Country Report Kuwait February 2009

Outlook for 2009-10

• The emir will remain the ultimate political authority. Although an election is not officially due within the outlook period, a political crisis between the government and the National Assembly (parliament) could force an early one.
• Kuwaiti foreign policy will remain founded on a long-standing strategic alliance with the US. Efforts at Gulf Co-operation Council integration will also continue.
• We forecast a budget deficit of around 8.4% in fiscal 2009/10, the first since 1998/99, as oil prices decline in 2009 and oil output growth slows. The fiscal balance is expected to return to a surplus of around 2.8% of GDP in 2010/11.
• Real GDP growth—which we estimate rose strongly to 8.5% in 2008—is now forecast to moderate sharply to 2.7% in 2009 owing to a fall in export volumes, before picking up again to 4.8% in 2010.
• We forecast that consumer price inflation will fall to an average of around 7.5% in 2009 and further to 6% in the following year, in line with slowing economic growth and depressed commodity prices.
• Owing to a massive fall in oil prices since mid-2008, export earnings are expected to drop heavily in 2009. This will have a dramatic impact on the current account, which is forecast to fall into a deficit of 0.5% of GDP.

Monthly review

• After being sworn in for the fifth time in less than three years on January 12th, the prime minister, Sheikh Nasser Mohammed al-Ahmed al-Sabah, has once more courted controversy by selecting a virtually unchanged cabinet.
• The Kuwaiti foreign minister has also been handed the oil portfolio in the new cabinet. He is thus likely to become embroiled in a heated dispute with parliament over the recently failed Dow Chemical Company joint venture.
• The emir has pledged to increase government spending in the 2009/10 financial year to help to boost the economy. His pledge appears to have contradicted the finance minister, who has warned of lower expenditure.
• The Kuwait Stock Exchange continued to fall in January, despite a massive injection of capital by a government investment fund. Officials, however, have stressed that the fund is not designed to bail out struggling companies.
• The fall in international oil prices has yet to affect Kuwait's 2008/09 budget, which—from April 1st-December 31st 2008—recorded a surplus well above official projections, according to the Ministry of Finance.
• Kuwaiti banks appear to have weathered the global economic storm relatively well, although they have faced problems. However, investment companies, a number of which are battling insolvency, have continued to struggle.

Source: Country Report

This report covers the following industry codes:
SIC Code: 49;60
NAICS Code: 22;52