Page 8 - Kuwait-Three-Years-Business-Outlook-2019-2020-2021

Kuwait Economy KHOA

• An extension of OPEC+ production cuts into H219 will weigh on Kuwait's growth rate over the coming quarters. Our Oil & Gas team
• have revised down their 2019 crude oil production forecast for Kuwait from 1.0% to 0.5%, to reflect the likelihood of an extension

• of current OPEC+ output cuts into the second half of the year (see 'Brent: Set For Further Gains In 2019', March 1 2019). Oil is by far
• the largest component of Kuwait's exports, typically accounting for some nine-tenths of the total in nominal terms. To factor in this

• slower growth in crude exports, we have revised down our real GDP growth forecast from 3.1% to 2.7% for 2019.

• That said, growth will still come in above its 2018 level, partly thanks to expansionary fiscal policy and loosened credit restrictions.
• The new FY2019/20 budget signifies expansionary fiscal policy as overall spending is set to grow by 4.7%, largely as a result of a

• 5.0% increase in the public sector wage bill. Furthermore, in a bid to stimulate private consumption growth, the Central Bank of
• Kuwait (CBK) loosened credit restrictions in November 2018 – consumers can now borrow up to 25 times their net monthly salary
• (up from 15 times previously), with a cap of KWD25000. We believe this will extend the current trend of rising personal credit growth.

• Together with an environment of subdued inflation and delays in tax implementation – most notably the 5.0% value-added tax (VAT)
• which has been postponed to 2021 – this will facilitate consumption growth through to 2020.

• Finally, growing fixed capital formation will provide tailwinds to overall growth. Despite lower oil production growth, rising oil prices will
• encourage the government to increase spending on capital and infrastructure projects.

• Several large-scale projects are set to be completed by end-2019, such as the Clean Fuels Project which consists of upgrades of the Mina
Abdullah and Mina Al- Ahmadi refineries.

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