International Monetary Fund. Middle East and Central Asia Dept.
This 2016 Article IV Consultation highlights that the economic activity in the non-oil sector in Kuwait has continued to expand, albeit at a slower pace, reflecting the impact of lower oil prices. Nonhydrocarbon growth slowed from 5 percent to an estimated 3.5 percent in 2015, as higher uncertainty weighed on consumption. Labor market reforms and efforts to promote the role of the private sector are important to foster diversification and boost job creation for nationals. Better aligning labor market incentives is necessary to encourage nationals to take on private sector jobs and private firms to create opportunities for them.
International Monetary Fund. Middle East and Central Asia Dept.
This 2015 Article IV Consultation highlights that decline in oil prices has adversely affected Kuwait’s fiscal and current account balances and slowed growth in 2014–15. Real non-oil GDP growth is projected to slow in 2015 and 2016, and pick up to 4 percent in the medium term, supported by government investment in infrastructure and private investment. The fiscal and external positions are projected to deteriorate further in 2015 and 2016, and improve somewhat over the medium term as oil prices and production recover partially.
Using narrative-based country-case studies, war episodes in the Middle East were examined to assess their economic impact on conflict and neighboring economies. The paper found that conflicts led to a contraction in growth, higher inflation, large fiscal and current account deficits, loss of reserves, and a weakened financial system. Post-conflict recovery depended on the economic and institutional development of the country, economic structure, duration of the war, international engagement, and prevailing security conditions. The net economic impact on neighboring countries varied according to their initial economic conditions, number and income level of refugees they hosted, economic integration, and external assistance.
The expenditure multipliers in Kuwait are likely to be high, and mostly operate through capital expenditure. Kuwait’s large state-controlled endowment of natural resource, pegged exchange rate regimes, and relatively open financial accounts are the mainstay. The nominal effective exchange rate diverged from the set pattern owing to higher inflation. Estimates from methodologies for exchange rate assessment indicate mixed results. Macroprudential policies in Kuwait would strengthen the management of systemic risk by reducing the probability and the impact of a financial boom-bust cycle on economic activity.
Employing a dynamic panel regression, this study estimates the medium-term current account position for three subgroups of emerging market and developing countries with shared economic characteristics. The fundamental determinants of the macroeconomic balance approach to current account determination (arising from the IMF's Consultative Group on Exchange Rate (CGER)) are augmented by determinants relevant to Middle Eastern economies' current account positions. The study also assesses the deviation of the actual medium-term current account position of three Middle Eastern subgroups of countries (emerging markets; low-income and fragile economies; and net oil exporters) from their medium-term current account norms. Key findings are that: augmentation of the fundamental determinants yields plausible Middle Eastern current account norms; and in comparison with the medium-term current account norm, the actual and projected current account imbalances of each of the three subgroups are typically not excessive.
Kuwait’s economy was affected significantly by the global crisis. The financial sector experienced funding pressures and deterioration in asset quality. The economic outcome depends largely on government spending and the associated private investment. Stress tests indicate that the banking system can withstand shocks. The macroeconomic policy mix is adequate, but growth of current expenditures should be contained. Successful implementation of the growth agenda requires progress in structural reforms. The financial system’s oversight framework should be strengthened. The household debt relief law can undermine the financial culture.
The paper gives statistical data on sectoral origin of gross domestic product at current prices and constant prices; expenditure at current market prices and at constant production in Kuwait. It provides data on disposal; and prices of oil and LPG; consumer and wholesale price index; output of major industrial products; population and employment; distribution of employees by economic activity and nationality; summary of government finance, revenue, monetary survey; and financial account reserves and net foreign assets of the financial sector along with other major areas.
While the underlying methodologies continue to be widely debated and refined, there is little consensus on how to assess the equilibrium exchange rate of economies dominated by production of finite natural resources such as the oil economies of the Middle East. In part this is due to the importance of intertemporal aspects (as the real exchange rate may affect the optimal/equitable rate of transformation of finite resource wealth into financial assets), as well as risk considerations given the relatively high volatility of commodity prices. The paper illustrates some important peculiarities of the exchange rate assessment for such natural resource producers by working through a simple two-period model that captures certain key aspects of many resource economies.
This paper discusses the Union of Comoros’ 2008 Article IV Consultation and request for Emergency Post-Conflict Assistance and disbursement under the Rapid-Access Component of the Exogenous Shocks Facility. Real GDP growth has been well below the regional average, and per-capita income has steadily declined. Rising food and energy costs have worsened the external position, and the external debt burden is far above the Heavily Indebted Poor Countries threshold. To reverse the deteriorating trend, the authorities have initiated measures in 2008 to contain the fiscal deficit and begin to address macroeconomic and structural impediments to growth.
The strong economic and financial position of Kuwait has improved further, but inflation has risen. The nation has made significant progress on the issues raised in the 2007 consultation. Kuwait’s integration into the global economy has been increasing in recent years. Global integration is underpinned by active membership in global and regional trade initiatives and an ongoing push to liberalize domestic regulations. Both the external current account and fiscal positions are projected to remain in large surplus, albeit at declining levels owing to the high import intensity of the planned investment projects.