Domestic Inflation For 2023 Is Forecast At 2.7%

According to the National Bank of Kuwait, tighter monetary policies globally and weaker global economic activity will moderate inflation rates in 2023, with rates expected to decline to about 2.7 percent on average. The Central Bank of Kuwait is also expected to continue raising the discount rate in the first half of 2023 as a result of the US Federal Reserve’s completion of its current cycle in raising the interest rate, while non-oil economic activity in Kuwait is likely to decline.

Labor shortages and high import costs, along with an increase in commodity prices, are among the risks threatening high inflation rates, according to Al Qabas. The report stated that the inflation rate in Kuwait reached 4 percent on average in 2022, indicating that external shocks resulting from the Ukraine war exacerbated supply chain bottlenecks in the first half of 2022, bringing the overall inflation rate in Kuwait in April at the level of 4.7 percent, while price pressures have receded since then, and the inflation rate fell to 3.2 percent by the end of the year, similar to the rates recorded in November and September.

According to the report, the slowdown in inflation is mostly due to the return of supply chains to their normal level, the fading of the effects of the rise in private education prices, and a slowdown in the pace of increases in residential rents. It added that inflation rates may decline marginally in the future amid the tightening of global monetary policy and the possibility of a slowdown in the global economy.

According to NBK, the food and beverage inflation rate reached 7.5 percent in December, up from 6.5 percent at the end of the third quarter. It was noted that the prices of some volatile sub-components such as fish and seafood increased in December, resulting from shortage of workers in the fishing sector, as well as high import prices, and partly the weakness of the dollar.

As per the report, inflation for housing services, such as rents, reached 1.4 percent on an annual basis, down from 2.2 percent in September, but it increased by 0.8 percent on a monthly basis. Furthermore, prices for the maintenance and repair services category rose at the fastest pace since March 2021. Moreover, the housing services inflation rate increased by 2.2 percent for the full year on average, compared to 0.5 percent in 2021, which is the fastest since 2016.

In December, the core inflation rate increased to 2.8 percent year-over-year, with clothing, footwear, transportation, and other goods and services contributing most to the increase. In addition to restaurants and hotels, services and miscellaneous goods, and health care, which saw sharp increases on a monthly basis as a result of a lack of medicines in government hospitals, core inflation in 2022 rose to 3.9 percent due to an increase in inflationary pressures in education, clothing, and transportation.

 

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