Arab News, Wednesday, Jun 07, 2023 | Thul-Qidah 18, 1444
Kuwait’s non-oil sector to grow 3.8% in 2023: IMF
Kuwait:
Kuwait’s non-oil growth is projected to increase to about 3.8 percent in 2023 on
account of a robust expatriate community, the International Monetary Fund has
forecast.
While overall growth is anticipated to drop to 0.1
percent this year, the non-oil economy will be strengthened on the back of the
financial stimulus and partial recovery in the employment of
expatriates, according to the IMF’s latest analysis of Kuwait.
The county’s advancement will occur despite the
slow growth of real credit, said the report, adding: “Benefiting from high oil
production and prices, Kuwait’s economic recovery continues.”
The report noted that Kuwait showed adequate
recovery from the effects of the pandemic, and inflation has been controlled
given the limited spillover from higher global food and energy prices.
This resulted from managed prices and subsidies,
as well as the general tightening of monetary policy in line with major central
banks.
Kuwait’s fiscal balance has developed since its
overall fiscal surplus is expected to have increased by 22.5 percent of the
gross domestic product in 2022, up from 6.4 percent in 2021.
As for the country’s external balance, the current
account surplus is estimated to have increased to 33 percent of the GDP last
year, up from 26.6 percent in 2021.
Additionally, the country’s financial stability
has been preserved as its banking sector sustains an efficient level of capital
and liquidity.
Economic threats
The instability of oil prices and production
brought on by external factors pose risks to Kuwait’s external balance, public
finances, growth and inflation, according to the report.
Kuwait’s economy could also be at risk of the
slowdown in global growth due to further tightening of monetary policy or
pressures in the banking sectors of major advanced economies.
The report also noted that the country is
susceptible to the delay in implementing the necessary financial and structural
reforms, which could lead to the continuation of the current public fiscal
policy.
In turn, this might damage investor trust, while
limiting progress towards diversifying economic activity and boosting its
competitiveness.
“The dominance of oil in the economy, coupled with
global decarbonization trends, necessitates fiscal reforms to reinforce
sustainability, and structural reforms to boost non-oil private sector-led
growth,” said the report, adding: “Political gridlock between the government and
parliament has hindered reform progress, which could be made now from a position
of strength.”