14/01/2013

The year 2012 was one marked by ups and downs for Kuwait, with a record profit highlighting the country’s economic growth, but also exposing its perpetuating reliance on oil revenues. While the planning of new infrastructure projects and growth in the banking sector showed that the country is recovering well from the effects of the 2009 economic crisis, the political scene was dominated by tensions between the government and opposition, which left the parliament paralysed for most of the year.

Kuwait’s GDP is on target to expand by an average of 5% per year over the next few years, according to the IMF, building on a strong performance in 2011 which produced growth of 5.7%.

In a trend that reinforced Kuwait’s positive economic performance, local banks posted strong third-quarter 2012 returns, with many institutions recovering from negative growth in the second quarter caused by allocating funds for provisioning against potential defaults. A number of banks have signalled their intention to continue approaching lending with caution and maintaining a strong provisions base in 2013 as part of an effective ongoing strategy to protect against market volatility.

The economy remained dominated by oil revenues in 2012, reflecting its listing in OPEC’s annual statistical bullet as the organisation’s fourth-largest producer of crude oil. However, the government’s National Development Plan (NDP), which maps out a strategy for economic expansion into 2035 through a series of five-year plans, puts the spotlight firmly on diversifying away from a reliance on hydrocarbons.

The current 2010-14 plan pinpoints significant investment in infrastructure projects, listing, among others, work on roads, ports, a $3.6bn expansion of Kuwait International Airport, a transportation network linking Kuwait to other GCC countries and an offshore tourism resort.

The construction industry in particular should see significant growth on the back of key projects. While construction was hit hard by the effects of the financial crisis, registering a 9.8% drop in activity in 2009, data compiled by the Irish market research company Research and Markets indicates that the sector should expand at a compound annual growth rate of 7.45% between 2012 and 2016.

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Oxford Business Group