Article

Continuing Structural Reforms, Monitoring Stock Market are Priorities for Kuwait

Author(s):
International Monetary Fund. External Relations Dept.
Published Date:
August 2006
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Kuwait’s economy strengthened further in the past two years, with real GDP growth of 6.4 percent in 2004 accelerating to 8.5 percent in 2005, thanks to higher oil production and buoyant non-oil activity. The overall fiscal surplus increased to an estimated 24 percent of GDP in 2004/05. Nonetheless, fiscal policy was expansionary as the non-oil primary deficit increased to 61 percent of non-oil GDP because of higher subsidies, transfers, and capital outlays. As a result of buoyant non-oil activity and the delayed effect of the dinar’s depreciation against the euro and the yen, inflation edged up to almost 4 percent in 2005. The stock price index more than tripled during 2003-05. Progress with structural reforms continued, albeit slowly, and private sector participation expanded, particularly in telecommunications, airlines, and infrastructure development.

The IMF Executive Board commended the authorities for Kuwait’s strong macroeconomic position and their constructive role in support of oil price stability. The Directors encouraged the authorities to further improve the structure of the budget by gradually increasing capital expenditure and achieving a better balance between productive expenditure and fiscal savings, and to develop a comprehensive and transparent medium-term strategy to manage fiscal surpluses. They welcomed steps taken to further strengthen banking supervision and open the sector to foreign banks and noted that the continuing increase in the stock price index should be carefully monitored to assess its potential impact on the financial sector. In this regard, it will be important to implement the Financial Sector Assessment Program recommendations, including passing capital market and insurance laws and establishing comprehensive oversight of the stock exchange, investment companies, and insurance sector.

Kuwait
Est.Proj.
2003200420052006
(percent change)
Real GDP13.26.48.56.2
Consumer price index1.01.33.93.5
(percent of GDP)
Current account balance133.130.726.025.1
Overall fiscal balance117.424.4–11.640.4
Total expenditure137.835.231.230.1

Fiscal year ending March 31.

Data: Kuwaiti authorities and IMF staff estimates and projections.

Fiscal year ending March 31.

Data: Kuwaiti authorities and IMF staff estimates and projections.

For more information, please refer to IMF Public Information Notices Nos. 06/23 (Palau), 06/51 (Lithuania), 06/48 (Ethiopia), and 06/35 (Kuwait) on the IMF’s website (www.imf.org).

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