Kuwait’s economy recovered at a slower pace than expected in the first half of 2010, after shrinking 21.2 percent in nominal terms last year due to weak oil prices, data from the Gulf Arab country showed on Thursday.
The global downturn hit Kuwait, the world’s fourth biggest oil exporter, harder than other Gulf states in 2009 as its economy is heavily reliant on the volatile hydrocarbon sector.
The OPEC member’s economy is expected to rebound this year, helped by higher oil prices and government spending plans. However, the second quarter trade data released by the central bank pointed to sluggish domestic demand.
Daniel Kaye, senior economist at the National Bank of Kuwait, said: “Imports look more or less flat over the past two quarters. This does not fit very well with the notion of the economy recovering, it probably tells the story that the economy is doing a bit better but it is not exactly booming forward.”
He added: “In terms of most people’s hopes for the coming year about the government’s major investment programme, most of that programme really has not got going yet.”
Imports fell 16 percent year on year in the second quarter, edging slightly higher compared with the previous three months, when they booked a 31 percent annual drop, the data showed.
Exports, of which oil accounts for 95 percent, jumped 30 percent from a year ago tracking the rise in crude prices, to reach their highest level since the third quarter of 2008. They rose by 67 percent in the first quarter. Kuwait’s trade surplus edged down slightly to $11.12 billion in April-June, the data showed.
Kuwait plans to spend $104.27 billion in the next four years to reduce its dependence on oil, but its parliament only approved the state budget for this fiscal year in June, two months after the year started.
The oil and natural gas sector’s share of the country’s GDP fell to 45 percent last year from 59 percent in 2008, the data showed, though that was mainly due to lower prices and output cuts.
The country’s nominal gross domestic product dropped to $109.6 billion in 2009 from $139.03 billion the previous year, the data showed. It rose 22.7 percent in the oil boom year of 2008.
The central bank did not release economic performance figures based on constant prices.
Central bank Governor Sheikh Salem Abdul Aziz al Sabah said last month that real GDP for 2009 was expected to have tumbled by 4.6 percent, worsening his March estimate for a contraction of up to 2 percent.
Reinhard Cluse, EMEA economist at UBS in London, said: “The percentage drop is in line with what we have for other oil-producing countries in the region, especially Saudi Arabia.”
He added: “The nominal GDP figure tends to fall in OPEC countries together with declining oil prices, a trend we have seen during last year.”
The central bank said in March it expected economic growth of 4 to 5 percent in 2010. Analysts polled by Reuters in June were more conservative, forecasting a 3.0 percent rise in real terms. (Reuters)
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