Source: Kuwait Times
KUWAIT: According to preliminary estimates for 2011, Kuwait’s gross domestic product (GDP) rose by 29% to a record KD 44.4 billion, compared to KD 34.4 billion in 2010. (Chart 1.) This was led by a 47% surge in oil GDP to an all-time high of KD 28.7 billion, on the back of record high oil prices. (Chart 2.) This pushed the oil sector’s contribution to total GDP to almost 65%, the highest in three decades.
Meanwhile, non-oil GDP was up by just under 6%, and stood at KD 15.7 billion. GDP per capita, an indicator of the standard of living, reached a record of around KD 12,000 ($42,600) in 2011, up by more than 25% on the previous year. This year we expect GDP to grow at a solid, yet slower, pace of 10-15% as oil prices remain firm.
The oil and gas sector (excluding refining) was the star performer of the economy during 2011, growing by a whopping 49% year-on-year to almost KD 28 billion and representing 62% of total GDP. (Chart 3.) This was not only bolstered by record oil prices, but also by an increase in Kuwait’s crude oil production which jumped by some 347,000 barrels per day (bpd) in 2011 to an average daily production of 2.7 million bpd.
Other sectors that witnessed double-digit growth included utilities (i.e. electricity, gas and water) as well as the community, social and personal services sector which includes a large chunk of government spending. Meanwhile, financial institutions, which represent the third largest sector in the economy, declined by almost 8% in 2011 as credit growth was soft and investment companies continued to delever.
The expenditure components of GDP revealed an improvement in consumption spending. (Chart 4.) Government consumption spending growth accelerated to 13% to a record KD 6.7 billion in part related to significant salary increases during the year. After falling in the previous two years, private consumption grew by about 7% to KD 10.1 billion helped by a strong consumer sector that has benefited from wage increments and steady employment levels.
On the other hand, capital formation saw a slight decline of 0.6% falling to just under KD 7 billion in 2011, which comes as little surprise given the continued stalling of the government’s development projects. Exports, comprised mainly of oil exports, have moved in line with oil prices; exports soared by more than 40% in 2011 to a record KD 31.6 billion on the back of a 38% increase in Kuwait Export Crude prices. Meanwhile, imports grew by a modest 9% to just under KD 11 billion.
Domestic demand, a measure of consumption and investment spending, totaled KD 23.8 billion in 2011, a gain of around 6% on the previous year. This year, we expect consumption expenditure, both public and private, to continue to expand supported by a growing wage bill. As to growth in investment spending (infrastructure), it is still a waiting game for the authorities to move on various contract awards and on the creation of the new PPPs (Public Private Partnerships). Growth in that component of GDP is needed to further boost the economy in coming years, and in particular the non-oil and private sectors.