Kuwait is the most democratic state in the Gulf Cooperation Council and attracts a number of our clients. Thanks to the high standard of living enjoyed by Kuwaiti citizens as well as the strict controls on the large expatriate workforce, the risk of widespread social discontent is low. Oil wealth typically enables the state to run a fiscal surplus, although the large size of the public sector hampers the development of the non-oil private sector.
We keep our clients abreast of the latest market moves and political developments as part of our 'top-down' and 'bottom-up' perspective. Clients also benefit from in-depth analysis on 18 of Kuwait’s most important industries. We provide interactive data and forecasting alongside detailed and risk-assessed analysis from our expert research teams. We aim to keep you ahead of the curve, so you can do business with ease in Kuwait.
Kuwait Country Risk
We expect the Kuwaiti economy to see modest growth over 2016 and 2017, forecasting real GDP growth of 1.5% and 1.2%, respectively, from -1.6% in 2015. After a long period of stagnation, the Kuwaiti investment outlook appears to be improving, while the prospects for consumption remain bright. However, we again highlight Kuwait's ever-volatile political situation as the key downside risk to economic activity.
Kuwait has seen a flurry of populist legislation recently, including several measures specifically targeting expatriate workers. This runs the risk of increasing uncertainty within the private sector, as well as cementing perceptions of the country as a hub of policy instability.
We expect tensions to remain between the government and the legislative branch, even with the election of a renewed 'loyalist'...
Kuwait Operational Risk Coverage (9)
Kuwait Operational Risk
Kuwait Operational Risk
BMI View: Kuwait is reasonably attractive for commercial businesses due to offering one of the more secure operating environments in the region, along with excellent availability of low cost fuel and basic utilities. However, highly regulated foreign investment policies, poor economic diversity and over-reliance on the hydrocarbons sector mean there are few options for investors, while extensive and time-consuming bureaucracy hinders many business operations. Subsequently, Kuwait scores 57.1 out of 100 in our Operational Risk Index. This puts it in eighth...
Kuwait Crime & Security
Kuwait Crime & Security
BMI View: Overall, especially when compared regionally, Kuwait possesses a relatively secure operating environment for businesses and investors. The most prominent threat stems from Islamic State terrorist activity within Kuwait's borders; however, this threat is counteracted by Kuwait's strong counter terrorism capabilities. Kuwait generally has low levels of petty and violent crime; however, further threats stem from the country's limited financial and cyber crime combating capabilities. Therefore, Kuwait scores a fairly respectable 66.2 out of 100 for the Crime and Security Risk pillar of the BMI Operational Risk Index. This places the country in fourth place out of 19 Middle East and North African states.
|Low Security Risk for Businesses by Regional Standards|
|Kuwait & Regional Crime And Security Risk Scores|
Kuwait Labour Market
Kuwait Labour Market
BMI View: Owing to structural weaknesses in the national education system and a net inflow of uneducated migrant workers from South Asia, we see fundamental risks that undermine labour market competitiveness and threaten investment performance in Kuwait. While migration acts to lower basic skills levels in the labour market, it is also the backbone of competitiveness, providing two thirds of the workforce and helping to lower the cost of labour. Overall, Kuwait performs moderately well in our Labour Market Risk Index with a score of 52.9 out of 100. This puts Kuwait in eighth place among 19 countries in the...
B MI View: Driven by considerable oil reserves, Kuwait's economy is expected to enjoy sustained growth over the coming years, which is likely to translate into an increasing appetite for consumer imports. Resource wealth also enables firms to benefit from cheap electricity and fuel prices, though a possible removal of subsidies could significantly increase energy and gasoline costs in the coming months. Although Kuwait's transport network is relatively efficient, particularly in the aviation sector, the absence of railways and a limited road network drive up transport costs, while a lengthy and cumbersome trade...
Kuwait Trade & Investment
Kuwait Trade & Investment
BMI View: Low levels of FDI flowing into Kuwait reflect poor economic openness and an unfavourable business environment for foreign investors. The Kuwaiti government still has a significant involvement in the economy, and privatisation has been very slow. Meanwhile, limited reforms have failed to yield vital improvements in foreign investment law, patent protection and public administration, which create fundamental stumbling blocks to business. We also expect to see increased subsidy cuts and indirect taxation as government revenues come under pressure due to the decline in global commodities prices, which will undermine Kuwait's primary investment incentive. In the short term, therefore, we do not expect to see FDI increase...
Kuwait Industry Coverage (18)
BMI View: A combination of a slowing economy, low oil prices and higher local interest rates continues to underpin BMI's cautious stance towards the Kuwaiti new vehicle sales market in 2016. We are targeting just 0.5% sales growth for the sector.
|Kuwait - Total Vehicle Sales|
|f = BMI forecast. Source:...|
Kuwait Commercial Banking
|Date||Total assets||Client loans||Bond portfolio||Other||Liabilities and capital||Capital||Client deposits...|
Kuwait Consumer Electronics
BMI View: The low oil price resulted in a further downward adjustment to our Kuwait consumer electronics devices forecast in the Q216 update. Our country risk team expects slower growth in private consumption over the medium term, at about half the rate of 2010-2015, while exacerbating the impact of this slowdown is the fact most device categories are saturated in Kuwait in 2016, including smartphones and tablets. These factors are behind our forecast for total device spending to contract at a CAGR of -0.8% 2016-2020. Despite the pressures on device spending, it will continue to be a lucrative market for vendors, with short replacement cycles and premium preference of Kuwaiti nationals supporting demand.
Latest Updates And Industry Developments
Defence & Security
Kuwait Defence & Security
BMI View: Though Kuwait's state revenues are feeling the effects of low oil prices, we forecast defence expenditure in the country to return to growth in 2016 amid growing security threats from Islamist extremism and sectarian tensions, both internally and externally. In addition to the national defence budget, the Kuwaiti parliament has approved USD10bn in defence modernisation funding over the next decade, covering the procurement of products such as fighter jets, tanks and air defence systems. Due to the highly limited size and capability of Kuwait's defence manufacturing base, such equipment will need to be sourced from abroad. We expect this to remain the case throughout the next decade, as...
Food & Drink
Kuwait Food & Drink
BMI View: Despite the current economic slowdown, we expect Kuwait's food and drink industry will experience positive growth over our five-year forecast period, driven by sustained household spending. We believe premiumisation will remain high in the food sector, as demand for non-essential foods increases and carbonated soft drinks consumption remains strong. We expect premiumisation to drive investment from supermarkets and hypermarkets formats, with a marginal decline in co-operative stores formats.
|Food & Drink Spending|
Kuwait Freight Transport
BMI View: We expect positive growth across the Kuwaiti freight transport sector in 2016, as the country recovers from the nominal fall in trade in 2015 - which was driven by a fall in oil prices which didn't affect the non-oil freight transport sector overly in the first place. Although the outlook is slightly more precarious than in years gone by, high levels of reserves and a wealthy population means that spending on both capital goods - driving bulk and project volumes - and consumer goods should continue, supporting the freight transport sector.
Although our growth forecasts for volumes carried on Kuwait's different freight modes in 2016 and 2017 - namely Air and Road, the rail network is not yet operational - are not for spectacular growth, they are...
Kuwait Information Technology
BMI View: We forecast a weak growth outlook for the Kuwait IT market, with a decline in oil prices and saturation of the retail market playing a key role in this. However, high incomes will ensure the market remains lucrative in per capita terms, despite a small population and limited growth prospects. Within the enterprise sector, we expect IT investments to benefit from the need to diversify the economy away from the oil sector.
Latest Updates And Developments
IT hardware sales in Kuwait will increase from KWD158mn in 2016 to KWD164mn in 2019, recording a compound annual growth rate (CAGR) of 1.3%.
Software will experience heightened growth compared to hardware, with sales of KWD59mn in 2016 increasing at a CAGR of 3.8% to reach KWD66mn in 2019.
Services will lead the sector...
BMI View: A flurry of infrastructure funding announcements and key contract awards characterised H115. Long-delayed turnkey projects in the power and transport sectors have been put back on track and may be an indication that the government will honour its USD116bn 2015-2020 development plan. However, a track record of project delays and under-spending means we remain cautious on the reality of major project momentum.
The KWD34bn (USD116bn) spending promised as part of a five-year development plan covering 521 key projects, including 45,000 housing units, a metro and railway system , and several power projects started to kick in H115 with several contracts awarded.
From January to October 2015, the country had awarded USD30bn in project funding, with...
BMI View: We remain of the view that much of the growth in the entire insurance sector will arise from greater purchase of (compulsory) health insurance by expatriates. Secular constraints to the expansion of other non-life sub-sectors - and the life segment - will continue to prevail. Kuwaiti companies continue to look for opportunities in other countries.
Kuwait Medical Devices
BMI View: Lower oil prices will have a detrimental effect on Kuwait's economy, weighing slightly on the government's expenditure plans but more notably on business confidence and consumer spending, which will have an impact on medical device consumption. Market growth will be moderate, benefitting from healthcare infrastructure developments and health insurance expansion.
|Total (USDmn)||Per Capita (USD)||Total (Local Currency mn)||Per Capita (Local Currency) ...|
Oil & Gas
Kuwait Oil & Gas
BMI View: Kuwait has made progress on key oil and gas projects that have previously been stalled, namely a major investment push targeting the downstream sector, but we maintain the country will fall short of ambitious production targets for both oil and gas. In addition to political and regulatory risks, Kuwait's oil sector also faces structural challenges from a surplus in both OPEC and non-OPEC supplies, and this will further weigh on the long-term production outlook.
As part of a major overhaul of the downstream sector Kuwait is pursuing the Al-Zour project to increase revenues through export of refined products and through investment in advanced downstream technologies. The project involves completion of the greenfield 615,000 barrels-per-day (bpd) Al-Zour refinery complex to be built in southern Kuwait, as well as upgrades at existing facilities as part of a wider downstream reorganisation. Additionally, the firm overseeing Al-Zour's refinery will also manage a worldscale petrochemicals facility that will utilise feed from the refinery, following a decision in Q116.
The Al-Zour project was set to raise downstream refinery capacity to 1.4mn barrels per day by 2019, but it looks set to be delayed until 2020 as costs escalate and Kuwait continues in its effort to secure financing. In the meantime, refining capacity is set to decline as a result of consolidation within the refining sector, a move...
Pharmaceuticals & Healthcare
Kuwait Pharmaceuticals & Healthcare
BMI View: With the recent oil strike representing a harbinger of significant political and economic turbulence ahead, the stability of its health and pharmaceutical sectors will depend on Kuwait's integration with neighbouring Gulf states and international partners.
Headline Expenditure Projections
Pharmaceuticals: From KWD300mn (USD997mn) in 2015 to KWD453mn (USD1.48bn) in 2016; +51.1% in local currency terms and +48.2% in US dollar terms. Forecast revised upward from Q216.
Healthcare: From KWD1.67bn (USD5.54bn) in 2015 to KWD1.79bn (USD5.83bn) in 2016; +7.2% in...
BMI View : Significant changes are on the cards in the Kuwaiti power sector as the government attempts to spur investment into the country's ageing infrastructure. The government has earmarked USD9.9bn for infrastructure projects including power, and progress is being made on greenfield thermal and renewable projects. The electricity and water ministry is aiming to double generating and desalination capacity by 2017 to cater to growing demand, and an estimated USD2.5bn is expected to be invested over the medium term.
Kuwait Real Estate
BMI View: The real estate sector is currently witnessing marginally increasing rental rates due to continued demand and low levels of new developments. Therefore, supply is reducing in relation to demand and the vacancy rate coming down. There is sustained demand for modern units in all sectors, particularly the retail and industrial sectors bolstered by consumer demand from the young population. An overreliance upon the oil sector continues to threaten growth in the country, however, continued efforts to diversify the nation's fiscal interests look to mitigate this somewhat. Such efforts will also prove beneficial to the office and industrial sectors in terms of demand for premises and growth.
BMI View: Kuwait's economy has been forced to shift its focus dramatically, following the recent drop in oil prices. While the country has a robust financial foundation, the economy is not diversified and this will minimise the possibility of sizable income gains in Kuwait households. The non-essential purchases will be impacted the hardest, with many Kuwaiti's shifting a large part of their budget to the housing sub-sector throughout our forecast period.
Key Updates and Forecasts
We expect household consumption to continue to climb, thanks to increasing affluence and wages.
The share of households in the USD50,000 plus income bracket will continue to expand, reaching 16.4% in 2016.
|New Data Services Key To Revenue Growth|
|Mobile Operators' Quarterly Revenues (USDmn), 2014-2015|
|Note: no Q215 data available yet for VIVA. Source: Operators|
Monthly blended average revenue per user (ARPU) continued to decline in the face of intense competition, to KWD7.2 in Q215. Despite a boost from data services, ARPU's will decline to KWD7 by the end of 2015 and further to KWD6 by the end of our forecast.
Take-up of 3G/4G data connections has...
BMI View: The water sector of Kuwait faces a daunting challenge. The country is one of the most arid on the planet and yet its water consumption levels per capita are among the highest in the world. With extremely limited natural resources the government has relied on desalination as its method of choice for providing households and industry with water. This process is expensive however and exploration into other processes has begun. Despite this interest in new technology and techniques, the environment for foreign investors looks unlikely to become particularly appealing. The country has a poor record for completing infrastructure projects and coupled with a somewhat unstable political landscape leading to frequent alleged cases of corruption, levels of foreign investment are forecast to decline.
Kuwait is susceptible to long periods of drought, as has been the case over recent months. This...