Kuwait anticipates second-highest inflation and lowest growth in the Gulf

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KUWAIT CITY, Nov 27, (Agencies): The Arab Monetary Fund has released its 19th edition of the Arab Economic Outlook Report for 2023, shedding light on the economic landscape across Arab nations. Notably, Kuwait is projected to experience the second-highest inflation in the Gulf in 2023 and the lowest economic growth in 2024.

The Gulf’s economic growth is anticipated to slow down significantly in 2023, settling at 2.3 percent compared to the robust 7.6 percent recorded in the previous year.

The report indicates that Kuwait’s economic growth will witness a considerable deceleration, stabilizing at 2.3 percent in 2023, down from the impressive 7.6 percent in 2022. However, a positive trajectory is predicted for 2024, with an expected growth rate of around 3.2 percent. This improvement is attributed to factors such as an anticipated increase in oil production compared to 2023, a reduction in monetary policy tightening, activation of major investment projects, and a surge in non-energy exports.

Examining the inflation dynamics, the report reveals that changes in food and beverage prices contributed significantly, with Kuwait recording 32 percent inflation in 2022, surpassing Saudi Arabia’s 28 percent. Housing and utility costs played a role in inflation increases in various countries, with Kuwait experiencing a 17 percent rise. Transportation services also contributed to inflation, with Kuwait’s rate expected to reach 3.2 percent this year, the second-highest in the Gulf after Qatar (3.3 percent).

In terms of global oil supplies, the report forecasts an increase in liquid fuel production by 1.2 million barrels per day in 2023 and 1.7 million barrels per day in 2024. Despite voluntary production cuts by the OPEC Plus bloc, oil production from outside OPEC, led by countries like the United States, Brazil, and Canada, is expected to drive this surge. Russia’s oil production is predicted to decrease by 0.3 million barrels per day in 2023, stabilizing in 2024. Meanwhile, OPEC’s crude oil production is projected to decrease by 0.8 million barrels per day in 2023 and increase by about 0.4 million barrels per day in 2024.

Addressing the impact of rising interest rates in Gulf countries, the Arab Monetary Fund emphasizes that this impact depends on two fundamental elements: oil prices and the strength of domestic demand. In practice, the report suggests that the impact of raising interest rates among the GCC countries until the third quarter of 2023 remains limited due to the rise in oil prices, supporting liquidity and enhancing investor and consumer confidence.

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