OPEC cuts will weigh on government revenue growth into 2018, says report
Kuwait’s fiscal deficit will narrow at a slower pace over the rest of 2017 and into 2018 than originally anticipated, according to a report.
However, the risks of a fiscal crisis still remain remote, it adds.
The report by BMI Research says that OPEC-initiated cuts to oil production are weighing on the Kuwaiti government’s revenue growth and hindering it from being able to shrink the deficit as quickly as it hoped.
BMI said it had upwardly revised its forecast for Kuwait’s budget deficit. It now sees the shortfall registering 20.8 percent of GDP in the fiscal year 2017/2018, up from its previous estimate of 17.1 percent of GDP.
Even so, the report said, “we maintain our view that the risk of a fiscal crisis is low as Kuwait has a range of financing options from which to cover its shortfall”.
Steadily falling yields on Kuwait’s eurobonds suggest the market agrees with that sentiment despite the higher deficit, BMI said.