The Euro falling to its lowest level against the dollar in 20 years a few days ago, some may think is a purely European-American affair, but in fact citizens and residents in Kuwait are also affected by this significant change in the exchange rate, positively or negatively, according to financial transactions with the European Union countries.
A local Arabic daily said, just as the Euro fell against the dollar, the Euro fell against the Kuwaiti dinar by approximately 15% from its highest level in 2020, similar to the Euro’s decline against the dollar for the same period with a slight rise of the dollar against the dinar. Therefore we can conclude the following:
While Kuwaiti tourists or tourists residing in Kuwait and heading to the European Union benefit from the decrease in the Euro, so that their expenses within the European Union become relatively less (a decrease of 15%), the Europeans heading to Kuwait will be affected in the same proportion.
Given that inflation is a global phenomenon common to the developed world due to the repercussions of the Corona pandemic, the rise in oil and food prices, etc., and due to the repercussions of the Russian-Ukrainian war, we, with an analytical aim, will not delve into the impact of inflation on both Kuwait and the European Union countries or the United States, etc.
It is worth mentioning, according to previous studies, that the number of tourists heading to the European Union from Kuwait may reach 600,000 next year, while the number of tourists from the European Union to Kuwait may not exceed 140,000.
That is, the number of tourists from Kuwait to the European Union will be four times the number of tourists from the European Union to Kuwait, and therefore it can be concluded that the decrease in the Euro is in the interest of Kuwaiti tourists significantly outweighs the damage caused to tourists heading to Kuwait from the European Union.
Those who have debts in Euros have benefited from the depreciation of the currency, whether they are countries or individuals and companies, and therefore it can be concluded that those who have large debts in Euros in the past few years have benefited from low benefits and a decline in the value of the currency in a way that brings them greater benefits, and vice versa.
Kuwait imports approximately 5.75 billion Euros of European Union products, and exports to the European Union approximately 1.26 billion Euros, according to 2021 data, and thus Kuwait is benefiting from the decline in the Euro due to the large volume of imports relative to exports, but the size of the interest may not be precisely known, since the costs of producing goods in the European Union are related to the costs of imports from countries outside the European Union, such as the United States, Russia, China, and others.
But in general, it can be emphasized that Kuwait benefited more from trade exchange due to the decline in the Euro than it was harmed by it.
There are big fears and doubts about a recession and a major economic slowdown in the eurozone, perhaps for many years due to the repercussions of the Russian-Ukrainian war, and the expansion of spending on armaments rather than development projects.
This may be reflected in investments of all kinds. Here, the Kuwaiti investor, whether an individual or as a country, is subject to many risks from currency depreciation and a decrease in the value of investments at the same time, even if the investments are protected from inflation such as real estate and others.
It is worth noting that Kuwait’s investments through the sovereign fund in Europe are close to 20%, according to expectations, i.e. more than 100 billion Euros, and therefore the Kuwaiti investments have been significantly affected relative to the European Union’s investments in Kuwait, which benefited from the decline in the euro despite being less even from 5 billion Euros.