Kuwaiti Economy shows positive performance in 2023, says NBK report
According to a recent report by the National Bank of Kuwait, the Kuwaiti economy concluded the year 2023 on a positive note with several indicators pointing to a shift in the growth trajectory of bank credit, real estate activity, and stock market performance during the last quarter.
Additionally, the report highlighted a decline in the inflation rate in December, following a period of relatively stable prices throughout most of the year. The positive morale was further boosted by the constitutional oath-taking of His Highness the Emir Sheikh Mishal Al-Ahmad Al-Sabah and the appointment of Dr. Sheikh Muhammad Sabah Al-Salem Al-Sabah, the former Minister of Foreign Affairs, as the Prime Minister to lead a new technocratic government. During the fourth quarter of 2023, the pace of government legislation accelerated, resulting in the passing of several significant laws.
These laws include the removal of the local agent requirement for foreign companies, enabling them to participate directly in tenders, and measures aimed at combating the monopolization of vacant lands to enhance the supply of residential properties. Positive fiscal impacts were also anticipated through proposed measures such as excise taxes on tobacco and sweetened beverages, along with a 15% tax on multinational corporations.
This tax comes as Kuwait joined the comprehensive framework of the Organization for Economic Cooperation and Development (OECD) in November to combat tax evasion and profit transfer. The report further discussed the resilience of the non-oil sector during the 2020 pandemic, as revealed by delayed data on national accounts recently published by the Central Bureau of Statistics. However, from 2021 onward, non-oil activity weakened compared to prior indications provided by relevant micro indicators.
Whilst the non-oil sector recorded growth of 1.5% in the second quarter of 2023, primarily driven by the transportation and construction sectors, the oil sector witnessed a decline of -3.9% due to Kuwait’s reduced crude oil production level in compliance with OPEC and its allies’ supply cuts. Consequently, the contraction of GDP stood at 1.3% in the second quarter. Looking ahead, projections for 2024 suggest that a further reduction in oil sector production could potentially keep the overall growth rate stable or even lead to marginal negative performance.
Nevertheless, the non-oil sector is expected to exceed 3.0% growth, supported by gains in the refining sector and continued private consumption. Oil prices experienced a sharp decline in the fourth quarter of 2023, erasing most of the gains achieved earlier in the year due to OPEC’s supply reductions. However, the impact of geopolitical risks, such as the Gaza conflict and subsequent attacks on cargo ships, had minimal effects on oil prices.
With expectations of slower but sustained demand growth and OPEC-led supply management, the price of Kuwaiti export crude is predicted to reach $82 per barrel in 2024. Kuwait has agreed to extend voluntary production cuts until the first quarter of 2024 as part of efforts to rebalance the market and prevent further oil inventory accumulation.
