Boston, MA -- (SBWire) -- 06/18/2013 --Kuwait experienced very strong growth, of just under 25%, in new car sales over 2012, in line with BMI's views on the subject.
Moving forward, although BMI's Country Risk has revised down its 2013 GDP growth forecast from 3.7%, to 3%, this is still indicative of steady growth over the coming period. Moreover, following the December 2012 elections, there is scope for the government to press on with long-delayed economic reforms, which could boost the economy further.
Encouragingly for the autos sector, we expect Kuwaiti growth over the coming 12 months to be driven primarily by robust domestic consumption. Private consumption remained strong through the second half of 2012, and should hold up well over 2013. Kuwaiti nationals are still benefiting from the across-the-board increases in public sector wages and social security transfers approved in March 2012, which helped to drive up household incomes. BMI forecasts household consumption to grow by 3.5% in 2013, with pay increases for Kuwaiti employees in 2013 expected to remain above inflation, according to Mercer's 2012 Total Remuneration Survey, with a projected rise of 5.4% in salaries.
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At the same time, inflation has stayed lower than in previous years, averaging 3.0% in the first 10 months of 2012 compared with 5.0% in the equivalent period of 2011, with food inflation in particular seeing a progressive deceleration over H212. Credit growth to the private sector reached a modest 3.8% y-o-y in November, bringing the average to 4.0% for the first 11 months of the year. However, much of the growth has been driven by consumers, with personal lending expanding by 12.2% y-o-y in November, compared with 4.8% y-o-y for corporate lending. Moving forward, the 50 basis points cut to Kuwaiti interest rates enacted in October 2012 - taking the key discount rate down to just 2% - should also ensure that car financing rates remain low, further bolstering demand for new autos among Kuwaiti residents.
Moreover, efforts to improve Kuwait's business environment and invest more in capital infrastructure - including planned new airport terminals and ports - could well help to drive domestic commercial vehicle sales upwards as well.
Against this backdrop, BMI believes that the Kuwaiti market can post steady growth, in the order of 9% per annum, over the rest of our forecast period to 2017.
In 2012, Toyota Motor remained the dominant player on the Kuwaiti new car sales market, now occupying all five of the top five best-selling models in the country. Its Prado, Hilux, Camry, Land Cruiser and Corolla models accounted for 25% of all cars sold in Kuwait over 2012.
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