A 7 Percent Growth Is Expected In Kuwait's Economy In 2022

It was reported in Al-Rai daily that the Institute of Chartered Accountants in England and Wales (ICAEW) predicted Kuwait's economy would grow by 7 percent in 2022, compared to 2.5 percent in 2021, as a result of rising oil prices and production. According to the institute, the abolition of Corona virus restrictions in Kuwait paved the way for a strong recovery in the non-oil sector, which is expected to grow by 4.7%, following a 3.1% increase last year due to high consumer spending and strong real estate sales.

In the report, the report stated that lending trends and the expansion of corporate credit contributed to the economic recovery, even as projects remain delayed, adding that the Al-Zour refinery will increase total refining capacity of the country by more than 0.6 million barrels a day to 1.4 million barrels a day.

As reported by the report, the oil sector, which accounts for more than half of the national economy, is a major driving force in Kuwait's economy this year, with an expected growth of 11.8 percent, indicating Kuwaiti crude oil production has inched up to over 2.6 million barrels per day after OPEC+ eased production restrictions. In 2021, the oil sector recorded a slight increase of 0.1 percent, following a decline of roughly 10 percent in 2020.

It is expected that Kuwait's financial situation will improve as a result of the improved outlook for oil prices and production, as a barrel of oil will cost $112 in 2022, higher than the break-even price for Kuwait's budget, which is estimated at $65, resulting in Kuwait recording its first budget surplus since 2014 at 6.2 percent of GDP. Public finances performed better due to increased oil revenues, as preliminary results indicate the budget gap narrowed to 3.6 billion dinars in 2021, and the sharp rise in oil prices led to increased liquidity and reduced the need for urgent expenditures on wages and subsidies (90 percent of total expenditures).

According to the report, the unexpected oil gains will not result in an increase in government spending, but the rise in government activity will support non-oil sectors, as well as hinted that ministerial reshuffles and administrative changes have hampered the ability of the state to initiate important reforms, including financial reforms.

The reform process is expected to remain slow, but it looks forward to introducing the Public Debt Law, which will allow the government to borrow internationally, and restoring the General Reserve Fund, which in recent years has been essential in bridging funding gaps.

A reduction in monetary stimulus, coupled with the easing of financial pressures, will help to suppress domestic price pressures as government spending will support domestic demand. Kuwait's inflation rate is rising, as is the case regionally and globally, mainly due to the rise in food and transportation prices, the report points out, noting that core inflation is also rising at a faster pace, suggesting that price increases are widespread.

According to the report, inflation will remain high until the supply chain turmoil subsides, and then begin to decline. There is a good chance that the inflation rate will reach 3.9 percent this year, up from 3.4 percent last year. While the report indicated that the country is still vulnerable to Corona variables, regardless of the risks posed by a decline in oil prices again, which would renew liquidity concerns and slow reform progress. Kuwait's vaccination campaigns were less successful than those in neighboring countries, as less than 10 percent of the population received the third dose.

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