Kuwait’s current account surplus to shrink in 2024
Gov’t spending and rising oil prices impact economy
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KUWAIT CITY, March 3: Fitch Solutions has revised its forecast for Kuwait’s current account surplus in 2024, anticipating a reduction compared to previous estimates. This adjustment is attributed to several factors, including a contraction in trade in goods and a widening trade deficit in services, driven by rising costs, reports Al-Qabas daily. The agency now predicts Kuwait’s current account surplus to contract from 26.4% of GDP in 2023 to 24.9% in 2024, down from the previous estimate of 28.8% in 2023.
This revision is primarily influenced by changes in Kuwait’s GDP data. Fitch Solutions attributes the projected decrease in the current account surplus to increased government spending on public sector salaries and subsidies, supported by rising global oil prices. The anticipated growth in budget spending is expected to boost local demand for consumer goods, leading to a rise in imports of goods. Furthermore, the agency foresees a moderate expansion in the services account deficit, driven by increased imports, particularly in the travel sector. Kuwaitis’ higher wages are expected to enhance their purchasing power, resulting in greater spending on travel abroad.
Despite the projected increase in imports, Fitch Solutions anticipates a slight improvement in services exports, with communications continuing to dominate this category. Regarding the primary income surplus, Fitch Solutions expects a moderate expansion, citing positive performance in global stocks and bonds. However, it predicts a marginal increase in the deficit in financial transfers abroad. Fitch Solutions also highlights potential risks to Kuwait’s external balance, including regional conflicts impacting global oil prices and economic growth slowdowns affecting current account surpluses. Nevertheless, Kuwait’s robust financial reserves, currency peg, and substantial assets are seen as providing stability amidst global economic uncertainties.
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