A surge in oil prices to a new record high level will boost Kuwait’s income to its highest ever level of more than $86 billion this year and revenue will climb further next year, according to the International Monetary Fund.
The Washington-based IMF expected crude prices to soar to an average $105 a barrel in 2011 and $105.8 in 2012 to break a new record after they peaked at an all time high of around $93.7 in 2008.
In a report on Kuwait, the Fund confirmed earlier forecasts that the Gulf country’s real GDP would grow by about 3.3 per cent this year, with oil growths projected at 3.2 per cent and that in the non-hydrocarbon sector at 3.3 per cent.
It said economic activity in the emirate, a major OPEC oil exporter, had been financed mostly by government expenditure as the increase in bank lending to the private sector was small with higher lending of 3.3 percent to the productive sectors (industry, services, and trade) partially offset by a reduction in credit to the real estate and financial sectors.
From around $61.7 billion in 2010, Kuwait’s oil export earnings are expected to leap to nearly $86.8 billion this year and swell further to $91.8 billion in 2012.
The IMF said the surge would be a result of a sharp rise in oil prices from an average $76.4 in 2010 to $105 in 2011 and $105.8 in 2012.
The Emirate’s crude output is also forecast to climb from about 2.31 million barrels per day to 2.42 million bpd in 2011 and 2.52 million bpd in 2012.
As a result, Kuwait is again expected to record high budget and current account surpluses this year despite a surge in public spending, the IMF said.
“Government expenditure in fiscal year 2010/2011-excluding energy-related subsidies and recapitalization of social security-is estimated to have increased by 21.5 percent, with expenditure accelerating in the second half of the fiscal year. Half of this growth was attributable to the recent Amiri grant, which offset the under-implementation of the budget,” the report said.
In 2010, fiscal and external surpluses are estimated at about 21 and 29 percent of GDP, respectively, compared to 28 and 24 percent in 2009, the report showed.
It expected the country’s fiscal and current account balance in 2011 to widen to 26.6 and 34.4 per cent respectively.
“Fiscal policy should be the first line of defense to manage the financial cycle that is typically associated with the oil cycle. Given the basket peg, macroprudential policies are of particular importance,” the IMF said.