The turnaround in oil prices will provide key support to 2018 recovery.
In a recent commentary, the Institute of Chartered Accountants in England and Wales ICAEW Institute of Chartered Accountant (ICAEW) said that a positive outlook is likely for Kuwait’s economy with a boost from higher oil prices and increased project spending amidst diversification efforts.
Kuwait’s economy is highly reliant on oil as in other GCC countries, making up 90 per cent per cent of the revenue.
In an announcement on their website, the institution said that the Government is strengthening its efforts to incentivise foreign direct investment, helped by reforms for full foreign ownership of companies outside of the special economic zones and reforms to tackle corruption.
However, with the New Kuwait 2035 programme announced in January, non-oil economy is expected to continue to recover at 3.5 per cent rate in 2018, from an estimated 2.5 per cent in 2017.
This reflects a renewed commitment to capital spending as well as push to attract FDI with $116 billion set aside to invest in key mega-projects, improving infrastructure, including education and health, as well as increasing housing supply.
Currently, higher oil prices is helping Kuwait’s fiscal position however, progress on diversifying the revenue base outside of the oil sector will likely remain slow.
The parliament approved expat remittances levies, which have the potential to add $230 million a year to government revenues. It is however, yet to pass the selective tax bill and the introduction of VAT, which parliament members oppose and has been postponed at least until 2019.
ICAEW pegged oil price at $71 per barrel in 2018, almost 30 per cent higher than the 2017 average of $54 per barrel, and Kuwait’s overall GDP growth is expected stabilise around three per cent in 2020-2021.