Country Report Kuwait May 2009

Outlook for 2009-10

• The emir will remain the ultimate political authority. Two elections within the space of 12 months, however, suggest that the long-running political differences between the government and parliament will continue in 2009-10.
• 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 2.7% of GDP in fiscal year 2009/10, the first since 1998/99, as oil prices decline in 2009 and oil output is cut. The fiscal account is expected to return to a surplus of 4.2% of GDP in 2010/11.
• Owing to greater OPEC quota compliance and weakening demand for Kuwaiti exports, we forecast that real GDPwhich we estimate grew by 8.5% in 2008will contact by 0.7% in 2009, before growing again, by 4.4%, in 2010.
• We forecast that average consumer price inflation will fall to around 7% in 2009 and further to 5.6% the following year, because of sharp falls in commodity prices.
• As a result of a forecast 59% fall in oil prices in 2009, export earnings are expected to drop sharply. This will dramatically reduce the current-account surplus, which is forecast to average 11% of GDP a year in 2009-10.

Monthly review

• Some 282 candidates have registered for the parliamentary election on May16th. This will be Kuwait's third general election in as many years.
• Ahead of the election, a debate has been raging over how best to improve the political system, in particular over how to end the long-running conflict between the government and parliament, which led to the latter's dissolution.
• The government has been criticised for passing a contractionary 2009/10 budget given the global downturn. Calls for an expansionary fiscal policy, making use of Kuwait's past surpluses to help boost growth, have intensified.
• The pursuit of a proactive monetary policy by the Central Bank of Kuwait has been credited with ensuring that Kuwait has been shielded from the worst affects of the global financial and economic crisis.
• High oil prices in the first half of 2008/09 ensured that the fiscal account recorded a tenth successive surplus for the whole fiscal year, according to preliminary data from the Ministry of Finance.
• Thirty-six local investment companies have had their shares suspended on the Kuwait Stock Exchange after failing to publish their 2008 results on time.
• Latest data from the Central Bank have shown a resumption in banking sector lending, following months of stagnation.

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