Kuwait’s real non-oil GDP must have grown 2.6 per cent in 2010 and projected to grow by 4.5 per cent in 2011 due to increased government spending on the recently approved development, the Gulf Investment House said, citing International Monetary Fund (IMF) figures.
Real oil GDP is expected to grow by 1.9 per cent in 2010 and by 4.3 per cent in 2011 due to increase in oil production.
Furthermore, credit agency Moody’s stated in a recent report that the government’s debt-to-GDP ratio is expected to decrease to 6.6 per cent in 2010 and down to 6.1 per cent in 2011.
Based on the Kuwait Development Plan (KDP), GDP is expected to grow at an annual rate of 5.1 per cent from 2010/11 to 2013/14. Overall, the economy is projected to gradually grow in the next few years as the global recovery increases oil demand; the implementation of the KDP will also boost the economy as the financial and construction sectors grow.
Kuwait’s economy has significantly slowed down since the fourth quarter of 2008 after witnessing several years of steady growth. Kuwait’s nominal GDP in 2009 experienced a 21 per cent decrease to reach KD31.5 billion, compared to a 23 per cent increase in previous year.
The non-oil GDP was not heavily affected as it increased by almost 6 per cent in 2009, while growing by 5 per cent in the previous year.
On the other hand, the oil GDP decreased by 41 per cent in 2009 after witnessing a 39 per cent increase in 2008. That significant decline in hydrocarbon figures was directly related to the diminishing oil prices that started in 2008 and continued in 2009.
The global financial crisis triggered a decline in oil, real estate, and equity prices which caused the economic slowdown in 2009.
In real terms, the GDP recorded a decline of 4.5 per cent in 2009, which was the worst in the Gulf Cooperation Council (GCC), to reach KD18.9 billion, compared to a 5.6 per cent growth in 2008.
Similar to most GCC countries, the hydrocarbon sector is a main contributor to Kuwait’s GDP as it represented an average of 53 per cent of nominal GDP during the same period. However, the hydrocarbon sector contributed 45 per cent of Kuwait’s GDP in 2009 due to the decline in oil prices.
Oil prices in the beginning of 2009 floated around $40-50 and then gradually started increasing to reach $80/barrel by the end of 2009 (average was $61.76/barrel for 2009 vs $93.78 in 20008).
As seen in the economic and social development plan of Kuwait, diversifying the economy away from oil is the long-term development strategy of the country. The new development plan aims to privatise many public entities to improve competitiveness in all sectors. Based on the development plan, the real non-oil GDP will grow by an annual rate of 7.5 per cent from 2010/11 to 2013/14.
The manufacturing sector, led by refined products, contributed 5 per cent of the GDP, which reinforces the importance of oil on Kuwait’s economy. The Real Estate and Wholesale & Retail Trade were the other sectors of Kuwait’s economy that had a significant impact on the total GDP.
Together, they represented almost 7.5 per cent of the GDP in 2009. Although some sectors witnessed growth in 2009, none of the sectors’ growth rates in 2009 surpassed the growth witnessed in 2008.