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Wed 18 May 2011 08:10 PM

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Kuwait will see 'minimal' impact from regional unrest

Business Monitor Int'l forecasts 3.4% growth for economy, oil price to ensure large fiscal surplus

Kuwait will see 'minimal' impact from regional unrest
Kuwaits stock exchange. (Getty Images)

Kuwait's economy will see "minimal" impact from the unrest elsewhere in the Middle East region, with oil prices ensuring large fiscal surpluses over the coming years, Business Monitor International has predicted.

Analysts said they were holding their forecast of 3.4 percent real GDP growth in 2011, despite the recent troubles in neighbouring Bahrain and Oman, as well as uprisings in the wider region.

"We believe that the recent unrest in the Middle East and North Africa will only have minimal implications on Kuwait’s growth outlook this year," BMI said in a new report.

It said elevated oil prices will ensure that Kuwait continues to run large current and fiscal account surpluses over the coming years.

"We have revised up our forecasts for budget revenues on the back of the prospect for higher oil prices in 2011," BMI analysts said.

But they added that given the $5bn fiscal stimulus package announced by the government at the start of 2011, a ramp up in government spending is also expected, so budget surplus projections remained unchanged.

On the down side, BMI warned that "persisting political tensions" between parliament and the government could "act as a drag on the country’s investment climate".

"Lingering tensions in Kuwait’s parliament, combined with the regional political crisis, could significantly distract the government from pushing through much needed reforms to the business environment," analysts said.

Earlier this month, preliminary data showed Kuwait's net budget surplus increased to KD6.5bn ($23.67bn) in its 2010/11 fiscal year as oil income jumped.

The budget included spending on a four-year, KD30bn ($109.26bn) development plan, which is aimed at diversifying the crude-reliant economy and increasing the role of the private sector.

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Jim Thompson 9 years ago

This can be assumed because of the orchestrated rift between the government and the Parliament, this country will remain in a regressive position in the GCC amist the constant political wragglings that is delaying the development process. This has been to the benefit of certain parties, who have used the political instability to their advantage, so it is really up to the Kuwait public to determine their breaking point and demand once again to desolve the Parliament. This tiny GCC nation has strong potential to become a business hub in the region, but that is only if the proper business reforms are in place and with the construction of a new airport which is the gateway to the nation. At this point leaders that truly care about this nation, can demand they break ground on major development projects that were approved last February or render their positions to someone more qualified to handle the reigns of progress.

Mariam M 9 years ago

I wouldn't speak too soon, the Arab spring may hit this tiny nation. After the PM has once again scathed past interpellations by playing the constitution card, the youth of this nation are vowing to make their discontent known in Safat Square on
Friday. It is hard to predict what the turnout will be, but after yesterday's fist pumping incident in Parliament, the MP's are not looking quite focused on the critical agendas of the day. Although the PM lifted his arm like Moses parting the Red Sea yesterday, in a motion to calm the waters when the scuffle broke out in Parliament, the youth could rock the boat tomorrow and join the waves of Arab discontent in the region, by making their voice heard using Twitter and Facebook which has become a common tactic on the Arab streets. The demonstration dubbed 'Friday of Contitution' will demand new elections which will be the youths’ response to the decision of the Parliament to postpone interpellations of the PM for a year.