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Among Gulf Countries, Kuwait Expects The Second-highest Inflation And Low Growth
In its 19th Arab Economic Outlook Report for 2023, the Arab Monetary Fund sheds light on the economic landscape across Arab nations. Notably, Kuwait is projected to experience the second-highest inflation in the Gulf in 2023 and the lowest economic growth in 2024.
A significant slowdown in the Gulf region's economic growth is expected in 2023, settling at 2.3 percent instead of the robust 7.6 percent recorded in 2018.
According to the report, Kuwait's economy will experience a substantial slowdown from 7.6 percent in 2022 to 2.3 percent in 2023. However, a positive trajectory is predicted for 2024, with an expected growth rate of around 3.2 percent. This improvement is attributed to factors such as an anticipated increase in oil production compared to 2023, a reduction in monetary policy tightening, activation of major investment projects, and a surge in non-energy exports.
According to the report, food and beverage prices played an important role in inflation dynamics, with Kuwait reaching 32 percent inflation in 2022, surpassing Saudi Arabia's 28 percent. Housing and utility costs played a role in inflation increases in various countries, with Kuwait experiencing a 17 percent rise. Transport services also contributed to inflation, with Kuwait’s rate expected to reach 3.2 percent this year, the second-highest in the Gulf after Qatar (3.3 percent).
Global oil supplies are expected to grow by 1.2 million barrels per day in 2023 and 1.7 million barrels per day in 2024, according to the report. Despite voluntary production cuts by the OPEC Plus bloc, oil production from outside OPEC, led by countries like the United States, Brazil, and Canada, is expected to drive this surge. Russia’s oil production is predicted to decrease by 0.3 million barrels per day in 2023, stabilizing in 2024. OPEC's crude oil production is expected to decline by 0.8 million barrels per day in 2023 and increase by about 0.4 million barrels per day in 2024.
The Arab Monetary Fund emphasizes that rising interest rates in Gulf countries are dependent on two fundamental elements: oil prices and domestic demand. Based on the report, there is little impact of raising interest rates among GCC countries until the third quarter of 2023 due to the rise in oil prices, which support liquidity and enhance investor confidence.
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