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New projects to keep Kuwait away from non-oil economy

The development of large projects in power and transport sectors in Kuwait during the second half of 2013 will boost stronger growth in non-oil economy in the country. The non-oil economy in Kuwait is hoped to rise from 4.5 percent in 2013 to 5 percent in 2014.

The GCC Brief issued by National Bank of Kuwait (NBK) states that the macro picture of economic growth in Kuwait is comfortable with moderate growth, low inflation and high oil revenues, generating vast budget and trade surpluses.

However, the implementation of government mega projects, would boost investment levels and catalyze activity in private sector, which has been slow to materialize, the report points out.

The activity levels in the consumer sector, which has been the backbone for non-oil sector in recent years, should remain strong, with improved benefits, low inflation, government’s debt relief measure and solid employment growth, the report said.

The employed nationals working in private sector in Kuwait has been on the rise, the increase has slowed down sharply in recent years. To secure rapid and sustainable private sector job growth, faster implementation of government projects and economic reforms to improve the rate of growth of economy are a must.

The oil output was reduced considerably earl this year, to 2.7mn of barrels per day in March. Some of this may be due to seasonal factors, as global oil demand is general weak during first half of each year. However, there are indications that output may fall at a quicker pace than expected, as leading OPEC countries aims to compensate supply increases elsewhere, the report said.

NBK expects inflation to remain in the 2 to 4 percent range over the forecast horizon, with moderation inflation rates in neighbouring countries.

Declining oil revenues will also have an impact on the budget balance, but, it should remain in huge surplus. Better government spending will be another factor, with the spending hoped to grow 12 percent in Financila area 2013-14.

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