Extraordinary economic facts help compensating Kuwait for adverse political developments. Reference is made to last week’s decision by the country’s ruler of dissolving the parliament for the sixth time in six years.
Certainly, this fact about calling for new elections tells a great about the state of politics in Kuwait. Anyway, as per a constitutional clause, fresh elections should take place within 60 days at a time of tense political tensions.
The controversial move followed weeks of political uncertainty amidst protests by the political elite for serious democratic reforms. Their demands include having an elected premier as well as providing the legislative branch all necessary tools to ensure oversight of the government, public finance and management of resources, notably the significant oil sector.
The argument goes that exceptional economic realities are not allowing the country to drift away into further problems on the back of political turmoil. The country is run on a patronage basis with the government providing numerous subsidies to the locals including jobs.
Suffice to say that governmental departments and enterprises associated with the state account for 92 per cent of employment opportunities for Kuwaiti nationals. What’s more, the state of public finance allows for employment of new Kuwaiti entrants to the job market.
Happily enough, plenty of evidence point to outstanding economic realities in the country. For instance, Kuwait registered a record $47 billion (Dh172.58 billion) in fiscal year 2011-12. The surplus marked the 13th consecutive year in a row in which the country registered a budgetary surplus. In retrospect, the previous highest surplus of $33.2 billion was posted in fiscal year 2007-2008. Interestingly enough, during the said fiscal year oil prices reached a record $147 per barrel.
Similar to the fellow Gulf Cooperation Council (GCC) state of Qatar, fiscal year in Kuwait runs from April to March. The practice allows for preparation of the budget on the basis of facts established following the start of the year.
Still, budgetary surplus would most likely be repeated in fiscal year 2012-13 if only for assuming conservative average oil price of $65 per barrel. Approved by the cabinet only recently due to political turmoil, the budget assumes a shortfall of nearly $26 billion on spending of $75.6 billion.
These economic facts contribute to another economic ending, namely, satisfactory sovereign ratings, For example, Standard & Poor’s (AA-) rating with stable outlook. The rating falls within the top level of investment grades and therefore provides an indication about economic direction. Also, Kuwait boasts ratings of (Aa2) by Moody’s and (AA2) by Fitch, certainly all within investment grades.
In fact, Kuwait stands out amongst GCC countries with regard to some key statistical performance, notably the magnitude of fiscal and trade surpluses. For example, according to 2010 figures, fiscal surplus in Kuwait amounts to more than 22 per cent of the gross domestic product (GDP).
Saudi Arabia ranks a distant second with fiscal surplus amounting to nearly 7 per cent of the GDP. Still, stronger budgetary surpluses mentioned above allow for expanding rather than narrowing statistical performance.
In addition, current account surplus represents some 28 per cent of the GDP in Kuwait, undoubtedly the highest within amongst GCC states. Qatar follows suit with a surplus standing at 25 per cent of GDP.
Certainly, other positive facts only add to the exceptional state of Kuwait’s economy. Amongst others, inflation is not a threat at the moment.
Nevertheless, it would be possible for Kuwait to appreciate its potential if its economic and political matters collectively are in the right direction. Only the future can tell that.
