World economies
Kuwait
KUWAIT is a small petroleum-based open economy. With crude oil reserves of about 102 billion barrels, it possesses the world’s seventh largest proven oil reserves. At current extraction rate, its oil will last for another 88 years.
The Kuwaiti dinar is the highest-valued currency in the world. Kuwait has a leading position in the financial industry in the Gulf Cooperation Council (GCC). With a gross domestic product (GDP) per-capita of $70,000 in 2017, the International Monetary Fund has ranked it amongst the world’s top 10 richest nations and the second richest GCC country after Qatar. According to the World Bank, it is the fourth richest country in the world per-capita terms.
The economy remains undiversified because of its high dependence on hydrocarbon products which constitute some 60 per cent of GDP. The oil-based industrial sector represents 48.4pc of the GDP. The non-oil sector is dominated by services, mostly real estate and financial services, accounts for 51pc of GDP and employs 70pc of the active population. Oil receipts account for nearly 90pc of total government receipts.
According to the Kuwaiti finance minister, due to successive cuts to output in a low-oil-price environment, 2017 became a challenging year. The economy contracted by an estimated -2.9pc over the year. However, the 2018 outlook appears more positive.
The Standard & Poor’s Ratings agency predicts +2.5pc growth for 2018 as energy prices rise and oil production starts to climb moving into 2019. The World Bank has forecasted continued growth at 1.9pc this year before rebounding to 3.5pc in 2019 as Organisation of the Petroleum Exporting Countries (Opec) production cuts taper off and oil output and exports increase.
According to Qatar National Bank’s Kuwait Economic Insight 2018 report, the GCDP growth in 2018 is expected to recover to +1.4pc as the non-hydrocarbon sector benefits from higher oil prices, stronger fiscal spending on the back of an expansionary budget and higher project spending. In 2019, growth is expected to accelerate further to 4.3pc.
Fiscal pressures lessened in 2017 due to the recovery in global energy prices which boosted oil receipts. As a result, the government has estimated 2017 deficit to have narrowed to 7.2pc of GDP.
The 2018-2019 budget reveals a huge deficit for the fourth-year in a row amid a shrinking economy. The shortfall is estimated at more than $21bn, about 17.5pc of the OPEC member’s GDP.
Spending is projected at $70bn, marginally higher than last year. Successive cuts to output in a low-oil-price environment have weighed on public finances, prompting the authorities to consider tax reforms to improve its fiscal position.
Contrary to budget estimates, analysts expect oil price to be at $71 per barrel in 2018, almost 30pc higher than in 2017. According to the Kuwaiti finance minister, state fund is under tremendous pressure due to growing budget expenditure. An economic and fiscal reform program is needed even if oil prices were to jump to $100 per barrel.
Saudi Arabia