IMF predicts Kuwait’s real GDP growth at 5% for 2011

In its recently released Article IV Consultation Report, the IMF expects the Kuwaiti economy to grow steadily in 2011 and over the medium term as the government implements the four-year development plan and global recovery supports demand for oil. It is worth noting that the government launched its four-year development plan in early 2010, with the aim of transforming Kuwait into a regional trade and financial center, while expanding the role of the private sector in the economy.

The IMF projects Kuwait’s real GDP growth to reach 5% in 2011, reflecting an increase in oil GDP of about 3.3% and non-oil GDP of 6%, spurred by government spending. Inflation is projected to pick up in 2011 to about 6.2%, driven by imported inflation. The fiscal and current account balances are expected to improve further in 2011. Despite projected growth of 12% in fiscal year 2011/12 expenditure, the fiscal balance is expected to improve by almost 5.5 percentage points to 26% of GDP on account of higher oil revenue. The external current account balance is projected to increase to 33.5% of GDP.

According to the IMF report, the deterioration in the regional political and economic environment, particularly Bahrain and Egypt, poses risks for Kuwait. Spillover channels would be mainly financial and include losses on Kuwaiti investment in the GCC and the MENA region, which could put further pressure on investment companies, along with direct exposure of Kuwaiti banks to the region and stricter access to and a higher cost of external funding for Kuwaiti entities in the short-term.

The article above has been published as a part of Bank Audi`s MENA Weekly Monitor for Week 32 of 2011. It can be accessed via Internet at the following web address : http://www.banqueaudi.com