Kuwait’s inflation is expected to hit a 15-year low of just 1% in 2018 from 1.5% in the previous year, according to a recent report by the National Bank of Kuwait (NBK).
This forecast is slightly lower than what NBK previously expected, due to softer than projected recent outturns.
Kuwait’s inflation stood at just 0.4% year-on-year in May and averaged 0.7% in 2018 year-to-date, the report added.
NBK added that “headline inflation has been kept low by two main factors: soft food price inflation thanks to international food prices, and continued falls in housing costs. Our measure of ‘core’ inflation, which excludes these components, stood at a slightly firmer 1.7% y/y in May.”
The US dollar, and therefore the Kuwaiti dinar, has strengthened slightly in 2018 as it recovered some of last year’s declines. This should help reduce import cost.
“Core inflation should also be kept low by base effects following sizeable increases mid-last year, moderate economic growth, and – amid an improved fiscal position – the absence of planned subsidy cuts that pushed inflation higher in 2016 and 2017,” the report said.
Meanwhile, delaying the implementation of the value-added tax (VAT) in the GCC nation will no longer raise prices in 2019 when inflation is expected to reach 2.5%.