Kuwait economy likely to grow 3% this year

Kuwait’s economy is projected to expand by nearly three per cent in real terms this year and pick up by more than four per cent in 2011, according to a key bank in the Opec oil producer.

The country’s nominal GDP dived by nearly 21.2 per cent to KD31.5 billion (Dh395bn) in 2009 because of lower oil prices and the repercussions of the global fiscal distress but it expected to recover by around 18 per cent this year, the National Bank of Kuwait said in a study.

“We still look for GDP to grow 18 per cent this year, by three per cent in real terms and a stronger 4.3 per cent in 2011,” the Bank said.

“The improvement should come as more large projects come on line,” it said, adding that official figures for real GDP in 2009 have not yet been released.

The report expected growth to be fuelled mainly by the private sector as well as the banking and transportation sectors.

It noted that both sectors were among the gainers in GDP share over the past few years, and projected them to continue to gain in the future with the plans to turn Kuwait into a financial and logistics hub.

Transportation doubled from four per cent of GDP to eight per cent of GDP in the past few years while the financial sector soared from six to 14 per cent.

The share of the public administration appears to have moved in the right direction, falling from 12 to under six per cent in 2008 as other sectors grew, according to the study.

“Not surprisingly, the public administration’s share of GDP increased again in 2009 as the private sector was hurt by the crisis, government being immune. The positive trends need to be sustained and reinforced, which is all part of the current five-year plan,” it said.

“Longer term, of course, the economy needs to increase the size of the non-oil economy for all the familiar reasons: reduce dependency on one-sector-one-commodity, create more job opportunities especially for Kuwaitis, planting the seeds of the post-oil economy etc. The non-oil side needs to take over and rise gradually - we do seem a bit stuck around the current 50/50 shares.”

Kuwait, which controls about 10 per cent of the world’s proven oil wealth, has the fifth largest Arab economy after Saudi Arabia, the UAE, Egypt and Algeria.

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