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)
By Andy Sambidge
Wed 18 May 2011 08:10 PM

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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