Limited industrial base, import of gadgets gives rise to inflation in Kuwait

Local rise in prices linked to global trends

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KUWAIT CITY, Jan 2: A government report stated that the whole world is expected to continue witnessing commodity price hikes, especially the prices of food products; which will put more pressure on countries that depend on food imports, those whose climate or conflicts could disrupt local food production, and those suffering from macroeconomic fragility, reports Al-Qabas daily. The report stressed the need to make urgent decisions to reduce the impact of global food price increases on the local market, especially since the cost to the national economy will be high. It indicated that food prices will continue to rise in the next five years — higher than the prices before the Corona crisis. The same applies to the prices of agricultural products and grains. Data from the Central Statistics Bureau showed that the consumer price index (inflation) in Kuwait rose by 3.79 percent in November, explaining that the annual rise in inflation rate stems from the increase in the prices of all the main groups affecting the movement of index numbers, particularly foodstuffs, education, clothing, and apparel.

Merchandise imports
Government data indicate that merchandise imports to Kuwait are concentrated in appliances, machinery, equipment, and industrial inputs and that the country imports approximately 80 percent of its food needs. They indicate that the steady growth in merchandise imports over the last 10 years is reflected in the Kuwaiti economy, represented by the high per capita income and the limited industrial base. Data show that cooperative societies are the most important outlet for selling food commodities and account for about 80 to 85 percent of the total food commodities in the local market. Therefore, any measure to neutralize price increases in the local market must be centered on cooperative societies. In addition, the delivery by ship method is the most important channel for transporting merchandise imports to Kuwait, exceeding about 85 percent of total imports; while delivery by land does not exceed 10 percent. This reflects the extent of the exposure of Kuwaiti imports to delivery by ship method, as well as the associated disruption in the ports and shortage of containers.

Global inflation
Several financial institutions said that global inflation may return to normal for the first time next year — after about four years. Goldman Sachs indicated that core inflation, which excludes food and energy in economies that witnessed an inflation boom in the post-Corona stage, specifically the United States, Europe, and many emerging markets, reached 2.2 percent during the three months ending last November. It expects that average inflation among these countries will be at or close to the inflation targets of most major central banks by the end of 2024. Oxford Economics expects inflation to reach 1.3 percent in the last quarter of next year in the Eurozone and 2.7 percent in the United Kingdom, while it will decline to 2.2 percent in the United States 10 recommendations to curb inflation The report indicated that to reduce the impact of global price increases on local prices, it is necessary to adopt the following recommendations:

1. Most countries in the world have witnessed record rises in commodity prices, especially food commodity prices, which threaten to spread more severely to the local economy. Therefore, this requires us to adopt a clear and strict mechanism to implement the relevant treatments.

2. The necessity of adopting the proposed treatment mechanism and linking it to a specific period for implementation, as the concerned authorities must implement their treatment mechanism and not fail to implement it as required.

3. These treatments in pricing policy must be accompanied by consensus in the direction of fiscal and monetary policies, ensuring that price inflation in the country is addressed, and in a way that does not conflict with the growth of economic activities.

4. Reconsidering the Cooperatives Law to allow more oversight of the practices of boards of directors in cooperative societies.

5. Price control to avoid large differences in commodity prices.

6. Activating the role of the competition agency in cooperative societies to ensure that their monopolistic practices are consistent when displaying goods in them, to ensure that there are sufficient substitutes for the commodity, which encourages competition and the consumer’s choice of the commodity with the appropriate price for his needs.

7. Studying the increase in the spaces allowed for displaying goods in cooperative societies to facilitate the process of supplying goods.

8. Creating job opportunities for nationals and reducing current expenses (salaries) in the State budget.

9. Intensifying media and awareness campaigns to rationalize food consumption.

10. Taking the necessary measures to ensure the application of governance, digitization of services, reducing the costs of cooperative societies and the costs borne by suppliers, preventing the collection of any amounts by cooperative societies from suppliers, and ensuring that profits are directed towards providing goods in cooperative prices.

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