Fitch Solutions says the risks of policy-making in Kuwait in the next government are expected to remain high in the coming months, even after the holding of the National Assembly elections, which means that the passage of political and economic decisions will remain suspended until after the parliamentary elections.
The agency said in its report that this is in line with “our previous view, which prompts us to maintain the rating of policy-making in Kuwait in the short-term political risk index unchanged.”
The agency indicated that the upcoming elections for the National Assembly in Kuwait will lead to limited improvements to the political and economic challenges, as it is likely that any new Kuwaiti government will continue to face strong opposition from the parliament, given that the fundamental differences between the executive and legislative authorities remain unaddressed.
The agency added, the differences between the government and the parliament have continued and deepened since the last elections in December 2020, “therefore we believe that the upcoming elections will not likely address the deep differences between the two parties.” This makes us believe that basic legislation will continue to delay in the short term even after the elections.
The new law on issuing debt bonds, the agency says, will not be approved in Kuwait until the end of 2023. “Given our previous expectations that Kuwait will witness successive financial deficits in the medium term, and the failure to pass the law on the issuance of debt bonds, the next Kuwaiti government will approve strict spending cuts,” added the agency.
The Foreign Investment Law, according to the agency, is one of the other draft laws that will be postponed in Kuwait, which would ease visa requirements and requirements for foreigners and give them greater rights to own property in the country.
The agency indicated that the political impasse in Kuwait will lead to further delay in achieving appropriate reforms for the businesses planned within the “Kuwait 2035” strategy, pointing out that this confirms its view that the growth of the non-oil economy of Kuwait will remain weak in the medium term, and will remain dependent on Government spending. Consequently, GDP growth in Kuwait will remain closely linked to oil production, which is expected to slow steadily in the next few years.
The agency said, “Despite the high risks that threaten our political and economic expectations for Kuwait, the upcoming elections constitute an opportunity to make better political and economic decisions. While we expect that some efforts to resolve the political crisis will achieve limited success, we do not rule out the appointment of a government that the opposition will deal with better. This may reduce the opposition that was previously faced by governments, which may lead to the passage of major bills in Kuwait earlier than we expected.”