Kuwaiti economy up 16.9% in 2010

Higher oil prices boosted Kuwait’s nominal GDP by nearly 16.9 per cent in 2010 after contracting by more than 23 per cent in 2009 because of lower crude prices and production, according to a bank in the Gulf emirate.

From around KD30.478 billion ($103.6 billion) in 2009, the OPEC producer’s GDP swelled to KD35.634 billion ($121.1 billion) in 2010, National Bank of Kuwait (NBK) said in a study, citing government data.

A breakdown showed the oil sector, which exceeded half the GDP, leaped by nearly 22.5 per cent while the non-hydrocarbon sector grew by 9.8 per cent.

The country’s economic performance last year was in contrast with 2009, when GDP dived by nearly 23.1 per cent in current prices.

The decline was mainly a result of a sharp fall in oil prices, which depressed the hydrocarbon sector by around 35.1 per cent in 2009. The non-hydrocarbon sector slipped by nearly 3.3 per cent.

The report showed trade, mining (oil and gas) and manufacturing were the largest gainers in 2010, recording over 20 per cent growth year-on-year.

Oil related industries, mining and manufacturing (which is driven by oil refining), witnessed robust growth as a result of a 26 per cent increase in Kuwait export crude prices in 2010, the report said, adding that this is in stark contrast to 2009 which saw a significant slowdown in these sectors when oil prices plummeted.

The two sectors grew by around 22 per cent each last year, but the oil refining sector in particular was the best performer in the economy, growing by 33.1 per cent.  The wholesale and retail trade sector expanded by 27.6 per cent in 2010, recording its first double digit growth since 2002. “This confirms the consumer sector’s strong recovery following the financial crisis.”

Construction increased by only around 3.5 per cent, reflecting lack of investment in infrastructure and oversupply in the commercial real estate sector.

“The sector is expected to improve as the government development plan begins to kick in and the effects of the financial crisis wither.”

The report showed the share of the oil sector in GDP increased slightly in 2010 given high prices and a modest recovery in crude production.

Although high oil price levels are likely to keep the sector’s contribution to GDP above 50 per cent, the government’s development plan should help boost activity in the non-oil sector in the next few years, it said.

According to NBK, expenditure components of GDP showed decent recovery in all areas during 2010, with private consumption gaining 6.4 per cent after falling 8.5 per cent in 2009. Gross fixed capital formation jumped 24.1 per cent after losing 21.6 per cent in the same period.

“Both consumption and investment recovered due to regained confidence in the economy in 2010. Having declined by over 30 per cent in 2009, exports rebounded 18.1 per cent last year on the back of high oil prices,” NBK said.

“This year, private sector activity should continue to improve gradually, and growth in exports will be supported by a good performance in the oil sector. As for government spending, consumption is expected to grow on the back of salary increases. Large increases in public investment spending are seen this year and next as a result of the implementation of the development plan.”

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