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OPEC related oil production cuts have weighed down growth. However, output should gradually recover supported by still buoyant non-oil activity and infrastructure spending, and as oil output is ramped up. Pressure on fiscal and current account balances is easing. Key challenges include hydrocarbon dependence and parliamentary opposition to deep structural reforms.
Hydrocarbons account for nearly half of GDP, and the OPEC’s June decision to extend production cuts until the first quarter of 2018 has weighed on oil output and exports. Outside the oil sector, activity has remained supported by the implementation of the five-year Development Plan (2015/16-2019/20) which contains several large infrastructure, transport and refinery projects. In January, the government released the New Kuwait 2035 Strategic Plan, which aims to transform the country into a regional, financial and commercial hub as part of long-term economic diversification efforts.
Incoming data suggest that non-oil activity is continuing to expand. Consumer confidence rose in July to its highest level in almost two years, although it remains well below 2014 levels prior to the fall in global oil prices. Consumer spending, as reflected in point-of-sale transactions, strengthened in Q2, rising 9 percent y/y. The correction in property markets over the past two years appears to have run its course: real estate prices have stabilized in recent months, and residential sector sales rose by a robust 43 percent y/y in July. While the banking sector remains well capitalized and generally healthy, bank lending to both firms and households has slowed over the past year. However, growth in lending to “productive” business sectors (this excludes real estate and securities lending) remained resilient at 8.4 percent y/y in July.
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| This website is maintained by Dr Emilie J. Rutledge, an Associate Professor of Economics and author of Monetary Union in the Gulf: Prospects for a Single Currency in the Arabian Peninsula. Emilie has developed a number of undergraduate and postgraduate courses that specifically cover the economic and sociopolitical trajectories of the six Gulf economies. Her present research interests are the Arabian Gulf’s labour market dynamics and economic diversification endeavours. Résumé Publications Consultancy |