Kuwait expects return to growth

Beirut : Kuwait's central bank expects inflation to slow next year and foresees the economy returning to growth, Governor Shaikh Salem Abdul Aziz Al Sabah said.

"For 2011 we expect between 3 and 4 per cent and for this year I can say almost zero" growth, Shaikh Salem said in an interview in Beirut yesterday. Inflation will be 4 per cent by the end of this year and "slightly lower" in 2011, he said.

Shaikh Salem said in March that the economy of Kuwait, which produces about 2.3 million barrels of oil a day, may expand by as much as 5 per cent this year as it recovers from a contraction caused by the global financial crisis.

Oil, the main source of Kuwait's revenue, is "not in the state's hand and we can't control this", Shaikh Salem said. Excluding oil, the country's output grew about 6 per cent last year and will achieve a similar rate this year, he said.

Crude prices, which fell to a low of $34 (Dh125) a barrel in December 2008, have averaged about $79 this year.

The country's inflation rate declined to 5.1 per cent in October from 5.3 per cent a month earlier, the state-run Kuna news agency reported on November 23.

The International Monetary Fund expects Kuwait's economy to grow 2.3 per cent this year and 4.4 per cent in 2011, according to figures on its website. The IMF estimates Kuwait's inflation will be 4.1 per cent in 2010 and 3.6 per cent next year.

Kuwait doesn't expect its economy to be affected by contagion from the European Union's debt crisis and there is no concern over the risk of a weak dollar, Shaikh Salem said. He said he is "very confident" about Kuwaiti banks, which he said had the highest earnings among lenders of the Gulf countries through the third quarter of this year.

"Kuwaiti banks have put together a very good and sufficient level of provisions not only for bad loans but also as precautionary measures," Shaikh Salem said, adding that he expected the ratio of provisions to decline. Kuwait's macro-economic indicators are "excellent", with a budget in surplus and a current account surplus exceeding 30 per cent of economic output, he said.