Kuwait’s economy faces a structural imbalance

Dominance of public sector threatens Kuwait’s economic sustainability

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KUWAIT CITY, March 17: In a recent report the Al-Shall has revealed that Kuwait’s local economy grapples with a significant structural imbalance in production, primarily attributed to the overwhelming dominance of the public sector, particularly the oil sector, which accounts for approximately 70% of the economy. This imbalance poses grave risks to the sustainability of public finances and the national labor market, reports Al-Qabas daily. The report underscores the challenges faced by the industrial sector, including exorbitant land costs compared to neighboring countries, inadequate market protection, and bureaucratic hurdles hindering efficiency.

The lack of early intervention to address these issues escalates the cost of rectification and diminishes the likelihood of success. Highlighting the government’s acknowledgment of the poor business environment, the report discusses the need for real partnerships with the private sector to mitigate the structural imbalance. There is an active dialogue regarding the establishment of a new organization to address industrial sector challenges, emphasizing the importance of aligning macroeconomic goals with industrial project objectives. The overarching objectives for the general economy include creating an attractive environment for capital localization, sustainable job creation, and supporting projects capable of competing domestically and internationally while ensuring profitability to sustain public finances. The report suggests granting long-term government-monopoly land and initial sponsorship for deserving projects to enhance their success rates.

However, it emphasizes fair treatment in regional agreements to avoid disadvantages to local consumers. Shifting focus to the real estate market, Al-Shall noted a decrease in liquidity in February 2024 compared to January 2024, with total contract trades valued at 172.2 million dinars, representing a decline of 34.7%. The number of real estate deals in February totaled 313, with Al-Ahmadi Governorate leading in transactions. Moreover, the analysis of Kuwait International Bank’s financial statements for the year ending December 31 indicates improvements in profitability indicators compared to 2022, with the return on average assets (ROA) index increasing to 0.5% and the rate of return on shareholders’ equity (ROE) rising to 6.5%. In conclusion, urgent reforms are imperative to address Kuwait’s economic challenges and ensure sustainable growth in the long term.

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