IMF Kuwaits GDP the weakest performance among GCC
The International Monetary fund is an organization designed to stabilize world economic systems. July 16th of 2010 marked the date in which the Executive board of the IMF would host the Article IV consultation with Kuwait on a lapse time basis. Due to the terms of the Article IV consultations, discussions of consultation were not disclosed.
Reports are showing that Kuwait faced a financial decline in 2009 by closing at a 4% loss. In further reports, Kuwait is the least performing countries among the GCC region with losses in real oil GDP at 11% and flat non-oil GDP displaying weak activity in there financial sector. Kuwait in particular had many challenges throughout the year because of the global tightening conditions matched with declining asset prices.
The National outlook of Kuwait was negative nearly across the board as well starting with the actual Kuwait dinar losing 4% value; Kuwait actually showed a decline in equity prices, money growth, and credit growth. Furthermore, lower domestic demand and a 12% drop in import prices reduced average consumer price inflation to 4%.
Declining asset prices also placed added pressure to Kuwait Investment companies. The pressure was actually severe enough to cause five investment companies to default in 2009. The remaining, struggling IC’s that were able to make it throughout the fiscal year also raised the nonperforming loan ratio up to 10%. Thankfully, the authorities were able to salvage and make it to the end of the year on a high note. Through quick strategic moves and the strict usage of the financial stability law, authorities were able to maintain the financial system stable.
After making it through 2009 on a positive note, the outlook for Kuwait looks very positive. The 10’/11’ fiscal year is projected to be very stable while the government has already devised a four year development plan. The development program is strategically designed around the expected rise for oil around the globe. In general, after a steady year in 2010/11 of regaining investments, there will more than likely be steady gains going forward.
In the challenges of remaining stable throughout the next fiscal year, it is imminent the financial sector focuses on real estate, IC’s, and equities. Of these upcoming challenges, facing IC’s will be the most extensive.
In order for Kuwait to succeed in there development and essentially rebounding from the results of 2009 it is imperative that the government also follows the plan. The fear becomes the overarching domestic risk which could force the government to overshoot there spending targets.
In addition, it is very important that the authority’s growth agenda is matched in order to continue progression with the plan. Thus, it is nearly required that there is progress in structural reforms. Regarding structural reforms, new IC’s companies will be very familiar with Capital Markets Law, the Labor Law, and the Privatization Law. In addition, it’s in best interest to also strengthen the Central Bank of Kuwait, the Capital Markets Authority, and the Ministry of Commerce and Industry. Either way, the key is to focus on Investment companies because if that financial sector struggles it is imminent that the GDP will struggle.