In what may seem like a familiar course of events for long-time followers of Kuwait, the country’s oil minister Bakheet Al Rashidi, and the minister of social affairs and labour, and state minister for economic affairs, Hind Al Sabeeh, survived no-confidence votes in May after parliamentary members in opposition had grilled the two for slow development work.
For minister Al Sabeeh, the no-confidence vote was her second in three months, and a sign that members of parliament are seeking to fast-track development projects in the Gulf country.
Kuwait’s political fallouts are frequent and well-documented. The last showdown between the government and MPs, over budget issues, led to the dissolution of the parliament as recently as October 2016 – the 55th time the Kuwaiti parliament had been dissolved since 1962.
But beyond the political logjam, the economic wheels finally appear to be spinning.
Kuwait is coming off a deep 2.5 per cent GDP contraction last year – the worst among Gulf states – as the oil-dependent economy recoiled on the back of lower commodity prices and curtailed oil output cut to support the Organisation of Petroleum Exporting Countries’ decision to collectively cut production by 1.8 million barrels per day.
A turnaround may see the Kuwaiti economy pick up by 1.3 per cent in 2018, and a stellar 3.8 per cent in 2019, according to the International Monetary Fund, second-best after minnow Oman’s projected 4.2 per cent GDP expansion next year.
But even as Kuwait’s overall economy contracted in 2017, its non-oil economy rose 3.3 per cent.
“We expect this trend to continue in 2018 and 2019, with non-oil growth seen accelerating to 3.5 per cent and 4 per cent, respectively,” according to Nemr Kanafani, head of research at National Bank of Kuwait, the country’s largest bank.
The lender attributes the growth to development of major projects as part of the capital spending commitment by the government.
“In March, the government re-iterated this commitment at this year’s Kuwait Investment Forum with its ambitious plan to develop the northern region,” Kanafani wrote in the latest monthly report.
“With the aim of diversifying the economy away from oil and bolstering national security, the plan promises to generate 200,000 jobs for Kuwaitis. This project will boost income and spending, providing an impetus to credit and economic growth over the medium term.”
With Iraq no longer a serious threat to the country’s sovereignty, Kuwait aims to build out its northern region through the ambitious $200bn Gulf Gateway project.
The project aims to generate $220bn to the country’s GDP over time, create as much as 400,000 highly-skilled jobs and attract 3 to 5 million visitors each year, as it transforms the area into a tourism hotspot and another key landmark in China’s cross-country belt and road initiative.
“To change things have prevailed, and to regain our growth we have chosen the Northern Gulf Gateway development, not only as an economic catalyst but also to build a new geopolitical era,” said Sheikh Nasser Sabah Al-Ahmad Al-Sabah, first deputy prime minister and minister of defence.
“Connecting to the Belt Road Initiative, the development will have a world-class airport, industries, a knowledge zone, leisure zone and educational zone.”
The government aims to address chronic low foreign direct investment into the country by attracting investors from Europe, Asia and the United States in the northern region. US aircraft maker Boeing has already confirmed it will set up an office in the country soon.
In many ways, the Gulf Gateway project was Kuwait’s coming out party. With peer Saudi Arabia in the midst of a generational transformational and the UAE already a diversified economic powerhouse, Kuwait has long been seen lagging in ambition.
But the latest oil downturn may serve as a wake-up call for Kuwait.
While the country has remained fiscally sound in past oil downturns – as its break-even oil price has easily been the lowest among its peers – the last oil downturn was structural, and the authorities know that diversification is vital for an economy that relies on oil exports to fund two-thirds of its budget.
Full article – http://gulfbusiness.com/kuwait-oil-habits-hard-break/