Kuwait’s real GDP in 2011 is expected to have grown by 5.7 percent according to IMF estimates, however, due to the political situation, development plans did not show the planned progress and capital expenditures were below budgeted figures.
Consequently, non-oil growth witnessed subdued progress and limited economic diversification for the economy. For 2012, IMF estimates, Kuwait’s real GDP to grow by 4.5% on further increase in oil production and increased government spending.
Based on available data, Kuwait’s total government revenue is expected to reach KWD29.5bn for 2011/12 while expenses even if they touch the usually budgeted high figure of KWD19.4bn will amount to a budget surplus of KWD10.1bn.
For FY2012/13, based on our scenario analysis, our estimates indicate a surplus in the range of KWD0.6 – 11.2bn in our worst and best case scenario assumptions. All in all, we project Kuwait to post its fourteenth consecutive surplus in FY2012/13.
Inflation rates in recent times have come down and for the month of February 2012 stood at 3.8% vs. 5.3% in the same month last year. With, pressure from international food and commodity prices expected to ease in coming months and a cautious domestic credit growth, inflation is expected to come down in the near term. For 2012, IMF projects Kuwait’s inflation to slow down to 3.4% while EIU estimates it to come down to 4.4%.
Global General Index declined 19.8% YoY amidst global uncertainty and an internal political deadlock to reach 179.3pts at the end of 2011. Investment Index was the biggest loser, shedding 30.4% of its value. Trading activity declined further during 2011 as trading volume and trading value shrank 49% and 52%, respectively. The market capitalization of the entire market shrank by KWD6.9bn or 19% YoY. However, there is a sharp increase in trading activity in 1Q-2012 (value traded up 94% QoQ and 17.2% YoY) indicating increased investors’ appetite and improved sentiment. Global General Index too is up 2.2% during the quarter.
According to the Central Bank data, Kuwait’s nominal GDP in 2010 grew by 17% to reach KWD35.6bn vs. a decline of 23% during the previous year. The growth was primarily driven by a 22% jump in oil revenue as average Kuwait Export Crude oil (KEC) prices shot up by 26% to USD76.3/b amidst recovery in international markets (KEC prices had declined by 33% in 2009). The non-oil GDP too witnessed an increase of 12% in 2010 driven by a 28% jump in trade and 22% jump in the manufacturing sector.
In real terms, as per IMF estimates1, the GDP recorded a growth of 3.4% in 2010 to reach KWD19.3bn. The growth was driven by a 3.2% increase in oil and 3.5% increase in non-oil activity.
As per the latest available IMF numbers for 2011 (October 2011), the nominal GDP was expected to grow by 29% on the back of both higher oil prices (up 38% to USD105.6/b) and increased oil production (up 10% in 2011 to 2.53bpd as per OPEC estimates). Since December 2010, Kuwait increased its oil production to assist in the effort to stabilize the global oil market. In real terms, for 2011, the IMF estimated the economy to grow by 5.7%.
Kuwait’s GDP per capita also registered gains in 2010 and stood at USD34,686. As per latest available data, further growth of 31% was estimated taking the expected levels to USD45,464 – next only to Qatar and UAE among GCC countries.
Similar to most GCC countries, the hydrocarbon sector is a main contributor to Kuwait’s GDP as it represented an average of 54% of nominal GDP during the same period and an expected 58% during 2011.
Real non-oil GDP, despite recovering from the recession of 2009 remained weak and as per IMF estimates grew by 3.5% in 2010. For 2011, IMF further estimated a growth of 5.5%.
However, the continued deleveraging in the financial sector, slow credit growth, and a seemingly slower implementation of the authorities’ 2010-2014 development plan driven by domestic politics hindered growth which we believe remained relatively weak.