Kuwait’s social security and government support help slow inflation locally
Despite the significant rise in inflation rates all over the world and reaching new records that exhausted peoples and economies, Kuwait was able to slow down inflation locally due to its robust social security safety network and government support.
According to the annual plan follow-up report (2023/2024) issued by the General Secretariat of the Supreme Council for Planning and Development recently, the domestic inflation growth rate for the year 2023 slowed to about 3.6 percent in accordance with the decrease in global inflation rates.
The report said that the Central Bank of Kuwait has taken many monetary policies since 2019, as the interest rate was recorded at 2.94 percent, then it was decreased in 2020 and 2021 to 1.79 and 1.5 percent respectively, then it rose again in 2022 and 2023 to about 2.35 percent and 4.13 percent.
It noted that the Central Bank of Kuwait took these decisions and measures to change local interest rates based on an analysis of the latest available economic, monetary and banking information and data, including general economic rates, inflation levels and local liquidity indicators, as they are the most important factors that determine the need to move interest rates.
The report stated that the decision has been made after considering various elements affecting the consumer price index to identify and evaluate the factors that constitute pressure on prices, as well as taking into account the nature of the Kuwaiti economy that is open to the outside world.
Regarding demand rates for goods and services, the report said that 2019 witnessed an increase of 0.3 percent, while it recorded a shrinkage in 2020 by (-3.4) percent, after which demand have increased clearly at about 6.8 percent and continued to rise in 2022 to about 8.5 percent.
It added that in 2023, the demand rates growth had decreased to about 3.2 percent, while the level of supply of goods and services was clearly affected by geopolitical developments, which was clearly reflected in the rise in production costs due to the rise in energy prices.
Moreover, the report said that Inflation was able to maintain acceptable levels during the fiscal years, in light of the relative stability of indicators of the commodity groups that affect the living expenditure of families, which in turn determines the capacity of consumer spending and services for members of society.
Looking at inflation levels in the past 10 years, between 2014 and the end of July 2024, it became clear that consumer price inflation had recorded an annual rate of 2.67 percent, while rates over the last 4 years recorded a noticeable increase to 3.46 percent.
This comes as a result of inflationary pressures on consumer prices, most of which are imported from abroad as a result of the Corona Virus (COVID-19) crisis and factors related to supply chains during the pandemic, in addition to the wars that followed it and the rise in global inflation to that reached new records in 2022 and its continued decline after that until the current year.
Regarding inflation rates during the past 20 years, the numbers indicate that the annual inflation rate recorded a rate of 3.55 percent. Excluding the infamous inflation in 2008, which recorded 10.57 percent, the general rate of annual inflation will decrease to 3.18 percent, which is considered acceptable in light of the economic and financial events, fluctuations and global geopolitical developments that occurred during that period.
This shows the government role in supporting basic commodities that positively affect the consumer’s standard of living.
Source: KUNA
