Kuwait Business Forecast Report Q1 2009

Publication Date	November 2008
Publisher	Business Monitor
Product Type	Report
Pages	69
ISBN Number	not applicable
Product Code	BMI03035

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Summary

New Year, New Challenges

As we move into 2009, the world is looking quite a different place, with a new US president and unprecedented financial crisis making for an interesting global backdrop. For Kuwait, the new president is unlikely to mean any substantial changes to security. With his less hawkish attitude towards Iran, Barack Obama may spark some concern over geopolitical stability in Kuwait, but we feel such fears would be unfounded, due to the weakening position of the Islamic Republic generally. The US will remain a key ally to Kuwait. The economic crisis will have a much more drastic effect: oil revenues will fall sharply, and confidence will remain low. That said, Kuwait will be able to spend itself out of the crisis, to some degree.

The reform outlook remains somewhat bleak, as the disunited parliament continues to pursue smallscale campaigns against various government members, taking the focus away from wider issues of national importance. We do not expect the house to make any major reform decisions. We also do not see much progress with the privatisation programme, which has been under discussion in various guises for over a decade. Longer term, one way in which Kuwaiti politics could become more organised and efficient would be with the legalisation of political parties, and we think this is highly possible over the forecast period.

Many governments worldwide are looking towards fiscal stimulus to boost economic prospects, and Kuwait is better placed than most to do this, with estimated sovereign wealth fund assets of US$200bn and a projected budget surplus of US$19.3bn in 2007/08 (final figures have not yet been released). We actually think the worst of the effects will be felt over the longer term, as Kuwait makes the transition from US$150/bbl oil to US$80/bbl oil (or worse), and existing resources are depleted. Against this backdrop, we see growth slowing from a projected 7.2% in 2008, to a still impressive 5.4% in 2009, 5.3% in 2010 and then to an average annual 3.7% thereafter.

The business environment is little improved as we move into 2009, with the sole positive development over the last few years having been the decision to abolish capital gains tax of 55% for foreigners investing in the stock market and reduce foreign corporate tax to 15% (from as much as 55%). Kuwait has high levels of market intervention and bureaucracy, and there is little sign of an increased role for the private sector. And these are only the problems specific to Kuwait. In addition, the regionwide issues higher interbank rates, tightening liquidity and banking sector exposure to US subprime mortgages are all also at play.

Content

Executive Summary
New Year, New Challenges
Chapter 1: Political Outlook
- Swot Analysis
- Bmi Political Risk Ratings
- Domestic Politics
- Parliamentary Disunity Still Threatens Reform Outlook
- The Kuwaiti Parliament Will Remain Disunited, Posing Risks To The Outlook For Reform
List Of Tables
- Table: Political Overview
Regional Foreign Policy
Obama In The Middle East: So Much To Prove
While Us PresidentElect Barack Obama Is Likely To Adopt A Much Less Interventionist Stance On Middle Eastern
Issues, Many Of The Developments Of The Next Few Years Will Be Taken Out Of His Hands By Economic Conditions
Chapter 2: Economic Outlook
- Swot Analysis
- Bmi Economic Risk Ratings
- Economic Activity
- Momentum To Sustain 2009, But Tough Times Ahead
- The Government Will Try To Spend Its Way Out Of The Current Financial Crisis, And Growth Will Remain Robust Over 200910
List Of Tables
- Table: Economic Activity
- Monetary Policy
- Inflation, Interest Rates To Fall Further
- The Basket Peg Arrangement Will Start To Serve Kuwait Better Now That The Dollar Is Strengthening, By Reducing The
- Cost Of EuroDenominated Imports. However, The Central Bank Will Likely Intervene To Prevent Excessive Depreciation
- Against The Dollar
List Of Tables
- Table: Monetary Policy
- Investment Climate
- Investment Summit Strikes Bullish Tone
- The Stock Market Has Not Yet Reached A Bottom, And Kuwait Could Be One Of The Slowest To Recover In The Region,
- Given Its Poor Business Environment. That Said, It Has Financial Resources In Its Favour, And Companies Continue To
- Talk Up Their Prospects
- Chapter 3: 10Year Forecast
  - The Kuwait Economy To 2018
  - Kuwait Faces Substantial Structural Challenges Over The LongTerm, But The Energy Sector Will Continue To Grow In
  - Real Terms To 2018, Keeping The Government In Surplus
List Of Tables
- Table: LongTerm Macroeconomic Forecasts
- Chapter 4: Special Report
  - Why The Us Can Remain World Superpower
  - Wealth Is Shifting East
  - The Uss Current Financial Woes Will Not Necessarily Undermine Its Position As A Global Superpower
List Of Tables
- Table: Geopolitical Power Index
- Chapter 5: Business Environment
  - Swot Analysis
  - Bmi Business Environment Risk Ratings
  - Business Environment Outlook
  - Latest Developments
  - Kuwaits Business Environment Has Traditionally Suffered From A Belligerent Parliament Which Has Acted As A Brake
  - On Potential Reforms And Continued To Hamper MuchNeeded Developments
List Of Tables
- Table: Bmi Business And Operational Risk Ratings
- Institutions
List Of Tables
- Table: Bmi Legal Framework Ratings
- Infrastructure
- Market Orientation
List Of Tables
- Table: Middle East & Africa Annual Fdi Inflows
- Table: Bmi Trade Ratings
- Table: Top Export Destinations
- Operational Risk
- Chapter 6: Key Sectors
  - Telecommunications
List Of Tables
- Table: Telecoms Sector Mobile Historical Data & Forecasts
- Freight Transport
List Of Tables
- Table: Main Freight Transport Industry Macroeconomic Indicators
- Chapter 7: Bmi Global Assumptions
  - Global
List Of Tables
- Table: Global Assumptions
- United States
- Eurozone
- Japan
- China
- Commodities