2012-09-05 09:47:09 - Kuwait Business Forecast Report Q2 2012 - a new country guide report on companiesandmarkets.com

We remain broadly sanguine about Kuwaits growth prospects in 2012. Heavy government spending is likely to boost the prospects for fixed investment and domestic consumption, and exports will remain steady. We retain our above-consensus forecast for real GDP growth of 5.4% this year.

Inflation is likely to remain broadly under control in the near term. While recently implemented public sector wage hikes and a healthy growth outlook will spur aggregate demand, we expect moderating prices across the global commodities complex to keep the headline print in check in the near term. We forecast inflation to average 4.9% in 2012, compared with an estimated 4.8% in 2011, though we emphasise that our annual forecasts mask an underlying trend of somewhat sharper price

 

 

rises in H2, with our end-year forecast coming in at 5.5% year-on-year (y-o-y).

Major Forecast Changes

We have revised up our forecast for the governments budget surplus in FY2011/12 on the back of data showing that public spending has come in significantly below-target through the first eight months of the fiscal year. We now expect spending to reach just KWD13.8bn, compared with our previous estimate of KWD16.0bn, raising our surplus forecast from 23.4% of GDP to 27.7% of GDP.

Key Risks To Outlook

Our forecasts for both fiscal spending and economic activity are predicated on a pickup in government spending in 2012. However, we emphasise that the highly dysfunctional structure of Kuwaiti politics – which gives parliament considerable power to hold up legislation, and which has resulted in lengthy delays in the implementation of key projects – presents considerable risks to this view.

While we continue to expect the anti-government protests that spread across the country in late 2011 to peter out after parliamentary elections in February, we highlight that further political infighting in the capital throughout the year could lead to further outbreaks of unrest in 2012. This would pose downside risks to our short-term political risk rating, which currently stands at 71.0 out of 100.The price of this business forecast report covers 4 quarterly reports on this country. This quarterly report will be downloadable instantly as a PDF document, with the 3 remaining reports delivered at regular intervals throughout the year.

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