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Kuwait Set for 4.7 Percent Economic Growth in 2011

Kuwait : 01 June 2011

Real GDP figures should increase by 4.7 percent in 2011, landing the CPI inflation rate around 4.7 percent. Rising oil prices and increased production as a result of lower output for Libya should undergird that sector.

Stable employment is solidly anchoring the consumer sector along with the Amiri grant recently announced. Each Kuwaiti family was allotted an $18,000 or KD 5,000 grant in February.

The balance of the nation’s economic sectors – including business services and construction – are still dependent on the current five-year plan and the projects included in it that are moving slowly down the pipeline.

Recovery was evident in the real estate sector last year and it continues to improve throughout this year. In total, real estate sales for 2010 were up by 53 percent over the 2009 figures, totalling KD 1.9bn. In the opening quarter of this year the apartments and buildings segment led the way with a year-on-year increase of 90 percent. Investors looking for income and yield are favoring that segment.

The five-year plan is worth KD 31bn and winds down at the beginning of 2014. For the fiscal year 2010/2011 the plan calls for KD 5bn spending on infrastructure. The government estimates that execution figures, or actual spending, will reach the 50 percent level at KD 2.5bn by the close of accounts. NBK expects that figure to reach 57 percent.

In the current fiscal year (2011/2012) the government has issued preliminary estimates for infrastructure spending of KD 5.4bn. The expected pace of spending should improve moving forward. As new PPPs (public/private companies) come on line and begin operation further spending should result.

Assuming the proposed schedule in maintained, the establishment of two major PPPs will occur this year. The KHAC (or Kuwait Health Assurance Company) will assume control of the health care and mandatory insurance for expats, taking over for the government. The selection of the Kuwaiti partner who will manage and partially own this endeavour is scheduled for sometime in the coming months. Another major PPP will form during the second half of 2011 for the construction and operation of an IWPP (or independent water and power plant) located in North Al-Zour.

Faithful execution of the five-year plan will result in enough growth throughout the non-hydrocarbon industry to see it surpass growth rates in the oil sector. Diversification away from oil is one of the main goals in the plan’s structure. Similar to the initial five-year plan, just 20 percent of new plans are within the oil sector while 80 percent are in non-hydrocarbons. Although this combination is not set in stone, KPC (or Kuwait Petroleum Company) announced nearly $95bn in oil projects within the current plan and moving forward through the coming years. Despite this figure, the goal to favor non-oil projects remains.

Consumer price inflation (or CPI) came in at 4 percent for 2009 and last year. NBK is forecasting an increase to 4.7 percent this year as a result of increased food prices. In the mean time, Kuwait’s strong and solid fiscal position continues to be the global exception. There should be another surplus for the 2010/2011 fiscal year, the twelfth in a row, of KD 4.5bn. Expectations for fiscal year 2011/2012 forecast an even larger surplus of KD 9.0bn.

Paul Holdsworth, Staff Writer, Gulf Jobs Market News
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