Country Report Kuwait November 2009

Outlook for 2010-11

• The emir will remain the ultimate political authority. Disputes between parliament and the government are likely to persist in 2010-11 because changes to parliament have not been reflected in the make-up of the new cabinet.
• 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 surplus of 13.2% of GDP in fiscal year 2010/11 (April 1st-March 31st) as oil prices and oil output rise. A further output rise in 2011 will offset a fall in prices, resulting in a broadly unchanged surplus in 2011/12.
• Owing to higher oil production and higher volumes of Kuwaiti exports, we forecast that real GDP—which we estimate will have contracted by 0.7% in 2009—will grow by 4.4% in 2010 and 4.8% in 2011.
• We forecast that average consumer price inflation will fall to around 4.5% in 2010 and further to 3.2% the following year, because of relatively low global non-oil commodity prices.
• Export earnings are expected to rise in 2010, after declining in 2009. This will lead to a widening of the current-account surplus, from 21% of GDP in 2009 to around 26% of GDP in 2010. The surplus will fall back to 23% of GDP in 2011.

Monthly review

• The emir's appeal at the opening of the second session of parliament for better relations between the executive and the legislative has gone unheeded after MPs continued to demand that the interior minister resign.
• MPs have also maintained calls for a complete write-off of consumer loans, an issue that is set to dominate the new parliamentary session, despite a refusal by the finance ministry to countenance such a move.
• Parliament's Financial and Economic Affairs Committee has approved a draft stockmarket law, which would pave the way for the creation of a Capital Market Authority. However, the full parliament must also now pass the law.
• A call by the Ministry of Finance for a delay to the "target date" for the launch of the GCC single currency was quickly reversed in October. The government has reiterated its full support for the currency union.
• The Ministry of Oil also made an about-turn in October after first appearing to abandon, and then reinstating, its long-standing crude capacity target of 4m barrels/day (b/d) by 2020.
• Although the Central Bank of Kuwait has expressed confidence in the financial system, the country's two biggest investment companies continue to face problems.

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