Country Report Kuwait

Summary

Tensions between the government and parliament are expected to increase further owing to the strengthening of opposition Islamist groupings in the May general election, although the emir will remain the ultimate authority.
Recent sectarian tensions between the Sunni majority and the Shia minority are expected to die down in the medium term.
Major structural economic reforms are unlikely, given projected high oil revenue, but the government will try to attract more foreign direct investment.
Following an upward revision to our oil price forecast to an average of US$106.5/barrel in 2008-09, we now expect the fiscal surplus to average above 29% of GDP over the outlook period.
Real GDP growth is set to rise to 9.2% this year, moderating to 7.2% in 2009.
Consumer price inflation is forecast to increase to an average of around 8.5% over the outlook period—well above the historical average.
The Kuwaiti dinar is expected to continue its appreciation against the US dollar in 2008, reaching about KD0.258:US$1 by the end of the year, before depreciating slightly in 2009 as the dollar strengthens against most currencies.
The current-account surplus should remain substantial over the outlook period, at an average of around 41% of GDP.

National Assembly elections on May 17th have given Islamist MPs 26 out of 50 elected seats, up from 21 previously—although this is not enough to give them parliamentary control, as 15 unelected ministers can also vote.
Among the Islamists, salafi and tribal MPs have gained at the expense of the Islamic Constitutional Movement. The liberals have kept the same number of seats, the centrists have lost some, and women have failed to win any.
The emir has appointed the same prime minister, Sheikh Nasser Mohammed al-Ahmed al-Sabah, and he has named a new cabinet that is largely unchanged from the previous one, balancing different groups and blocs.
The election results have further set back the prospect of economic reform.
The chief executive of the Kuwait Petroleum Corporation has announced that foreign oil companies will be offered contracts linking their fees to oil output levels, as part of Kuwait's efforts to boost production.
The Central Bank has released balance-of-payments data for 2007, showing a slight narrowing in the current account surplus, from the massive KD15bn (US$56bn) seen in 2006 to a still strong KD13.5bn last year.