Kuwait’s real gross domestic product (GDP) has been projected to slow this year as the government cuts subsidies before recovering in the next two year as major development projects get underway, according to a report.

QNB Group’s ‘Kuwait Economic Insight 2015,’ examined recent developments and the outlook for Kuwait’s economy.

Kuwait is well placed to withstand lower international oil prices with strong macroeconomic fundamentals and the lowest breakeven oil prices amongst the GCC countries, it said.

In the hydrocarbon sector, the government has planned to invest $100 billion from 2015-19 on boosting production, upgrading refineries, petrochemicals and transportation - the Burgan oil project, among others, should accelerate oil production growth starting in 2017.
The non-hydrocarbons are expected to be the main engine of growth, driven by government investments, including the Kuwait Metro, the new port and the redevelopment of the airport.

The inflation is expected to rise as subsidies are reduced, with the largest impact in 2015 (4.2 per cent), subsiding to an average four per cent in 2016-17.

The government has announced plans to substantially cut current spending, mainly through the removal of subsidies on diesel, electricity and water, healthcare and petrol.

The foreign inflation is likely to slow this year as commodity prices fall on weak global demand, but this is expected to be reversed in 2016-17, leading to higher foreign inflation.

The government has also planned for a 20 per cent cut in current spending this year, which will mainly be achieved by reducing subsidies, said the report.

This will moderate expenditures throughout 2015-17 despite a growing wage bill and an increasing amount of public investment, it added. - TradeArabia News Service