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.

Country Risk

Kuwait Country Risk

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Core Views

  • We expect the Kuwaiti economy to perform relatively well over 2015 and 2016, and retain our forecast for real GDP growth of 2.6% and 2.4%, respectively, from an estimated 2.7% in 2014. 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...

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Kuwait Operational Risk Coverage (9)

Kuwait Operational Risk

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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 and low cost of fuel and electricity. However, poor economic diversity and reliance on the hydrocarbon sector means there are few options for investors, while extensive and time-consuming bureaucracy hinder many business operations. As a result, Kuwait scores a regionally average 53.1 out of 100 in BMI 's Operation Risk Index, placing it eighth out of 19 countries in the Middle East and North Africa (MENA).

Kuwait benefits from numerous international links, which contribute to a well-developed and capable security infrastructure. With extensive training links with the UK and...

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Kuwait Crime & Security

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BMI View: Despite significant levels of regional instability, investors and businesses working in Kuwait benefit from a moderately secure operational environment. Firms face the lowest degree of risk in terms of crime owing to the absence of a notable organised criminal presence, an effective police force and low levels of crime. Although Kuwait has had a tumultuous history with neighbouring Iraq, which culminated in the latter's 1990 invasion of Kuwait, the current likelihood of interstate conflict also poses a limited threat to firms, with Kuwait's military investment, and its military and diplomatic alliances, presenting a notable deterrent to future invasion. The highest degree of risk stems from terrorism, though Kuwait possesses an effective counterterrorism force...

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Kuwait Labour Market

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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 Middle East and North Africa (MENA) region...

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Kuwait Logistics

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BMI 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 bureaucracy increases the risk of delays and uncompetitive lead times. Kuwait ranks 1...

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Kuwait Trade & Investment

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BMI View: Low levels of foreign direct investment (FDI) flowing into Kuwait reflect poor economic openness and an unfavourable business environment for foreign investors. The Kuwaiti government still has a strong 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 taxation, which will undermine Kuwait's primary investment incentive. In the short term, therefore, we do not expect to see FDI increase significantly, and portfolio investment into the Kuwaiti Stock Exchange will present the most attractive channel for investors to capitalise on strong economic growth.

Kuwait has low levels of economic openness, moderate legal risks and a moderate degree of...

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Kuwait Industry Coverage (18)

Autos

Kuwait Autos

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There are growing downside risks to BMI's forecast of 5% sales growth for the Kuwaiti new vehicle sales market in 2015. For one, we expect economic growth to head broadly lower over the coming years, primarily on the back of weaker oil prices and minimal growth in the oil sector. Secondly, we are expecting an increase in Kuwaiti interest rates before year-end.

Turning first to the economic backdrop, BMI's Country Risk team now expects economic growth in Kuwait to head broadly lower over the coming years, primarily on the back of weaker oil prices and minimal growth in the oil sector. Lower oil prices will only have a marginal detrimental impact on government spending as Kuwait has some of the largest buffers to lower oil prices, with fiscal breakeven prices at around USD50/bbl. Indeed, the government's five year development plan (2015-2020) will mitigate some of the...

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Commercial Banking

Kuwait Commercial Banking

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...
Commercial Banking Sector Indicators
Date Total assets Client loans Bond portfolio Other Liabilities and capital Capital Client deposits

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Consumer Electronics

Kuwait Consumer Electronics

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BMI View: We retain a muted growth outlook for Kuwait's consumer electronics market in 2015, as the drop in oil prices weighs on consumer confidence and the wider economic environment. Our weak growth outlook is also due to the small population and mature nature of the market, where high penetration of smartphones and tablets means there remains only a small pool of first time buyers for vendors to target. Nevertheless, Kuwait has one of the highest GDP per capita levels in the world and consumers have demonstrated their preference for luxury items and fashionable brands such as Apple. We expect this trend to continue over the next five years, ensuring Kuwait's consumer electronics market remains highly lucrative in per capita terms.

Headline...

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Defence & Security

Kuwait Defence & Security

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BMI View: Kuwait continues to have a close defence relationship with the US, although Kuwait's role in facilitating terrorism in the region is creating tensions within the relationship. BMI does not believe that Kuwait faces any immediate serious threats to its security. However, rapidly changing regional dynamics, and particularly the instability in Iraq, could potentially pose a threat to Kuwait in the long term.

Kuwait is one of the more stable countries in the Middle East, and integrated under the US defence security umbrella, it is generally perceived as a Western ally. However, we believe that its failure to stamp out financing activities on its territory in support of terrorism is creating tensions in its relations with the US. In this sense, the...

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Food & Drink

Kuwait Food & Drink

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BMI View: Growth in Kuwait's food and drink industry will be driven by the gradual formalisation of the retail sector and a rapidly growing population over our forecast period to 2019. That said, opportunities for substantial growth will remain limited by the small market size and already high per capita consumer spending on food and drink items.

Headline Industry Data

  • Total food consumption (local currency) year-on-year (y-o-y) growth in 2015: +2.8%; compound annual growth rate (CAGR) 2014-2019: +2.9%

  • Per capita food consumption (local currency) y-o-y growth in 2015: -0.2%; CAGR 2014-2019: +0.4%

  • Bottled water volume (litres) y-o-y sales growth in 2015: +4.1%; CAGR 2014-2019: +4.0%

  • ...

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Freight Transport

Kuwait Freight Transport

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BMI View: We expect positive growth across the Kuwaiti freight transport sector in 2015, despite a nominal fall in trade. This is because this has been driven by a fall in oil prices, rather than by a decline in goods traded. The outperformer will be air freight, which will outpace the expansion in road freight volumes, while the launch of the country's rail freight network grows ever closer, with approval granted to its construction by the municipal council.

Kuwait will see moderate real growth in trade in 2015. We forecast an expansion of 2.6%, following an estimated 2.5% expansion in 2014. In 2016 we predict that growth will slow slightly to 2.5%, and will average 2.5% over our medium-term forecast period to 2019. Unlike some of its fellow GCC states, such as the UAE and Qatar, Kuwait does not...

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Information Technology

Kuwait Information Technology

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BMI View: We have a subdued growth outlook for Kuwait's IT market, reflecting the negative impact of the depressed oil price on wider economic growth and enterprise software and services opportunities. We forecast IT spending growth of 0.5% in local currency terms in 2015 and a CAGR of 1.5% to 2019. Nevertheless, Kuwait's government will maintain its expansionary budget aimed at diversifying the economy away from hydrocarbons, which will create new areas of opportunity for IT vendors, for example in the healthcare, power and financial services sectors. Meanwhile, GDP per capita in Kuwait remains among the highest in the world, generating strong demand for premium hardware vendors such as Apple.

Headline Expenditure Projections:

  • ...

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Infrastructure

Kuwait Infrastructure

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BMI View: Positive regulatory changes and a commitment to infrastructure spending as spelt out in the country's latest five-year plan support our view of moderate industry growth. Yet, as the long-delayed Kuwait International Airport expansion project goes back to tender, the business environment needs to improve before the country's great potential can be fully realised. We will therefore wait for genuine project momentum before making significant adjustments to our forecasts. B...

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Insurance

Kuwait Insurance

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BMI View: Despite healthy growth in premiums in recent years, Kuwait's insurance market remains the third smallest in the GCC region, ahead only of Bahrain and Oman. Substantial public investment programmes under Kuwait Vision 2035 will provide a long term boost to key non-life sectors, however significant cultural barriers are impeding growth in the life sector, while an uncertain regulatory environment and fragmented marketplace are impacting on the non-life sector.

We expect economic growth in Kuwait to head broadly lower over the coming years, primarily on the back of weaker oil prices and minimal growth in the oil sector. This will, in all likelihood, constrain growth in certain insurance lines as consumer confidence is declining slightly and the population is more likely to save than spend on perceived non-essentials at present, such as non compulsory insurance policies. Wider domestic economic growth...

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Oil & Gas

Kuwait Oil & Gas

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BMI View: We forecast oil production will continue to rise but Kuwait will not meet its 4mn b/d target as a result of project delays, regulatory uncertainty and a failure to attract necessary investment. The greenfield al-Zour refinery is also at risk of further delays while new funds set aside for Kuwait's first onshore LNG import terminal underpin our forecast for rapidly rising gas demand.

Headline Forecasts (Kuwait 2013-2019)
2013 2014e 2015f 2016f ...

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Petrochemicals

Kuwait Petrochemicals

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BMI View: Kuwait's export-oriented petrochemicals industry will face a major challenge in the face of the Chinese economic slowdown and its effects on the Asian regional market and product prices, but we are optimistic that low naphtha prices will help the country's producers defend their margins.

The fall in the price of crude has had a direct impact on the price of naphtha, which is Kuwait's main petrochemical feedstock. This should help producers compete in price terms in a market that is over-supplied, particularly against regional rivals that utilise ethane as feedstock. Kuwait's growing competitive advantage will help bolster the forthcoming growth in the capacities of ethylene and derivatives, including a 1.4mn tonnes per annum (tpa) naphtha cracker.

Nevertheless,...

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Pharmaceuticals & Healthcare

Kuwait Pharmaceuticals & Healthcare

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BMI View: While the persistence of lower oil prices will drive down national budgets and curtail some investment programmes, we maintain that the healthcare sector's perception as a critical source of economic diversification away from hydrocarbons in addition to public support, will continue to be largely insulated from major cuts to funding. As such, drugmakers will continue see to sector values rise in all categories, although patented prescription drugs will dominate in value terms. However, a continued escalation of regional security concerns and to a lesser extent, internal political...

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Power

Kuwait Power

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BMI View: Recent blackouts across Kuwait have drawn attention to the significant challenges that the Kuwaiti power sector is facing in the years ahead. With power generation struggling to keep up with growing demand, much greater levels of investment are urgently needed. However, with the sector almost wholly state-owned and operated, and the regulatory and political landscape remaining highly restrictive, attracting major investment will be difficult unless the government presses ahead with significant reform.

Significant changes are on the cards in the Kuwaiti power sector over the coming years, as the government attempts to spur investment into the country's ageing infrastructure. Kuwait's first public-private...

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Real Estate

Kuwait Real Estate

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BMI View:   Over the long term the Kuwaiti real estate sector continues to provide enticing opportunities. The country enjoys immense oil wealth and high GDP per capita, while government initiatives are supporting an increasingly dynamic private sector. However, we believe that forecast growth in the sector will be pushed back several years due to developments in 2014. The drop in the price of oil and political instability in the region surrounding Kuwait has meant that the Kuwaiti economy is not growing as quickly as previously forecast, and thus supply continues to outpace demand in the real estate sector.

Demand for commercial real estate is set to grow in Kuwait, as the country has a stable government and...

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Retail

Kuwait Retail

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BMI View: Kuwait's economy witnessed a slowdown with the damage to the world oil industry in the last year, however prospects for the retail sector remain strong. Despite being a relatively small country, both population and area wise, there are high numbers of affluent households and individuals, driving growth in the retail sector. The high levels of urbanisation and preference for modern retail formats and luxurious brands means Kuwait represent great opportunities to retailers who can build up strong brand loyalty and take advantage of the wealthy population.

The growth in Kuwaiti economy will not be as strong as it has been in the last five years, due to the downturn in the oil industry due to falling prices of oil, while Kuwait is highly dependent on the oil industry for its income and exports. As a result the growth in the economy will average less than 3% y-o-y during our...

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Shipping

Kuwait Shipping

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BMI View: We expect continued growth through Kuwait's major ports. Although the economy faces significant challenges from the dramatic fall in the price of oil through the closing months of 2014 - Kuwait is reliant on oil revenues - we believe that growth will hold up, thanks to considerable reserves and a commitment to a five-year plan. This will maintain growth in gross tonnage volumes through the country's ports. In terms of container demand, we expect that household spending in Kuwait will continue to grow, and that the country's container-handling facilities will see steady if unspectacular growth over the next several years. That said, the opening of the new Mubarak al-Kabir facility, now expected to happen in 2016, will boost volumes in the country.

Headline Industry Data

  • 2015 port of...

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Telecommunications

Kuwait Telecommunications

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BMI View: With the mobile penetration rate now well over 200%, Kuwait's three mobile operators' strategies to drive revenue growth from new services rather than new subscriptions are well under way. Aside from aiming to retain existing customers with improved customer care and network quality, mobile operators are also leveraging their networks to break into the M2M and wireline markets. Over the coming two years, BMI sees particularly strong opportunities in the broadband market, where the absence of a strong regional player or any of the existing mobile players means that highly lucrative multi-play services have yet to take hold. However, Kuwait's mobile ARPUs are among the highest in the region, and we therefore believe there is strong appetite among consumers for these types of services.

...

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Water

Kuwait Water

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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...

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