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Fri 26 Nov 2010 04:37 PM

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Kuwait expects faster growth, lower inflation, says Sheikh Salem

Gulf country’s inflation rate declined to 5.1% in October from 5.3 % a month earlier

Kuwait expects faster growth, lower inflation, says Sheikh Salem
INFLATION WATCH: Central bank expects an inflation rate of 4% this year and slightly lower next year (Getty Images)

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

“For 2011 we expect between 3 and 4 percent and for this year I can say almost zero” growth, Sheikh Salem said in an interview in Beirut, Lebanon today. Inflation will be 4 percent by the end of this year and “slightly lower” in 2011, he said.

Sheikh 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 percent 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,” Sheikh Salem said. Excluding oil, the country’s output grew about 6 percent last year and will achieve a similar rate this year, he said.

Crude prices, which fell to a low of $34 a barrel in December 2008, have averaged about $79 this year. Oil is trading at about $83 a barrel today.

The Arabian Gulf country’s inflation rate declined to 5.1 percent in October from 5.3 percent a month earlier, the state run KUNA news agency reported on Nov. 23.

The International Monetary Fund expects Kuwait’s economy to grow 2.3 percent this year and 4.4 percent in 2011, according to figures on its website. The IMF estimates Kuwait’s inflation will be 4.1 percent in 2010 and 3.6 percent 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, Sheikh Salem said.

He said he is “very confident” about Kuwaiti banks, which he said had the highest earnings among lenders of the Persian Gulf countries through the third quarter of this year.