Oil price dictates growth
Kuwait possesses the world’s seventh largest proven oil reserves (6% of global resources) and, at current rates of extraction, its oil will last for another 88 years. Gas reserves have a life time of over 100 years. The oil sector dominates the economy (over 60% of GDP and over 80% of export revenues).
Such a high dependence on oil (prices) has resulted in volatile GDP growth, even relative to the Middle East region (see Figure 2). Due to low oil prices in recent years, annual average growth dropped to +1.4% in 2013-2016 from +6.1% in the preceding decade, though it surprised by a better-than-expected +3.5% in 2016. In 2017, we forecast GDP growth to fall to +0.5% as a result of OPEC-agreed oil production cuts, before it should pick up again to around +2% in 2018.
A period of relatively low GDP growth will be sus-tained by significant financial resources accumu-lated during times of higher oil prices. Foreign ex-change (FX) reserves provide around seven months of import cover and the country’s Sovereign Wealth Fund (SWF) is estimated at around USD592bn.