Standard & Poor’s expects Kuwait’s economy to grow by 8% in...

Standard & Poor’s expects Kuwait’s economy to grow by 8% in...
Standard & Poor’s expects Kuwait’s economy to grow by 8% in...

Kuwait – Mubasher: The credit rating agency Standard & Poor’s expected that the real GDP in Kuwait would grow by 8 percent this year, driven by the increase in oil production under the “OPEC +” agreement.

And the credit rating agency explained, in a report issued late on Friday, that it expected the average budget deficit in Kuwait to reach 12 percent of GDP until 2025, despite the rise in prices and quantities of oil production, “which is among the highest rates among all ranked countries. by the agency,” according to a statement by the Central Bank of Kuwait.

The report indicated that the government of Kuwait is close to depleting the liquidity of the General Reserve Fund and has not yet reached an agreement with the National Assembly on a comprehensive strategy for financing the budget deficit, which represents financing risks for the state, especially if oil prices drop.

The agency indicated that relations between the executive and legislative authorities began to improve after the national dialogue, which increases the possibility of passing the Public Debt Law and the public financial control plan.

She pointed out that Kuwait is currently benefiting from the rise in oil prices from its lowest levels since the beginning of the pandemic in 2020, expecting that Kuwait will nonetheless face a public budget deficit averaging 12 percent of GDP in the medium term and an estimated equilibrium price of the public budget between 85 and $90 a barrel.

Regarding the positive developments after the national dialogue, the agency said that these conciliatory moves increase the likelihood that the government and parliament will reach an agreement on major structural reforms, noting that a comprehensive strategy for budget financing has not yet been developed, while the General Reserve Fund has been exhausted, and “this situation constitutes negative financing risks. on the country’s credit rating, especially if oil prices fall.”

It estimated, the total general government debt of Kuwait at 8 percent of GDP, while interest expenditures amount to about 1 percent of total public spending, explaining that any possible adjustment to uncontrolled public spending could weaken the economy and weaken the confidence of foreign investors.

She pointed out that Kuwait is the only Gulf country that has not yet implemented a value-added tax at a time when reducing public spending is politically difficult, given that most of it represents government wages and subsidies.

She stated that Kuwait’s economy is largely dependent on oil, as it accounts for about 90 percent of government exports and revenues, and the oil sector constitutes 50 percent of GDP, expecting that economic performance will strengthen during the next two years after the difficult pandemic period.

It also expected that the gross domestic product of Kuwait would reach a little less than about 140 billion dollars in 2024, which is an almost constant level compared to the levels of 2018, indicating that the total assets of the sovereign wealth fund exceed 460 percent of the GDP and the general government net assets are estimated at about 450 percent. percent of GDP, the highest among all sovereigns classified by the agency.

And it considered, that the general budget deficit is the highest in the world with the absence of a comprehensive financing strategy, expecting that the Kuwaiti dinar will remain linked to a basket of currencies dominated by the dollar, a system that served Kuwait in a way, “but it restricts its ability to manage an independent monetary policy to help mitigate fluctuations in the In addition, the local currency debt market is less developed compared to its peers.

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