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Sustaining economic growth can only be achieved by diversifying sources of income away from oil

The non-oil sector is growing, but it cannot be relied upon in the event of a collapse in oil prices

The need to develop serious policies to develop the agricultural, health, tourism and educational sectors

The need to involve the private sector in order to have an effective role in the growth and prosperity of the national economy

Ahmed Maghribi – Ali Ibrahim
A government report on scenarios for future oil price changes and their impact on the performance of the Kuwaiti economy concluded that the sustainability of the economy’s growth can only be through diversifying sources of income, which requires concerted national efforts in all its scopes.
The report, obtained by Al-Anbaa, showed that in all cases, as soon as oil prices decline in the medium term, the economy may be affected clearly, indicating its weakness through its dependence on oil as a main source of income, and when observing the extent to which the non-oil sector was affected, we find that it is achieving growth. But it does not rise to the level required to be relied upon in the event of the collapse of the global oil markets.
The report added that this matter requires the need to make optimal use of the current high global oil prices and direct revenues towards diversifying sources of income in all the various sectors of the country, and to develop serious policies in developing the agricultural, industrial, health, tourism, educational and other sectors, and to eradicate corruption of all kinds, to achieve sustainable economic growth. for Kuwait.
According to the report, which was based on the use of the macroeconomic model of the General Secretariat of the Supreme Council for Planning and Development, expectations of a rise in world oil prices for the year 2022 were modeled, bringing the average price of a barrel of global crude oil to $99 during the year, with the assumption of standardized estimates for an increase in the volume of Kuwaiti oil production during the years ( 2022 – 2026) and then 3 scenarios were applied assuming a decline in global crude oil prices and its impact on the performance of Kuwait’s economic indicators in the medium term, he stressed that it is necessary to involve the private sector to have an effective role in the growth and prosperity of the national economy, whose role is still marginal It must witness a broad and significant renaissance in order to be able to lead economic activity under a supportive institutional state apparatus, which is what Vision 2035 aspires to.
The 3 scenarios
The first scenario: I assume a sharp drop in global oil prices for the year 2023 by about $47 a barrel, to rise again during the following years, and reach a maximum of $63 a barrel for the year 2026.
The second scenario: Assuming a decline in global oil prices for the year 2023 by about $60 a barrel, with a continued decline during the following years by $10 a barrel annually.
The third scenario: assume that global oil prices rise in 2023 to $100 per barrel, then decline during the following years and reach a maximum of $80 per barrel in 2026.
local production
The report referred to the gross domestic product figures, as the Kuwaiti economy witnessed a deficit of about 21.53% in the year 2020, and its growth was estimated at about 19.27% ​​for the years 2021 and 2022, and in the medium term, it is noted in the first scenario that a slight growth of about 0.21% occurred. In the second scenario, there is a deficit of about 6.60%, while in the third scenario, we notice a growth of about 2.91%.
It showed the clear impact of the oil sector on the gross domestic product, as the oil sector witnessed a large deficit of about 39.19% in 2020, with an estimated growth of about 51.82% for the years 2021 and 2022. In the medium term, a decline is observed in all scenarios. In the first scenario, its deficit is estimated at about 2.82%. %, and in the second scenario, a large deficit of about 21.25%, while in the third scenario, a deficit of about 0.60%.
The non-oil sector of the gross domestic product witnessed a deficit of about 6.68% in the year 2020, and its growth was estimated at about 3.98% for the years 2021 and 2022. In the medium term, convergent growth is observed in all scenarios. In the first scenario, a growth of about 5.13% occurred, and in the second, a growth By about 5.04%, and in the third it is witnessing a growth of about 5.23%.
consumer prices
The report indicated that at the level of inflation rates in Kuwait, consumer price indices witnessed stability in 2020 during the Corona pandemic, but it was estimated to rise by about 1.41% in the years 2021 and 2022, to reach its peak in the third quarter of the year 2022 by about 2.8%, and in the medium term. In the first scenario, it is noted that the inflation rate decreased to below zero by about 0.06%, and in the second scenario it decreased to below zero by about 0.26%, while in the third it showed an increase of about 0.11%.
Balance of Payments
At the level of the balance of payments, it achieved a growth in the year 2020 by the equivalent of 212.82%, and its growth for the years 2021 and 2022 is estimated at about 156.9%. In the medium term, it is noted in the first scenario that there has been a decline of about 3.54%, in the second a decline of about 5.65%, and in the third a decline of about 2.51%. .
The current account witnessed a contraction in the year 2020 by the equivalent of 32.28%, and its growth in the years 2021 and 2022 was estimated at about 86.88%. In the medium term, it is noted in the first scenario that a decline of about 1.54% occurred, and in the second a decline of about 35.52%, and in the third a decline of about 4.77%.
The financial account, which measures the difference between net financial assets and financial liabilities, recorded a decline in the year 2020, equivalent to 24.92%, and estimated its growth in the years 2021 and 2022 by about 46.16%. In the medium term, it is noted in the first scenario that a decline of about 75.89% occurred, and in the second a growth of about 25.43%. In the third, it decreased by 5.45%.
In terms of the capital account, which includes capital transfers between Kuwait and the rest of the world, it recorded a growth in the year 2020 by the equivalent of 878.06%, and its growth in the years 2021 and 2022 was estimated at about 37.08%. In the medium term, it is noted in the first scenario that a decline of about 4.30% occurred, and in the second a decline By about 18.00%, and in the third it decreased by about 3.11%.

Prices have been going up for years

It is estimated that the prices of rents, purchase of vehicles, furniture, home maintenance, cigarettes and non-alcoholic beverages will continue to rise in the coming years, and that the transportation sector will witness instability in prices.

While the prices of clothing, footwear, food, culture and entertainment, hotels and restaurants, health, education and means of communication have witnessed successive declines over the years.

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