Kuwait non-oil activity sluggish, but oil GDP set to soar
KUWAIT CITY, July 9, 2024
Kuwait's non-oil sector GDP growth weakened in Q4 last year amid further falls in manufacturing and services activity. However, its oil GDP is likely to rise, alongside exports as oil prices held up despite concerns the Opec+ decision could lead to a supply glut, according to a report by National Bank of Kuwait.
Non-oil indicators in Q2 2024 came in mixed but overall suggestive of a still-sluggish economy, which, according to recent GDP figures for 2023 is operating at subpar levels.
Nevertheless, improvements so far this year in consumer spending, business credit, real estate and project activity, provide some grounds for optimism ahead.
PMI readings have also remained in expansion territory in recent months, with business confidence
running at historically high levels, stated NBK in its Kuwait Quarterly Economic Brief.
Moreover, the outlook for overall economic growth was boosted in early June by the news that Opec+ would begin unwinding its voluntary crude oil production cuts from October 2024 onwards.
Kuwait will see its oil GDP rise, alongside exports. Oil prices have also held up, despite concerns the Opec+ decision could lead to a supply glut at some point over the next few quarters,
Oil prices had closed slightly higher in Q2 2024, supported by ongoing Opec+ voluntary supply cuts, resurfacing regional geopolitical risk, a fairly resilient global economy and improving prospects for US Fed monetary policy easing in H2.
Local marker Kuwait Export Crude ended June at $87.9/bbl, up 1.9% q/q (+10.5% ytd). Prices were volatile in June, especially after Opec+ surprised markets with its decision to gradually unwind 2024’s voluntary supply cuts from October onwards, a move that caused prices to drop by around 5%.
Prices eventually recovered once Opec+ made it clear that it could reverse its decision if oil demand weakened and as tensions in the Levant and the Red Sea intensified.
Non-oil private sector activity slowed in Q2, with the June PMI reading coming in at 51.6, down from March’s postpandemic series high of 53.2.
Nevertheless, June was the 17th month of expansion for local firms, supported by ongoing gains in output and new orders as well as in employment. Staffing and purchase costs were major drivers of higher input prices for businesses, many of which had to raise selling prices to maintain profit margins. Overall business optimism about the year ahead remained strong.
Preliminary GDP figures for Q4 2023 published by the Central Statistical Bureau show that despite a quarter-on-quarter improvement (+11.2% q/q) in line with the seasonal trend, non-oil output contracted further year-on-year (-2.3% y/y from -2.0% in Q3), said the report by NBK.
This extends the run of declines to five consecutive quarters, it added.
