Kuwait's oil GDP growth is expected to decline in 2023 due to oil production cuts, but non-oil GDP growth would stay robust, driven by domestic demand, and is foreseen to remain steady over the medium term, says an IMF report.
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Non-oil GDP growth rose to an estimated 3.4 per cent in 2021, benefiting from a recovery in domestic and external demand, and strengthened further to 4 percent in 2022.
This, together with a pickup in oil production, resulted in a rebound in overall real GDP growth to 8.2 percent in 2022, said the report released following IMF Executive Board's consultation with Kuwait.
After peaking at 4.7 percent y-o-y in April 2022, headline inflation has receded to 3.7 percent in May 2023. Subsidies on basic food items such as rice and sugar, and caps on domestic gasoline prices, helped contain inflation, as did tighter monetary policy.
Core inflation (excluding food and transport items) has also been trending down since 2022Q2, the report noted.
The fiscal and external balances have strengthened, and external buffers are increasing.
The overall fiscal balance turned into a surplus of 6.5 percent of GDP in FY2021/22, while the non-oil balance (less investment income) improved by about 9 percentage points of non-oil GDP to -90.1 percent, and fiscal financing needs fell substantially.
The fiscal surplus is estimated to have improved to 23.4 percent of GDP in FY2022/23, benefiting mainly from high oil revenues, but also from expenditure restraint which helped increase the non-oil balance by about 2 percentage points of non-oil GDP to about -88.3 percent. Helped by higher oil revenue, the current account surplus is estimated to have reached 33.8 percent of GDP in 2022 and is projected to remain high in 2023. ■
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