Kuwait returns to growth
The Kuwaiti economy is expected to enjoy a stronger recovery than previously expected. In its October 2018 world economic outlook, the International Monetary Fund said the economy would enjoy a more robust recovery than had been hoped for after the recession in 2017 brought on by the collapse in oil prices. The economy will grow by 2.3% in 2018, the IMF said, a signi cant upgrade from the 1.3% it had pencilled in in April 2018. It powered back into growth in 2018 thanks to expanded oil production and higher crude prices. In the second quarter of 2018, GDP expanded by 1.9% y/y, compared with a contraction of 0.5% y/y in the three months to March. That was supported by a sharp pick-up in growth in the non-hydrocarbon sector, whereas the hydrocar- bon sector contracted by 0.1% y/y. It experienced a large contraction in real GDP growth of 2.9% in 2017 as a whole. The decline was mainly due to a 5% decrease in oil production implemented under the Organization of the Petroleum Exporting Countries (Opec) agreement. Standard & Poor’s, the ratings agency, expects that Kuwait growth will return to positive territory in 2018 on the back of a recovery in oil production expected in the second half of the year (following an agree- ment reached by Opec in June 2018), and steady public spending on infrastructure projects. S&P expects GDP growth of 2.8% on average over 2018-2021. Kuwait pumped 27.6m barrels per day (bpd) in October 2018, down from 2.74m bpd in September, a cut in production of 80,000 bpd rather than the 130,000 agreed quota. Kuwait had earlier stuck to its agreement to cut production by 131,000 bpd, which it enforced with an extra 5% of contraction compared with its baseline in March 2018.
In ation drops sharply
Annual in ation fell in October 2018 to a 15-year low of 0.2% from 0.3% in September. It was the lowest in ation rate since a at reading in November of 2003. The main driver was house prices which fell by 1.1% year-on-year. The 0.3% annual gure means in ation is on track to hit the IMF’s October 2018 forecast for it to end 2018 at 0.8%, before accelerating to 3.2% by 2021. In ation does look set to rise further in the coming months after the government announced that it would hike fuel prices by as much as 83%. Wholesale price in ation might continue to see some upward pressures from the manufacturing sector. However, ongoing weakness in agriculture, livestock and shing prices should help limit the in ationary pressure. Kuwait was alone in the region for the second time in a row in not following the US Federal Reserve in hiking interest rates by a quarter point in September 2018. It is the only member of the six-nation Gulf Cooperation Council (GCC) state not to peg its dinar solely to the US dollar.