Kuwait’s economy needs a booster shot

Kuwaiti officials with oversight responsibility on the performance of the local economy cannot overlook recent suggestions of low growth rates partly due to slow implementation of planned infrastructure projects.

Regarding economic expansion, the IMF for one has downgraded the forecast of real adjusted for inflation) GDP from 5.5 per cent in 2012 to 1.1 per cent in 2013. Certainly, this represents an adverse development and serves as testimony of the untold economic challenges in the country.

Happily, economic forecasts can always recover and suggest reaching as high as 3.8 per cent in 2014. However, this would partly depend on the implementation of development projects.

Trouble is Kuwait has developed a reputation for posting budgetary surpluses partly by not making good on promised expenditures. In reality, whilst final statistics for fiscal year 2012-13 ending in March are not yet published, all talks focus on the surplus levels rather than the possibility of reporting a deficit. This would mark the 15th time in a row for posting budgetary surpluses.

As to other disturbing developments, the IMF is projecting a bothersome inflation rate of 3.3 per cent in 2013 and rising to 3.8 per cent. This level of inflation is similar to that of 3.5 per cent projected in a report by the Bank of America Merrill Lynch.

Still, the fact that the index of Kuwait Stock Exchange (KSE) merely registered a 2 per cent growth in 2012 serves as testimony that investors are reacting negatively to largely adverse economic reports. Conversely, indexes of bourses of Dubai, Abu Dhabi and Saudi Arabia grew by 20, 9.5 and 6 per cent in 2012, respectively.

Equally worrying is the ranking of Kuwait’s economy among major indexes issued by the World Economic Forum (WEF). Undoubtedly, the not-for-profit institution based in Switzerland cannot be blamed for targeting the oil-rich country. Amongst others, WEF is known for holding an annual global conference in Davos, Switzerland.

Sadly, Kuwait lags behind fellow GCC economies in numerous WEF’s surveys. This is true in the information and communication technologies (ICT) survey. In fact, Kuwait is ranked number 62nd worldwide in the Network Readiness Index (NRI), in turn forming an integral part of the Global Information Technology Report 2013. Qatar leads the GCC on NRI with a ranking of 25.

Still, another recent report by WEF dealing with travel and tourism gives Kuwait a poor ranking. The Travel & Tourism Competitiveness Report 2013 grants Kuwait ranking number 101 globally, making it the sole GCC state not ranked among the top 100 places. Conversely, the UAE leads Arab countries by securing a ranking of 28th among 140 nations in the report.

Last but not least, Kuwait has overtaken Bahrain as the least competitive country in the GCC in the 2012-2013 Global Competitiveness Report. Kuwait is ranked number 37 among 144 nations reviewed in the report.

Yet, the report ranks Qatar as the 11th most competitive economy in the world, the best within the MENA area. Clearly, Kuwaiti officials need to make concerted efforts to overcome absence of impressive ranking in some key indexes if only to catch up with other GCC countries.

Reflecting differences in economic growth rates over the past few years, Qatar has overtaken Kuwait as the third largest GDP among GCC countries. As such, gone are the days when Kuwait’s economy was only behind those of Saudi Arabia and the UAE.

Judging by its local human capital, Kuwait has the means to report stronger performance. Suffice to say that Kuwaiti investors are noted for their international outlook.