Kuwaiti Household Sector Is Expected To Grow 6.8% In 2022 And 2.6% In 2023

According to Fitch Solutions, it is highly likely that household expenditure in Kuwait will increase by 6.8 percent in 2022 and 2.6 percent the following year. Consumer spending in Kuwait is anticipated to increase between 2022 and 2023. Additionally, it is anticipated that the GDP of the nation will increase by 7.1% this year and by 4.6% in 2023.

The agency, which was cited by a local Arabic newspaper, Kuwait's increase in household spending in 2022 was caused by the epidemiological situation improving after the government launched a successful vaccination campaign against the Covid-19 pandemic, which decreased the risk of closures for the remainder of this year and until 2023.

According to Fitch, total family spending in Kuwait is projected to be around 19.8 billion dinars in 2023, up from 18.9 billion dinars in 2022. About two months ago, Fitch predicted that total family spending in Kuwait will be about 11.8 billion dinars this year, up from 10.7 billion in 2021.

The agency noted that the odds of delaying the implementation of the value-added tax until 2023 or 2024, amid concerns about inflation, geopolitical events, and local political conditions, are supportive of expectations of the growth of household spending in Kuwait in the current year and the following year.

According to the sources, the agency's risk team anticipates that the Kuwaiti government's financial flexibility will lessen the need for a new tax in the current year. Kuwait's consumer expenditure is expected to increase this year, which is in line with forecasts for a 7.1 percent GDP growth in Kuwait in 2022. Wages and employment in Kuwait will be supported by the increase in oil prices following Russia's invasion of Ukraine, which will also increase crude production and loosen OPEC+ limitations.

Although they issued a warning about the continuous rise in inflationary pressures, the sources claimed that Kuwait's oil study team anticipates that the average price of Brent would average roughly $100 per barrel in 2022, compared to $72 per barrel in 2021. The agency claimed that Kuwait's service industries began to experience inflation at the beginning of the second half of this year.

The country's consumer spending faces a serious threat from rising inflation for the remainder of this year, which might result in a loss of buying power and alter projections for consumer spending in the future.

According to the organisation, inflationary pressures started to increase internationally in 2021 as a result of problems with commodity shortages, high oil costs, and supply chain disruptions.The price of supply of basic commodities like oil, gas, wheat, corn, barley, and fertilisers has also been significantly impacted by the Russian-Ukrainian conflict. All these elements will have an impact on consumer spending and prices.

The price of supply of basic commodities like oil, gas, wheat, corn, barley, and fertilisers has also been significantly impacted by the Russian-Ukrainian conflict. Throughout the current year, Kuwait's prices and consumer spending will be impacted by all of these factors.

Due to the impact on customers' purchasing power, Fitch Solutions indicated that the increase in food prices creates a risk to its predictions regarding consumer expenditure in Kuwait. It anticipates Kuwait's average inflation rate to increase to 3.9 percent in 2022, which is a marginal increase from 3.4 percent in 2017.

According to Ministry of Finance data from April, household debt in Kuwait decreased as a percentage of GDP to about 12.3 percent. The sources also noted that consumer loan growth between 2015 and 2020 was comparatively stable at less than 800 million dinars per year, but it increased to 1.1 billion dinars in 2021 amid a global low interest rate environment.

Be aware that the increase in loan costs brought on by the high interest rates would have an impact on Kuwaiti families' discretionary income. With regard to the non-oil economy, Fitch Solutions stated, "Our risk expectations tend to rise, as a faster recovery than anticipated or higher inflation for a longer period may force the Central Bank of Kuwait to raise interest rates further in the future, which may put pressure on household incomes."

Comments Post Comment

Leave a Comment

Submit