Fast Market Research recommends "Kuwait Business Forecast Report Q3 2013" from Business Monitor International, now available

Boston, MA -- (SBWire) -- 06/07/2013 --We expect Kuwait to see relatively strong growth over 2013, as non-oil economic activity continues to expand on the back of solid household expenditure. Our forecast for 2013 real GDP growth is unchanged at 3.0%, down from 8.2% in 2011 and an estimated 5.2% in 2012. While we now expect a marginal increase in oil exports, we note that progress on Kuwait's capital investment plans has so far been disappointing, and have revised down our forecasts for government spending and fixed investment.

Kuwait has seen a flurry of populist legislation over the last few weeks, including several measures specifically targeting expatriate workers. This runs the risk of increasing uncertainty within the private sector, as well as cementing perceptions of the country as a hub of policy instability. We note that while pro-government MPs hold a majority of seats in the new parliament, tensions remain between the government and the legislative branch.

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Major Forecast Changes

Kuwait's budget surplus for FY2012/13 (fiscal year running from April 2012 to March 2013) is likely to reach a new record high. We have raised our estimate for the FY2012/13 budget balance to 31.0% of GDP (KWD14.5bn), up from 28.3% in 2012. We forecast a slightly lower surplus of KWD12.7bn for FY2013/14, equivalent to 26.5% of GDP. Despite the government's renewed control of the legislative branch, progress with capital spending plans has so far been limited.

Consumer price inflation in Kuwait has stayed largely subdued of late, with a decline in international food prices helping to offset higher non-food inflation. We see inflationary pressures remaining weak over the rest of the year, and project the headline print to average 3.0% in 2013 - down from our previous forecast of 4.0%.

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. Therefore the underlying risks in this regard are minimal.

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