% previously. Meanwhile, the one-year bill saw LKR 12.7bn in demand, but only LKR 2.1bn was accepted, with the yield holding steady at 8.02%.

The results underscore the government's continued preference for short- and medium-term financing while maintaining yield discipline amid a stabilising macroeconomic environment.

T-bill auction, Oct 1
Maturity3-month6-month12-monthTotal
Target (LKR mn)8,00025,00010,00043,000
Bids received12324557881265880,770
Bids accepted5,00235938206043,000
Bid-to-cover ratio1.542.231.271.88
% of target62.5%143.8%20.6%100.0%
Yield (%)7.537.898.02
Previous yield (%)7.577.898.02
Change, bps-400
Source: CBSL
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CBW
Rising inflation to limit room for rate cut in November
Sri Lanka | Oct 01, 17:18

Next Policy Meeting: Nov 26, 2025

  • Overnight Policy Rate (OPR): 7.75%
  • Previous Decision: Hold (Sep 23)
  • Our Forecast: Hold
  • Rationale: CBSL maintained its policy stance to anchor inflation expectations around the 5% medium-term target while supporting the recovery, noting broad-based credit growth and resilient external flows despite global uncertainties.

At its September meeting, the Central Bank of Sri Lanka (CBSL) kept the OPR unchanged at 7.75%, consistent with its aim of guiding inflation back to target. The Board noted that monetary conditions remain accommodative, with previous easing still transmitting through credit markets. The policy corridor was left symmetric, with the SDFR at 7.25% and the SLFR at 8.25%.

Inflationary Landscape

Headline inflation turned positive in August after nearly a year of deflation, and rose further to 1.5% y/y in September. Food inflation accelerated to 2.9% y/y (from 2.0% in August), driven by coconuts, sea fish, milk powder, and private education fees, while declines in fresh fruits, onions, and petrol capped the rise. Non-food inflation moderated slightly to 0.7% y/y, with upward pressures from clothing, utilities, and education offset by softer housing, transport, and alcohol prices. Core inflation also firmed, reflecting gradually strengthening demand. CBSL projects inflation to continue its upward path, converging to the 5% target by mid-2026. A continued upward trajectory would limit the central bank's headroom to cut rates further.

Growth Dynamics

Sri Lanka's economy expanded 4.8% y/y in H1 2025, with leading indicators signalling continued momentum into Q3. Private sector credit has expanded broadly, supported by lower lending rates and stronger activity, and is expected to further underpin domestic demand in the months ahead. Most rating agencies and institutions, including the IMF and ADB, remain optimistic about Sri Lanka's growth for 2025. However, risks from US tariffs have weighed on prospects for 2026. Consequently, CBSL could face the challenging situation between prioritising growth and inflation control. We expect CBSL to hold the rate in favour of maintaining inflation control.

External Sector

The current account surplus rose 7% y/y to USD 368 mn in August, extending Sri Lanka's streak to eight consecutive months in surplus. The cumulative Jan-Aug surplus reached USD 2.04 bn, up from USD 1.62 bn in 2024. The merchandise trade deficit narrowed slightly by 1.9% y/y to USD 414 mn, as exports grew 4.1% y/y to USD 1.28 bn, outpacing import growth of 2.6% y/y to USD 1.70 bn. However, the Jan-Aug trade deficit widened to USD 4.26 bn, reflecting earlier import surges in vehicles and consumer goods.

Reserves stood at USD 6.2 bn at end-August, covering 3.7 months of imports, while the rupee depreciated 3.3% YTD by end-September, reflecting modest external adjustment alongside stable buffers.

Outlook

The CBSL signalled a wait-and-see approach, emphasising that policy will remain data-driven. The current stance allows space for earlier easing to filter through, while guarding against premature moves amid a fragile inflation recovery and global uncertainties. With all three major agencies upgrading Sri Lanka's sovereign rating, confidence has improved, but geopolitical risks, global energy volatility, and external demand weakness could still weigh on the outlook. The next review is scheduled for 26 November 2025, where CBSL is widely expected to hold unless inflation accelerates more sharply than anticipated.

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KEY STAT
Current account surplus rises 7% y/y in August to USD 368mn
Sri Lanka | Oct 01, 17:10
  • Current account remained in surplus for eighth consecutive month
  • Trade deficit widened on a cumulative front
  • Worker remittances continue to rise and support secondary income account

The current account surplus rose by 7.0% y/y to USD 368mn in August, marking Sri Lanka's eighth consecutive monthly surplus, according to CBSL data. While services trade softened and income outflows rose, strong remittance inflows and modest export gains helped sustain the positive balance. The cumulative current account surplus for Jan-Aug 2025 rose to USD 2.04bn, up from USD 1.62bn in 2024.

In more detail, the merchandise trade deficit narrowed slightly by 1.9% y/y to USD 414mn, as exports rose 4.1% y/y to USD 1.28bn, marginally outpacing the 2.6% y/y increase in imports to USD 1.70bn. However, the Jan-Aug trade deficit widened to USD 4.26bn, up from USD 3.57bn a year ago, driven by strong growth in vehicle and consumer goods imports earlier in the year.

The services account posted a net surplus of USD 291mn, down 5.4% y/y, amid weaker transport and IT/BPO exports. Meanwhile, tourism earnings fell 8.2% y/y to USD 259mn, despite a 20.4% y/y increase in arrivals. Transport receipts dropped 31.8% y/y to USD 124mn, while IT/BPO exports slipped 9.9% y/y to USD 72mn. On the outflow side, services payments fell 16.1% y/y to USD 267mn, led by lower outbound travel and shipping costs.

The primary income deficit widened sharply by 71.0% y/y to USD 183mn, as inflows dropped 22.5% y/y to USD 46mn, while outflows surged 38.4% y/y to USD 229mn. Direct investment-related outflows rose 87% y/y to USD 79mn, and portfolio outflows jumped to USD 59mn. On the other hand, the secondary income account remained the strongest contributor, with net inflows rising 19.3% y/y to USD 674mn. Worker remittances climbed 17.9% y/y to USD 681mn, extending their steady momentum and marking the fifth consecutive month above USD 600mn. Outflows under this account stood at USD 7.5mn, largely in line with recent trends.

Despite headwinds in services and investment income, Sri Lanka's current account remained in surplus in August, supported by resilient remittance flows, recovering exports, and easing import pressure.

Meanwhile, gross official reserves stood at USD 6.2bn at end-August, equivalent to approximately 3.7 months of imports. As of end-September, the Sri Lankan rupee had depreciated 3.3% YTD, reflecting modest external adjustment amid stabilising reserve buffers. The US, India, and the UK remained Sri Lanka's top export destinations in August and year-to-date, while China, India, and the UAE continued to lead as the country's main import sources.

Current Account Summary
Aug 2024 (USD mn)Aug 2025 (USD mn)% y/yJan–Aug 2024 (USD mn)Jan–Aug 2025 (USD mn)% y/y
Current Account Balance343.9368.07.01,618.02,039.5026.1
Trade Balance-422.3-414.2---3,566.20-4,264.20--
Merchandise Exports1,231.701,282.34.108,506.309,076.606.7
Merchandise Imports1,654.001,696.502.6012,072.5013,340.9010.5
Services Account (net)307.9291.2-5.42,608.302,667.102.3
Services – Inflows625.8557.9-10.904,621.804,785.403.5
Services – Outflows317.9266.6-16.12,013.52,118.405.2
Primary Income Account (net)-106.5-183.1---1,616.9-1,392.2--
Primary Income – Inflows58.745.5-22.5362.6413.414.0
Primary Income – Outflows165.2228.638.41,979.601,805.6-8.8
Secondary Income Account (net)564.9674.119.34,192.805,028.9019.9
Workers' Remittances – Inflows577.5680.817.94,288.205,116.0019.3
Personal Transfers – Outflows13.17.5-42.7100.289.5-10.7
Source: CBSL
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Fitch affirms CCC+ sovereign rating
Sri Lanka | Oct 01, 14:11
  • Margin for policy slippage remains low
  • Sustained reform momentum and IMF support required for maintaining rating
  • Elevated government debt continues to hold back rating

Fitch Ratings has affirmed Sri Lanka's sovereign credit rating at CCC+, noting that while reforms under the IMF programme have delivered a stronger recovery, the rating remains constrained by elevated government debt and a high interest-to-revenue ratio. The agency highlighted substantial progress under the 48-month IMF arrangement, including the passage of the 2025 budget in line with programme targets, restoration of cost-reflective electricity pricing and reforms to revenue administration and state-owned enterprises. Efforts to strengthen investment inflows and improve the climate for FDI are expected to continue, though gains will be gradual, the press release noted.

In terms of updates, the agency mentioned that the Central Bank of Sri Lanka (CBSL) has refrained from monetary financing of the deficit, preserved exchange-rate flexibility, and transferred debt-management responsibilities to the newly created Public Debt Management Office (PDMO), set for full operationalisation by January 2026. Despite restructuring and fiscal adjustment, debt levels are still heavy. Fitch projects gross government debt to GDP at around 96% in 2027, well above the CCC median of 74%. The interest-to-revenue ratio is forecast to ease to 46.5% in 2027, but remains far higher than the 14.3% CCC median. Fitch projects the fiscal deficit narrowing to 4.2% of GDP by 2027. However, revenue-to-GDP at 15.2% remains below the CCC median of 22.5%.

Fitch assumes that Sri Lanka's macro-linked bonds will trigger higher payments after 2028 due to stronger-than-expected GDP and exchange rate outcomes, raising annual debt service. Still, with primary surpluses and steady GDP growth, the impact is expected to be absorbed within a declining debt trajectory.

In terms of outlook, the agency forecasts 4.4% in 2025, moderating to 3.8% in 2026 and 3.6% in 2027 as US tariffs weigh on exports. Inflation is expected to gradually rise to the CBSL's 5% target by 2027. Downside risks to the rating stem from a breakdown in reforms or IMF programme implementation, or failure to rebuild reserves. Meanwhile, a meaningful fall in the debt ratio supported by credible fiscal consolidation, stronger revenue growth, faster economic growth, and an extended record of policy credibility could prompt an upgrade.

We remind that Sri Lanka is rated Caa1/stable by Moody's and CCC+/stable by S&P.

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Thailand
PRESS
Press Mood of the Day
Thailand | Oct 02, 06:41

PM Anutin welcomes everyone wanting to join Bhumjaithai (Bangkok Post)

New stimulus to turbocharge GDP (Bangkok Post)

Booming export numbers on course to smash expectations (Bangkok Post)

Thai Finance Minister Dismisses Gold Trading As Baht's Main Strength Driver (The Nation)

US semiconductor giant to expand chip investment in Thailand (The Nation)

US Government Shutdown May Hit Thai Exports And Baht, Warns Finance Ministry (The Nation)

Vitai outlines vision as new Bank of Thailand governor, pledges economic stability and independence (The Nation)

Thai Business Leaders Unveil 'Reinvent Thailand' Blueprint To Combat Global Headwinds (The Nation)

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Business sentiment index rises to 48.0 in September
Thailand | Oct 02, 06:33
  • The 3-month expected BSI rises to 52.0

The composite Business Sentiment Index (BSI) increased to 48.0 in September from 47.5 in August, the BOT said. BSI values of less than 50 indicate that the respondents' business sentiment has deteriorated m/m. In September, the investment, production, production costs (invert) and total order book components rose m/m. The performance and employment components fell m/m.

BOT's press release focused on the q/q changes in the BSI and its components. In Q3, the BSI dropped q/q, mainly due to a decrease in the manufacturing index across almost all businesses, especially in export-related industries, where the total order book and production sub-indices dropped significantly. The decline was led by the food and beverage industries like frozen seafood and canned tuna, partly due to accelerated exports in previous quarters and weakened foreign demand after the reciprocal tariffs became effective. Confidence improved q/q only in the electronics industry, which stayed consistently above the 50-threshold. The non-manufacturing index improved slightly. The hotel and restaurant sectors drove the increase. Nonetheless, the non-manufacturing index remained below the 50-threshold and was lower y/y due to weak performance of foreign visitor arrivals. The construction sector confidence improved.

On a related note, the 3-month expected BSI rose to 52.0 in September from 51.1 in August. The index rose slightly q/q in Q3. The increase was led by the non-manufacturing index, where confidence rose across all businesses. The BOT noted improvements in the hotel and restaurants sector (due to the high tourism season) and the retail trade sector (due to the government's Half-Half co-payment programme and additional New Year festival spending). At the same time, the manufacturing index fell slightly q/q, mainly in the food and beverage industries.

Economic uncertainty has been the top concern for businesses for the second quarter in a row, the BOT said. It should be noted that the share of respondents declined in September on the back of the formation of the government. Last month, difficulty in price adjustment became the top constraint for doing business. The 12-month-ahead inflation expectations were 2.2% in September, unchanged from August and July. The September survey had a response rate of 65.7%.

Business sentiment index by components
May-25 Jun-25 Jul-25 Aug-25 Sep-25
BSI46.748.645.847.548.0
1. Performance 47.0 49.3 44.3 48.5 47.2
2. Total Order Book 44.4 48.0 45.6 46.5 47.4
3. Investment 51.2 52.0 50.6 51.3 52.7
4. Employment 49.5 49.6 48.6 49.4 49.0
5. Production Costs (Invert) 40.9 41.2 40.4 41.6 42.7
6. Production 46.8 51.0 45.1 47.6 48.8
Expected BSI49.449.547.951.152.0
Source: BOT
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CBW
BOT likely to cut policy rate on Oct 8
Thailand | Oct 01, 15:34
  • Next MPC meeting: Oct 8
  • Current policy rate: 1.50%
  • EmergingMarketWatch forecast: 25bp cut
  • Rationale: Negative CPI inflation; new forecast by the ADB; strong baht; comments by new Governor Vitai

BOT's Monetary Policy Committee (MPC) will likely reduce the policy interest rate by 25bps at its meeting Oct 8, in our view. In August, the MPC voted unanimously to cut the key rate by 25bps to 1.50%.

The main arguments supporting a rate cut next week include expectations of lower economic growth; negative CPI inflation; weak performance of the foreign tourism sector; and relatively strong exchange rate of the baht against the US dollar. There are also arguments in favour of a hold decision, including the still high household debt and the need to preserve policy space. Maintaining the policy rate is hence the second most likely scenario next week.

New BOT Governor Vitai Ratanakorn took office on Wednesday. He told Bloomberg he would not say he is "very dovish" and that he prefers "accommodative monetary policy to support sustainable growth." The BOT's primary mission is to ensure macroeconomic stability, the new governor told reporters. He also vowed that the central bank will uphold its independence from political pressures. At the same time, he also supports collaboration with all government agencies.

Economic growth

The Asian Development Bank (ADB) forecasts that Thailand's GDP will rise by 2.0% in 2025 and 1.6% in 2026, the ADB said in the September edition of its Asian Development Outlook. Both figures are significant downward revisions from the April projections of 2.8% and 2.9%, respectively. The changes in the forecasts were driven by both external and domestic factors.

Thailand's GDP increased by 3.0% y/y in H1, but its growth is predicted to slow in H2 and in 2026. A key factor is US tariff hikes, which will reduce exports, weaken private consumption and reduce private investment. In addition, the ADB revised down its forecast of international tourist arrivals to 34.0mn from 39.5mn expected in April. While the downward revision reflects mainly the fewer inbound tourists from China, increased competition from other regional destinations also contributed.

Earlier in September, Fitch Ratings said it forecasts Thailand's GDP growth to moderate from 2.5% in 2024 to 2.2% in 2025 and 1.9% in 2026.

Inflation

The headline CPI fell by 0.79% y/y in August, after dropping by 0.70% y/y in July, the commerce ministry said last month. The ministry noted the falling prices of fresh food items and energy. The y/y decrease in the CPI in August compares with a 0.70% decline projected in a Reuters poll. The headline inflation has been negative for five consecutive months.

The CPI growth has been below the target range of 1-3% for the sixth month in a row. The headline inflation was 0.08% y/y in Jan-Aug. The core CPI rose by 0.81% y/y in August, decelerating from 0.84% y/y growth in July. The core CPI increased by 0.94% y/y in Jan-Aug.

The Trade Policy and Strategy Office (TPSO) retained its forecast that headline inflation will be between 0.0% and 1.0% in 2025.

Meanwhile, the ADB lowered its inflation forecast for 2025 to 0.5% from 1.0% expected in April. Inflation is anticipated to accelerate slightly to 0.8% in 2026.

Exchange rate

The Thai baht is trading at USD/THB 32.373 as of the time of writing, which compares with USD/THB 32.305 on Aug 13, the date of the latest MPC meeting.

The exporters consider the current exchange rate level too strong and have called for tackling the issue.

Vitai said that the strong baht is one of a lot of short-term problems that they need to address urgently.

Further reading

MPC decision of Aug 13

Schedule of MPC meetings

Edited minutes of MPC meetings

Monetary policy report

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Private consumption index rises by 1.9% y/y in August
Thailand | Oct 01, 12:27
  • Seasonally adjusted PCI flat m/m

The private consumption index (PCI) increased by 1.9% y/y in August, slightly decelerating from 2.0% y/y growth in July, the BOT said. The latest figure for July is a major upward revision from a 0.7% y/y decline reported initially. The PCI is a composite index representing private consumption conditions. The seasonally adjusted PCI was flat m/m in August.

The services index increased by 0.7% m/m in August. Spending on hotels and restaurants, as well as transport, rose helped by both domestic and foreign tourism and the "Thai Half-Half Travel" campaign. The non-durables index increased by 0.7% m/m in August, supported by both fuel sales and household electricity consumption. Nonetheless, the durables index fell by 3.7% m/m, as consumers waited for promotions and new models at the Motor Expo. The semi-durables index dropped by 1.0% m/m.

In y/y terms, the non-durables index edged down in August, reversing a modest increase in July. Positive growth decelerated in August for the durables and semi-durables indices, but sped up for the services index.

The non-residents expenditure index fell by 3.8% y/y in August, following a 6.4% y/y decline in July. After seasonal adjustment, the index was 4.6% higher m/m.

The consumer confidence index decreased to 50.1 in August from 51.7 in July, according to data from the University of the Thai Chamber of Commerce (UTCC). The index has been declining m/m for seven consecutive months. The August reading is a 32-month low. The latest m/m decrease in the consumer confidence index reflected concerns about a slow economic recovery and political instability, as well as US trade policies.

Private consumption indicators, % y/y
Apr-25 May-25 Jun-25 Jul-25 Aug-25
Private Consumption Index1.8%1.5%0.3%2.0%1.9%
Non-durables Index -0.6% -1.0% -1.0% 0.6% -0.1%
Semi-durables Index 0.4% 0.2% 2.3% 0.9% 0.2%
Durables Index 3.4% 4.8% 5.6% 5.1% 3.7%
Services Index 4.3% 3.7% 1.1% 1.6% 2.4%
Private Consumption Index , % m/m sa2.4%-0.5%-1.0%1.0%0.0%
Source: EmergingMarketWatch
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Vietnam
PRESS
Press Mood of the Day
Vietnam | Oct 02, 05:32

Two-tier local government model must outperform old system in serving citizens: PM (Vietnam plus)

SBV intervenes FX market through forward sales (VietnamBiz)

Foreign investors net sell over USD 1bn in September (VietnamBiz)

Treasury raises over VND 255.7tn through bond issuance (Kinh tế tài chính)

Anxiety over labor market (VnEconomy)

New orders rebound, export maintain stability (Bao dau tu)

PM: government targets state budget revenue exceeding plan by 25% (Dien dan doanh nghiep)

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HIGH
SBV sells USD 1.2bn in forwards to stabilize FX market
Vietnam | Oct 02, 05:25
  • The SBV continued its intervention by selling USD 1.2bn in cancellable forward contracts with a 180-day tenor.
  • The move is seen as a short-term measure to ease exchange rate pressures, particularly amid rising demand for USD.

The State Bank of Vietnam (SBV) continued to intervene in the foreign exchange market on October 1 by selling USD 1.2bn through cancellable forward contracts with a 180-day tenor. The intervention came as the USD/VND rate at commercial banks remained at the ceiling level.

The sales are limited to credit institutions with negative foreign currency positions, at a selling rate of VND 26,550 per USD. Each bank's allocation is capped at the amount required to bring its FX position back to balance.

This marks the central bank's second round of FX intervention in just over a month. On August 25-26, the SBV sold about USD 1.5bn in forward contracts under similar terms.

Analysts view the move as a short-term remedy to cool exchange rate pressures, while also helping smooth USD demand in the banking system toward the end of 2025 and early 2026, when FX supply is expected to strengthen from remittances and potential further rate cuts by the US Federal Reserve (Fed).

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Treasury sells VND 5.1tn bonds, bond yields increase
Vietnam | Oct 02, 05:25
  • The State Treasury raised VND 5.1tn through the issuance of government bonds this week
  • Total bond issuance decreases by 5.2% compared to the same period last year

The State Treasury successfully raised VND 5.1tn (approximately USD 192 million) - through the issuance of 5Y and 10Y government bonds in a Wednesday auction, according to the Hanoi Stock Exchange.

Investors show weaker demand this week. While the 10-year bonds attracted the highest interest-receiving bids totaling nearly VND 4.5tn, the Treasury accepted VND 4.1tn. In addition, State treasury sold VND 1tn in 5Y bond.

Bond yields continued to elevate by 4-5bps this week. 5Y and 10Y yield stay at 3.07% and 3.64% respectively.

Since the beginning of 2025, the government has issued a total of VND 260.8tn in government bonds. The State Treasury aims to raise a total of VND 500 trillion via bond issuance this year.

Government bond auction, October 1
Instrument5Y10Y15Y30YTotal
Offering, VND bn10008000150050011,000
Tendered, VND bn120044652005,865
Accepted, VND bn100040655,065
Yield, %3.073.64
Yield change, bps45
Bid-to-cover1.21.11.2
Source: HNX
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