For full coverage of Middle East business, see MEED
Kuwait’s current account will move into a deficit of 1 per cent of GDP in 2016 due to lower oil prices and continuing import growth, National Bank of Kuwait (NBK) said in a report released yesterday.
Kuwait’s external position nevertheless remains relatively strong in comparison to its GCC peers thanks to its high level of overseas assets and more resilient current account, NBK said.
Kuwait’s trade surplus fell by more than half to an 11-year low of KD 8.4bn in 2015 mainly due to a 47 per cent drop in oil exports. Imports grew by 7.1 per cent due to large increases in spending on capital projects and higher capital goods imports. Net services outflows continued to rise in 2015, boosted by solid growth in net travel expenditures of 10 per cent.
“A decline in net investment income also added downward pressure on the current account balance (in 2016),” NBK said. “Net investment income fell by 7.8 per cent in 2015 largely as a result of a rise in investment income outflows. Meanwhile, investment income inflows from Kuwaiti overseas investment continued to see healthy growth of 8.2 per cent. Income from portfolio investment was particularly robust, growing by 10 per cent during 2015.”
Kuwait’s current account surplus fell in 2015 from 33 per cent of GDP to 5.1 per cent of GDP in 2014.
NBK said Kuwait remained a net creditor to the rest of the world, with a financial outflow of KD 2.1bn compared to KD 16.4bn in 2014. Most of the drop came from a drawdown of liquid assets. Currency and deposits held by the government declined by KD 8.1 billion.
The Central Bank of Kuwait held substantial reserves of KD7.8bn at the end of 2015, or an estimated 9.9 months of imports. The foreign assets of the state as a whole, the bulk of which are held by Kuwait Investment Authority (KIA), are thought to be in excess of KD 170bn, NBK said.