Country Report Kuwait January 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 0.7% 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 8.4% of GDP in 2010/11.
• Real GDP growthwhich we estimate rose strongly to 8.5% in 2008is now forecast to moderate sharply to 3.7% in 2009 owing to a fall in export volumes, before picking up again to 5.7% in 2010.
• We forecast that consumer price inflation will fall to an average of around 11.3% in 2009 and further to 8.7% 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 0.4% of GDP.

Monthly review

• The political impasse in Kuwait has continued into 2009 following the resignation of the government and the decision by the emir to re-appoint Sheikh Nasser Mohammed al-Ahmed al-Sabah as prime minister.
• Relations with Iraq have come to dominate Kuwait's foreign policy, with the settlement of outstanding debt and compensation claims since Iraq's invasion and occupation of Kuwait in 1990-91 foremost on the political agenda.
• The Ministry of Finance has admitted that fiscal projections for 2009/10 might be revised downwards as a result of the dramatic fall in the international oil price since mid-2008.
• The Central Bank of Kuwait has continued to loosen monetary policy in the face of worsening economic conditions. The bank discount rate has been lowered further by 50 basis points to 3.75%.
• An indefinite delay in a major refinery project and a total breakdown of a joint petrochemicals venture with the US-based Dow Chemical Company has raised questions over Kuwait's attitude to foreign investment.
• Following recent banking disclosures, particularly those of Gulf Bank, the government is focusing heavily on preserving the stability of the local banking sector.

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

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