Kuwait cenbank sees interest rates as 'suitable'

Central bank governor Sheikh Salem expects Kuwaiti inflation to be between 5 and 6 percent this year
Kuwait cenbank sees interest rates as 'suitable'
CENBANK HEAD: Governor of the Central Bank of Kuwait, Sheikh Salem Al Sabah (Getty Images)
By Reuters
Sun 13 Mar 2011 05:21 PM

Kuwaiti inflation is expected

to be between 5 and 6 percent this year, the Gulf Arab state's

central bank governor said on Sunday, adding interest rates are

at a 'suitable' level.

Kuwait's annual inflation eased to 5.2 percent in January

from a nearly two-year high. Price pressure rose in Kuwait last

year, led by food costs, pushing inflation to 6.0 percent in

December, the highest rate in the oil exporting Gulf.

"We expect inflation in Kuwait in 2011 to reach 5 to 6

percent," Central Bank Governor Sheikh Salem Abdul Aziz Al Sabah

told a news conference.

Sabah also said the OPEC member's 2011 nominal gross

domestic product (GDP) was expected to be 8.3 percent, after an

expected 17.3 percent in 2010, based on IMF forecasts.

In the first half of 2010, Kuwait's economy recovered at a

slower pace than expected after shrinking 21.2 percent in

nominal terms in 2009 due to weak oil prices, data showed last

year.

The nominal GDP of Kuwait, the world's fourth largest oil

exporter, dropped to KD31.5bn ($113.4bn) in

2009, from 40.0 billion in the previous year.

Several hundred protesters took to the streets last week for

the first time since the start of the Arab uprisings, demanding

an end to corruption and the removal of Kuwait's unpopular prime

minister.

On Friday, a small demonstration by stateless Arabs in the

north of the capital was met with volleys of teargas.

The global downturn hit Kuwait harder than other Gulf states

in 2009 as its economy is heavily reliant on the volatile

hydrocarbon sector.

"The situation of liquidity is good. The percentage rise in

profits for local lenders in 2010 was 62.6 percent despite

provisions that were booked," Sabah said.

He also said he would expect a decline in the percentage of

non-performing loans in the first half of 2011, and that the

bank would not change its loan provisioning policy

Sabah also said that interest rates were "very suitable",

and that Kuwait would have no need to drop the peg, sticking to

its currency basket.

Kuwait is the only Gulf oil exporter tracking a currency

basket, after ditching the dollar peg in 2007.

($1=KD0.2778)

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