2013-02-24 15:05:18 - Fast Market Research recommends "Kuwait Business Forecast Report Q2 2013" from Business Monitor International, now available

Core Views

We forecast Kuwait's budget surplus to reach approximately KWD11.0bn (US$39.1bn) and KWD8.2bn in FY2012/13 and FY2013/14 respectively, down from a record surplus of KWD13.2bn in FY2011/2012. We expect oil receipts to reach their peak over the current fiscal year, with flat output growth and lower prices signalling a fall in revenue in FY2013/14. At the same time, current spending is set to grow further going forward, while recent political evolutions could give renewed (and much-needed) momentum to capital expenditure.

Consumer price inflation in Kuwait should see modest growth over the next few quarters, after an overall tame year in 2012. We expect inflation to average 4.0% year-on-year (y-o-y) through 2013, with a deceleration in food prices and continuing government subsidies

on basic consumer staples helping to keep the headline print under control.


Full Report Details at
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Major Forecast Changes

The Kuwaiti economy should perform relatively well over 2013, with robust domestic consumption continuing to drive growth. However, a plateau in oil production means that Kuwait is unlikely to achieve the breakneck pace of growth seen in previous years, and we have revised downward our real GDP forecast for 2013 to 3.0%, from 3.7% previously. The government's newfound domination of the legislative branch offers a sizeable upside risk, as it could pave the way for an acceleration of long-delayed economic reforms.

Key Risks To Outlook

As ever, given the economy's heavy dependence on oil, any sustained downturn in global energy prices would prove disastrous. That said, Kuwait has the financial wherewithal to cope with any short-term volatility in oil prices, and therefore the underlying risks in this regard are minimal.

Our forecasts assume that the implementation of the government's development plans will be slow owing to the impact of bureaucratic gridlock. However, the state certainly has the firepower to move forward with its capital spending plans if political compromises can be reached. Furthermore, the regime's renewed domination of parliament, following legislative elections in December, offers the prospect of an acceleration of long-delayed economic reforms and infrastructure projects. Any improvement on this front would pose upside risks to our growth forecasts, as well as downside risks to our budget surplus projections.

Partial Table of Contents:

Executive Summary
Core Views
Major Forecast Changes
Key Risks To Outlook
Chapter 1: Political Outlook
SWOT Analysis
BMI Political Risk Ratings
Political Outlook I
Entering A New Phase Of Uncertainty
- Kuwait's parliamentary elections on December 1 predictably returned a solid pro-government majority, following a successful opposition boycott. While this could conceivably allow the regime to push through a series of long-delayed development projects, the low voter turnout (40.3% officially and 26.7% according to opposition estimates) reduces the new parliament's legitimacy and makes continued opposition protests highly likely.
Political Outlook II
New Cabinet: In With The Old
- Kuwait's new cabinet, sworn in by Emir Sheikh Sabah al-Ahmad al-Jaber al-Sabah on December 12, contains few surprises. We expect the Emir, now able to rely upon a compliant parliament and familiar faces in the cabinet, to largely focus on accelerating long-delayed economic reforms and infrastructure projects. While the market could respond favourably to any progress in the economic growth outlook, we expect performance in 2013 to remain volatile and sharply influenced by political developments.
TABLE: POLITICAL OVERVIEW
Long-Term Political
Democracy: No Turning Back
- Kuwait's political backdrop is complicated by labour and population imbalances, as well as a parliament which has consistently blocked the government's reform efforts. Meanwhile, with five dissolutions of the National Assembly and subsequent elections since 2006, the prospect of new polls and policy instability is always on the horizon.
Chapter 2: Economic Outlook
SWOT Analysis
BMI Economic Risk Ratings
Economic Activity
Slower Growth In 2013
- The Kuwaiti economy should perform relatively well over 2013, with robust domestic consumption continuing to drive growth. However, a plateau in oil production means that Kuwait is unlikely to achieve the breakneck pace of growth seen in previous years, and we have revised downward our real GDP forecast for 2013 to 3.0%, from 3.7% previously. The government's newfound domination of the legislative branch offers a sizeable upside risk, as it could pave the way for an acceleration of long-delayed economic reforms.
TABLE: ECONOMIC ACTIVITY
Fiscal Policy
Spending Set To Accelerate
- We forecast Kuwait's budget surplus to reach approximately KWD11.0bn (US$39.0bn) and KWD8.2bn in FY2012/13 and FY2013/14 respectively, down from a record surplus of KWD13.2bn in FY2011/2012. We expect oil receipts to reach their peak over the current fiscal year, with flat output growth and lower prices signalling a fall in revenue in FY2013/14. At the same time, current spending is set to grow further going forward, while recent political evolutions could give renewed (and much-needed) momentum to capital expenditure.
TABLE: FISCAL POLICY
Monetary Policy
Inflation To Stay Restrained
- Consumer price inflation in Kuwait should see modest growth over the next few quarters, after an overall tame year in 2012. We expect
inflation to average 4.0% y-o-y through 2013, with a deceleration in food prices and continuing government subsidies on basic consumer staples helping to keep the headline print under control.
TABLE: MONETARY POLICY

Full Table of Contents is available at:
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