Kuwait's Limited Industrial Base And Import Of Gadgets Contribute To Inflation

The government reported that commodity prices are expected to continue to rise throughout the world, particularly for food products. According to Al-Qabas daily, this will increase the pressure on food importers, countries whose climate or conflicts may disrupt local food production, and countries suffering from macroeconomic fragility. As a result of global food price increases, the report stressed that urgent decisions must be made to reduce their impact on the local market, especially since the cost to the national economy will be high. The report predicted that food prices will continue to rise over the next five years - higher than they were before the Corona crisis. Agricultural products and grains are also subject to price increases. Kuwait's Central Statistics Bureau reported that in November the consumer price index (inflation) increased by 3.79 percent, explaining that the annual rise in inflation rate is mainly due to an increase in the prices of all of the main groups that affect index numbers, such as foodstuffs, education, clothing, and apparel.

Imports of merchandise

Kuwait imports approximately 80 percent of its food needs from abroad, according to government data. Appliances, machinery, equipment, and industrial inputs account for most of the country's merchandise imports. They indicate that the steady growth in merchandise imports over the last 10 years is reflected in the Kuwaiti economy, represented by the high per capita income and the limited industrial base. Most of the food commodities sold in the local market are sold through cooperative societies, which account for 80 to 85 percent of the total market. Therefore, any measure to neutralize price increases in the local market must be centered on cooperative societies. Ship delivery is the most important channel for delivering merchandise to Kuwait, exceeding 85 percent of total imports; while land delivery accounts for only 10 percent. In addition to the disruption in ports and the shortage of containers, Kuwaiti imports are exposed to delivery by ship method.

The global inflation rate

According to several financial institutions, the global inflation rate may return to normal next year for the first time in about four years. Goldman Sachs indicated that core inflation, which excludes food and energy in economies that witnessed an inflation boom in the post-Corona stage, specifically the United States, Europe, and many emerging markets, reached 2.2 percent during the three months ending last November. Inflation in these countries is expected to reach or be near the inflation targets of most major central banks by 2024. During the last quarter of next year, Oxford Economics predicts that inflation in the Eurozone will reach 1.3 percent and in the UK will reach 2.7 percent, while in the United States it will drop to 2.2 percent. 10 recommendations to curb inflation According to the report, following recommendations can help reduce the impact of global price increases on local prices:

1. Commodity prices around the world have seen record rises, especially in food commodity prices, which may impact local economies adversely. Consequently, we need clear and strict mechanisms for implementing the relevant treatments.

2. Adoption of the proposed treatment mechanism and its link to a specific period for implementation, in order that the concerned authorities will not fail to implement the proposed treatment mechanism.

3. Price policy treatments must be accompanied by consensus on fiscal and monetary policies, ensuring price inflation in the country is addressed without compromising economic growth.

4. Revising the Cooperatives Law so that boards of directors of cooperative societies are given more oversight.

5. Commodity price control to prevent large price differences.

6. Activating the role of the competition agency in cooperative societies to ensure that their monopolistic practices are consistent when displaying goods in them, ensuring there are sufficient substitutes for the commodity, which encourages competition and the consumer's choice of a commodity at an appropriate price.

7. Studying the increase in the spaces allowed for displaying goods in cooperative societies to facilitate the process of supplying goods.

8. Creating job opportunities for nationals and reducing current expenses (salaries) in the State budget.

9. Intensifying media and awareness campaigns to rationalize food consumption.

10. Taking the necessary measures to ensure the application of governance, digitization of services, reducing the costs of cooperative societies and the costs borne by suppliers, preventing cooperative societies from collecting any amounts from suppliers, and ensuring that profits are directed towards providing goods at cooperative prices.

Comments Post Comment

Leave a Comment

Submit