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KUWAIT CITY, March 7: Global Finance magazine revealed that high oil prices in 2022 led to an increase in Kuwaiti crude revenues by 85%, which led to a growth in the country’s gross domestic product by 8.5% and a decrease in the deficit by 70%, which constitutes the first decrease in the fiscal deficit in 3 years, reports Al-Qabas daily. The report on the Kuwaiti economy said that Kuwait’s oil wealth may protect it relatively from the looming global economic recession, in addition to high inflation and disruption of supply chains, yet it faces strong challenges of its own.
He pointed out that the absence of economic reforms may lead Kuwait to the end of its rentier model, and expectations indicate that there is a need for 96,000 new jobs to absorb young Kuwaiti graduates by 2025, and 298,000 jobs by 2035. To provide some jobs, Kuwait aims to reduce foreign workers, and it has sent hundreds Thousands of workers are being sent home, but this is only a temporary solution. The report pointed out that international financial institutions and local observers have repeatedly warned of the “oil curse” and called for economic and financial reforms.
However, the rentier state culture is deeply rooted in the country, as Kuwaitis are accustomed to a comprehensive care system that provides them with all their needs, including housing, health and pensions. retirement and employment. As a result government wages and subsidies represent 76% of public spending, leaving very little margin for investment spending. The report touched on Kuwait’s heavy dependence on oil and its revenues, indicating that Kuwait is a very financially rich country, but it is also economically weak, as its economy moves with the global charts of oil prices, noting how Kuwait recorded 5 years of budget deficit, which it covered from the General Reserve Fund, and when it decreased GDP by 9.9% in 2020, and the liquidity to pay the salaries of government employees has almost run out. He pointed out that regardless of the economic difficulties, oil still constitutes the main base in the country, as the government announced the Al-Zour refinery and plans to expand production until 2027, as well as a plan to build the largest oil research center in the world with the aim of improving production and refining techniques.
Global Finance pointed to Kuwait’s ambitious plans, “Kuwait Vision 2035”, to transform the country into a center for trade and logistics services, by building 3 new economic zones in addition to the Silk City, which alone is estimated to cost $130 billion, noting that the construction of these projects should raise the gross domestic product. The total Kuwaiti economy by 13% to 16%, and to provide more than 200,000 new job opportunities, but these projects were not actually realized, and the government confirms that the projects will return to the right track after being delayed due to the pandemic. The report quoted the CEO of the National Bank of Kuwait, Salah Al-Fulaij, as saying that while the world has faced tensions since last year due to the Russian-Ukrainian war that negatively affected the global economic scene, the operating environment in Kuwait was positive mainly due to high oil prices, intense demand for commodities and high consumer spending. in the country.
The CEO of Ahli United Bank, Jihad Al- Humaidhi, said that oil prices continue to fluctuate, which will affect Kuwait’s gross domestic product. Rapid reforms in the field of economic diversification, financial management, labor and housing markets are imperative at this stage. Abdullah Al-Tuwaijri, CEO of private, personal and digital banking services at Boubyan Bank, indicated that payment operations must be developed in specific sectors such as real estate rental or some government transactions. There are also basic services that need to be expanded such as digital signature, digital identity and open banking services.