Kuwait’s economic growth is expected to slow to 6.6 percent in 2012 from 8.25 percent in 2011, the International Monetary Fund has said in a new report.
In its latest Article IV review of the Kuwaiti economy, the IMF said higher public spending and buoyant oil revenues should keep the economy growing rapidly this year.
The 2012 consultation discussions were held against the backdrop of significantly higher oil revenues for Kuwait, a product of higher global oil prices and an increase in oil production.
The IMF said Kuwait's headline inflation in 2011 increased to about 4.75 percent, from 4 percent in 2010, as food inflation increased to almost 9.25 percent.
It added that the economic outlook for Kuwait in 2012 was "broadly positive".
"Economic recovery is expected to strengthen, led by high government expenditure - particularly wages and capital expenditure," it noted.
It added that inflation is projected to moderate slightly due to a decline in global food inflation.
"Kuwait has significant fiscal space but the country is now at a crossroads as regards conserving wealth for its future generations," the IMF report said.
It added that rising public sector wage and pension costs and rapid population growth are expected to exert pressures on public finances in the medium term.
"If Kuwait is to preserve wealth equally for its future generations, fiscal consolidation will be needed in the medium term," the IMF said.
Overall, the IMF said there was a need to improve the productivity and welfare impact of government spending in the Gulf state.
"Legislative and other reforms are needed to improve Kuwait’s business environment and employment opportunities for Kuwaitis," the report said, adding that specific attention should be given to upgrading the education system to make it attuned to the needs of the business sector.
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