A plant of the Kuwait Catalyst Company

A plant of the Kuwait Catalyst Company

Non-oil sector drives Kuwait’s GDP

01 September 2014

KUWAIT’S nominal GDP rose to KD49.8 billion ($175.4 billion) in 2013, a growth of 2.3 per cent over the previous year, thanks to the non-oil sector that grew a robust 10.6 per cent, according to national accounts data.

The non-oil sector continued to recover from the 2008 crisis and its related weakness that lingered until 2010, said the latest Economic Update released by the National Bank of Kuwait (NBK).

The data show a gradual improvement since 2011 with 2013 the strongest year so far. The increase was driven by three sectors: manufacturing (excluding refining, but including petrochemicals) which saw a huge 33.5 per cent rise, ‘government and other services’ which gained 10.9 per cent, and the trade sector which posted a 12.3 per cent gain.

The oil sector corrected lower, -1.5 per cent in 2013, following strong growth that averaged 31 per cent in 2011-12, said the update.

Crude oil output fell in 2013 to an average 2.9 million barrels per day while KEC prices fell as well, from an average $108.7 per barrel in 2012 to $104.6 last year. The oil share of GDP remained however near its recent highs at 66 per cent (including refining). This strong and stubborn share reflects both the lack of progress on expanding the non-oil sector in Kuwait but also the strength of the oil market sector in recent years, according to the report.

“The new set of numbers does not affect our outlook for real GDP growth at this point,” said Elias Bikhazi, group chief economist at NBK.

“We still look for real growth of about 4.5 per cent in the non-oil sector for this year and next.”

GDP data were revised back to 2010. The earlier GDP levels were revised down, primarily because of lower investment spending estimates. Investment spending was revised down by an average KD1.3 billion for 2010-2012 (or 3 per cent of GDP).

The update also indicated that private sector activity continues to gradually improve. As a proxy, the combined output of the construction, trade, transport and communication, and finance sectors grew by 6.5 per cent in 2013, up from 1 per cent in 2011 and 4.5 per cent in 2012. These sectors ought to be the prime beneficiaries of wider growth ahead and of the fuller execution of the development plan.

On the expenditure/demand side, growth was supported by the always steady and reliable government expenditures, up 12.8 per cent, said NBK. Consumer spending rose 4.9 per cent following two strong years of double-digit growth.

Exports, in line with oil production, fell 2 per cent last year. Gross capital formation, or the spending on investment and infrastructure, posted a solid 12.7 per cent gain.

However investment, at KD7 billion in 2013, is still at 14 per cent of GDP and needs to move higher (18-22 per cent) to match Kuwait’s recent highs, if not the performance of other GCC countries.

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