Kuwait’s Budget: Price of Oil, Over-dependance on Oil and Public Spending

Kuwait currently enjoys robust economic growth. According to the latest report by Global Investment House Kuwait’s Real GDP expected to grow by 5.7% in 2011, 4.5% in 2012. Nevertheless, oil continued to dominate total exports of Kuwait in 9M2011, as it did with total government revenues.

On average, oil exports have accounted for 94% of total exports from 2005 to 9M-11. Over-dependance on oil exports coupled with the skyrocketing public spending (wages and salaries component increased by 400% over the last decade) are casting a shadow on the economic future of Kuwait.

Note from Global Investment House Report:

Kuwait’s public finance in 2011/12 is all set to post a surplus for the thirteenth year in a row. The economy has consistently surpassed budgeted figures due to conservative government assumptions.

The government creates the annual budget based on conservative oil prices as well as production. Kuwait’s 2011/12 budget assumed the oil price per barrel to be USD60, while the actual price of the KEC is expected to be around USD110 on an average.

Total government revenue is expected to reach KWD29.5bn for 2011/12 while expenses even if they touch the usually budgeted high figure of KWD19.4bn will amount to a budget surplus of KWD10.1bn. This could be a conservative estimate as for the first nine months of the current fiscal, the public finance surplus stood at KWD13.2bn.