Kuwait: Country Economic Forecast: 07 Feb 2012

Kuwait: Country Economic Forecast: 07 Feb 2012


February 7, 2012
5 Pages - SKU: OFE6799194
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Countries covered: Kuwait

A victory for the loose Islamist-led opposition in this month's snap parliamentary elections may only deepen the policymaking deadlock. But there is a chance that the opposition and cabinet, which is appointed by the Prime Minster, unite and push for bigger increases in government spending. In 2011, the fiscal surplus widened to over 33% of GDP thanks to high oil prices and rising oil production. A decline in the surplus to 31% of GDP is forecast in calendar 2012. Oil production edged up further in January and was some 14% higher than a year ago. But we expect output to stabilise at this level given weaker global activity, the revival in Libyan output, a tighter OPEC quota and output close to capacity. Oil investment fell in 2011, notably in Q4. The pace of economic activity is forecast to continue to slow, with GDP growth put at 3.9% in 2012 after an estimated 4.8% in 2011. As well as slower oil production growth, the global slowdown, weaker oil prices and political instability will all undermine activity and confidence. Inflation hit a 19-month low of 3.1% in December. Inflationary pressures will remain relatively restrained by the downward trend in global food and commodity prices as well as subdued money and credit growth. But base effects and low interest rates will leave inflation averaging 3.9% in 2012 after 4.8% in 2011. Lower oil prices will drive a narrowing in the current account surplus to some 34% of GDP this year from about 40% in 2011.



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