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KIF 2018: building a positive momentum

KIF 2018: building a positive momentum



Economy on a rebound

April 2018

Kuwait’s non-oil sector is expected to maintain moderate and positive growth rates in the coming years.

In his speech at the KIF 2018, Governor of the Central Bank of Kuwait Mohammad Al-Hashel pointed out that Kuwait’s economic indicators are encouraging and attractive to investors. He predicted that Kuwait’s non-oil sector would maintain moderate and positive growth rates in the coming years with the help of the low inflation rates. He said the state had kept capital spending at high levels in the past years, accounting for 11 per cent of total spending and reached 14 per cent last year.

Kuwait’s current account recorded a surplus last year after a slight deficit in 2016 for the first time in Kuwait since 1990, he said, attributing that the current account surplus to the recovery of oil prices on global markets and the country’s economic reforms.

Echoing the same, National Bank of Kuwait (NBK) has also said that economic indicators remained positive for Kuwait, supported by a healthy projects pipeline and a recovering consumer sector.

“This is also being reflected in continued improvement in the real estate market and healthy bank profits. Last year’s rally in oil prices has played no small part, bolstering the fiscal position and supporting consumer and investor sentiment,” NBK said in its March economic update.

NBK said it expected Kuwait’s non-oil gross domestic product (GDP) to have increased by 3 per cent in 2017 in real terms, and for growth to accelerate to 3.5 per cent in 2018 and 4 per cent in 2019.

Reiterating the positive outlook for the Gulf state, ratings agency S&P earlier said that Kuwait’s economy will likely return to growth in 2018 after a difficult past 12 months. It reaffirmed a rating of “AA/A-1+” and stated that the country is stable.

Like many oil-producing countries, 2017 was a challenging year for Kuwait. S&P’s report outlined how Kuwait’s economy remains “undiversified” because it derives about 60 per cent of its GDP, more than 90 per cent of exports, and about 90 per cent of fiscal receipts from hydrocarbon products. As a result, its GDP fell by 2.3 per cent over the year as oil prices remained underweight.

However, the picture for 2018 is more positive, with S&P predicting a 2.5 per cent growth in 2018 as energy prices rise and oil production starts to climb moving into 2019.

“Kuwait’s large government and external net asset positions will continue to afford the authorities space to gradually consolidate government finances,” the report said.

“The stable outlook reflects our expectation that Kuwait’s public and external balance sheets will remain strong over the forecast horizon, backed by a significant stock of financial assets. We expect these strengths to offset risks related to lower oil prices, Kuwait’s undiversified economy, and rising geopolitical tensions in the region.”

 




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