Country Forecast Kuwait June 2018 Updater

Country Forecast Kuwait June 2018 Updater

  • June 2018 •
  • Report ID: 1697371 •
  • Format: PDF


  • The Economist Intelligence Unit expects the Al Sabah family to remain in power in 2018-22, with internal differences over the political succession likely to spill over into parliamentary affairs. There is a risk in the short term that unpopular austerity measures may increase social instability.
  • We do not expect Kuwait to be successful in its attempts to resolve the ongoing boycott of Qatar by four Arab states. The formation of a separate military and trade bloc by the UAE and Saudi Arabia, in addition to Qatar banning goods from the boycotting nations, suggests that disunity in the region will continue to deepen.
  • Policymaking will be constrained by tensions between the legislature and the executive. However, given that many of the major projects in the govern-ment's five-year development plan are under way, strains in executive-legislative relations will have less of an impact on capital spending in the short term.
  • The fiscal balance will return to a small surplus in fiscal year 2018/19 (April-March), before falling back into deficit in 2019/20, as global oil prices rise to an average of US$72/barrel in 2018. As the forecast period progresses, privatisation of state assets, in addition to a further recovery in oil prices from 2021, will push the budget deficit down to 1.1% of GDP in 2022/23.
  • After contracting by 2.9% in 2017, real GDP is forecast to expand only modestly in 2018, hampered by a slight dip in oil production. However, growth will accelerate to an annual average of 3.2% in 2019-22, supported by rising oil production and the completion of some major infrastructure projects. The hydrocarbons sector will also benefit from additional refining capacity in the later stages of the forecast period.
  • We expect consumer price inflation to average 2.5% a year over the forecast period. Implementation of value-added tax (VAT) in 2021 and subsidy reforms are likely to push up inflation, albeit only slowly, and demand-side pressures will pick up gradually.
  • The current-account surplus widened in 2017, after falling to its lowest level since 1992 in 2016, and is expected to increase further in 2018-22, to an annual average of 11.2% of GDP, as oil prices recover. The non-merchandise account, however, will remain in deficit, with the shortfall rising in absolute terms throughout 2018-22, as the services deficit continues to grow.


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