Economy of Kuwait

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Economy of Kuwait
Kuwait city cityscape.jpg
Currency Kuwaiti dinar (KD)
1 April–31 March
Trade organisations
WTO and OPEC
Statistics
GDP $200.062 billion[1]
GDP per capita
$84,309[1]
GDP by sector
agriculture (0.3%), industry (50.6), services (49.1%) (2013 est.)
2.5%[2]
Main industries
petroleum, petrochemicals, cement, shipbuilding and repair, desalination, food processing, construction materials
67th[3]
External
Exports $115.46 billion f.o.b. (2013 est.)
Export goods
oil and refined products, fertilizers
Main export partners
 South Korea 16.0%
 India 15.7%
 Japan 13.4%
 United States 11.7%
 China 9.2%
 Singapore 4.2% (2012 est.)[4]
Imports $36.54 billion f.o.b. (2013 est.)
Import goods
food, construction materials, vehicles and parts, clothing
Main import partners
 United States 11.8%
 China 9.2%
 Saudi Arabia 8.3%
 Japan 8.2%
 South Korea 7.0%
 Germany 5.1%
 Italy 4.7%
 India 4.6%
 United Arab Emirates 4.2% (2012 est.)[5]
$38.82 billion (31 December 2008 est.)
Public finances
$14.21 billion (29.6% of GDP) (2004 est.)
Revenues $113.3 billion (2008 est.)
Expenses $63.55 billion (2008 est.)
Economic aid N/A
Standard & Poor's:[6]
AA- (Domestic)
AA- (Foreign)
AA+ (T&C Assessment)
Outlook: Stable[7]
Moody's:[7]
Aa2
Outlook: Stable
Fitch:[7]
AA
Outlook: Stable
Main data source: CIA World Fact Book
All values, unless otherwise stated, are in US dollars.

Kuwait is a small, relatively open economy. The Kuwaiti currency is the highest-valued currency unit in the world.[8] Kuwait has nearly 10% of the world's oil reserves. Petroleum accounts for nearly half of GDP and 95% of export revenues and government income.[9] In recent years, Kuwait has done little to diversify its economy due to positive fiscal situation and hostile relationship between the parliament and government, which has prevented the implementation of economic reforms.[9]

Kuwait's first free-trade zone was inaugurated in 1999. Kuwait has a well-developed banking system. The National Bank of Kuwait is the largest bank in the country and one of the largest in the Arab world.[10]

Diversification[edit]

Kuwait's revenues rely significantly on oil, increasing from 85% of total revenues in 2001 to 95% in 2013. Diversification of the economy remains a long-term issue. In recent years, Kuwait has done little to diversify its economy due to positive fiscal situation and hostile relationship between the National Assembly parliament and government, which has prevented the implementation of economic reforms.[9] In May 2014, the Kuwaiti government announced the preparation of comprehensive report on economic diversification within six months. The report is expected to include ways to develop existing fish, agriculture and small-scale industries and attract more foreign investment.

Prior to the Gulf War, Kuwait was successfully diversifying its economy. The development of non-oil sectors significantly declined after the Iraqi invasion in 1990, after hundreds of companies and foreign institutions relocated to Dubai and Bahrain. During the past 20 years, Kuwait has not implemented any development projects with significant economic value, while the dependence on oil revenues has increased.

Between 2006 and 2012, political turmoil hindered attempts at economic diversification. In 2013, the relationship between the parliament and government became amicable.

Oil[edit]

In 1934, the Emir of Kuwait granted an oil concession to the Kuwait Oil Co. (KOC), jointly owned by the Anglo-Persian Oil Company (later British Petroleum Company) and Gulf Oil Corporation In 1976, the Kuwaiti Government nationalized KOC. The following year, Kuwait took over onshore production in the Divided Zone between Kuwait and Saudi Arabia. KOC produces jointly there with Texaco, Inc., which, by its 1984 purchase of Getty Oil Co., acquired the Saudi Arabian onshore concession in the Divided Zone.

In the Offshore Divided Zone, the Arabian Oil Co. – 80% owned by Japanese interests and 10% each by the Kuwaiti and Saudi Governments – has produced on behalf of both countries since 1961. The original concession agreements will expire in January 2003; negotiations to replace the concession with a technical service agreement should be completed in 2002.

The Kuwait Petroleum Corporation. (KPC), an integrated international oil company, is the parent company of the government's operations in the petroleum sector, and includes Kuwait Oil Company, which produced oil and gas; Kuwait National Petroleum Co., refining and domestic sales; Petrochemical Industries Co., producing ammonia and urea; Kuwait Foreign Petroleum Exploration Co., with several concessions in developing countries; Kuwait Oil Tanker Co.; and Santa Fe International Corp. The latter, purchased outright in 1982, gives KPC a worldwide presence in the petroleum industry.

KPC also has purchased from Gulf Oil Co. refineries and associated service stations in the Benelux nations and Scandinavia, as well as storage facilities and a network of service stations in Italy. In 1987, KPC bought a 19% share in British Petroleum, which was later reduced to 10%. KPC markets its products in Europe under the brand Q8 and is interested in the markets of the United States and Japan.

Kuwait has about 94 billion barrels (14.9 km3) of recoverable oil reserves. Estimated capacity, before the war, was about 2.4 million barrels per day (380×10^3 m3/d). During the Iraqi occupation, Kuwait's oil-producing capacity was reduced to practically nothing. However, tremendous recovery and improvements have been made. Oil production was 1.5 million barrels per day (240×10^3 m3/d) by the end of 1992, and pre-war capacity was restored in 1993. Kuwait's production capacity is estimated to be 2.5 million barrels per day (400×10^3 m3/d). Kuwait plans to increase its capacity to 3.5 million barrels per day (560×10^3 m3/d) by 2005.

Agriculture[edit]

Agriculture accounts for 1% of Kuwait's economy and 8% of the gross domestic product.[11] The agricultural sector provides fruit and vegetables for sale in the country's supermarkets. Agriculture is limited by the lack of water and arable land. The government has experimented in growing food through hydroponics and carefully managed farms. However, most of the soil which was suitable for farming in south central Kuwait was destroyed when Iraqi troops set fire to oil wells in the area and created vast "oil lakes". Fish and shrimp are plentiful in territorial waters, and largescale commercial fishing has been undertaken locally and in the Indian Ocean.

Shipping[edit]

The Kuwait Oil Tankers Co. has 35 crude oil and refined product carriers and is the largest tanker company in an OPEC country. Kuwait also is a member of the United Arab Shipping Company.

Tourism[edit]

Main article: Tourism in Kuwait

External trade and finance[edit]

The Kuwaiti dinar is a strong currency pegged to a basket of currencies in which the U.S. dollar has the most weight. Kuwait ordinarily runs a balance-of-payments surplus.

Kuwait Exchange Stock in Kuwait City

The government's two reserve funds: the Fund for Future Generations and the General Reserve Fund, which totalled nearly $100 billion prior to the invasion in 1990, were the primary source of capital for the Kuwaiti Government during the war. While these funds were depleted to $40–$50 billion after the war, they currently are estimated around $208 billion. The bulk of this reserve is invested in the United States, Germany, the United Kingdom, France, Japan, and Southeast Asia. In order of importance, foreign assets are believed to be invested in stocks and bonds, fixed yield instruments (mostly short term), and real estate. Kuwait follows a generally conservative investment policy.

Kuwait has been a major source of foreign economic assistance to other states through the Kuwait Fund for Arab Economic Development, an autonomous state institution created in 1961 on the pattern of Western and international development agencies. In 1974, the fund's lending mandate was expanded to include all – not just Arab – developing countries.

Over the years aid was provided to Egypt, Syria, and Jordan, as well as the Palestine Liberation Organization. During the Iran-Iraq war, significant Kuwaiti aid was given to the Iraqis. The Kuwait Fund issued loans and technical assistance grants totaling over $520 million during its fiscal year ending 30 June 2000.

The stock market capitalisation of listed companies in Kuwait was valued at $130,080 million in 2005 by the World Bank.[1]

Macro-economic trend[edit]

This is a chart of trend of gross domestic product of Kuwait at market prices estimated by the International Monetary Fund with figures in millions of Kuwaiti Dinars.[12]

Year Gross Domestic Product US Dollar Exchange Inflation Index
(2000=100)
Per Capita Income
(as % of USA)
1980 7,764 0.27 Kuwaiti Dinars 55 171.08
1985 6,450 0.29 Kuwaiti Dinars 68 71.58
1990 5,328 0.29 Kuwaiti Dinars 80 37.00
1995 8,114 0.29 Kuwaiti Dinars 92 62.14
2000 11,570 0.30 Kuwaiti Dinars 100 48.92
2005 21,783 0.29 Kuwaiti Dinars 108 64.35

For purchasing power parity comparisons, the US Dollar is exchanged at 0.288 Kuwaiti Dinars only. Mean wages were $27.83 per manhour in 2009. As for skilled and experienced Kuwaiti (Engineers, Doctors, and Managers) the average monthly salary is hiked up tremendously, to an average of $10,000+ a month excluding living and other benefits. Kuwait is a tax free country so all the above figures reflect actual take home numbers.

During the 1970s, Kuwait benefited from the dramatic rise in oil prices, which Kuwait actively promoted through its membership in the Organization of Petroleum Exporting Countries (OPEC). The economy suffered from the triple shock of the 1982 Souk Al-Manakh stock market crash, the mid-1980s drop in oil prices, and the 1990 Iraqi invasion and occupation. The Kuwaiti Government-in-exile depended upon its $100 billion in overseas investments during the Iraqi occupation in order to help pay for the reconstruction. Thus, by 1993, this balance was cut to less than half of its pre-invasion level. The wealth of Kuwait is based primarily on oil and capital reserves, and the Iraqi occupation severely damaged both.

In the closing hours of the Gulf War in February 1991, the Iraqi occupation forces set ablaze or damaged 749 of Kuwait's oil wells. All of these fires were extinguished within a year. Production has been restored, and refineries and facilities have been modernized. Oil exports surpassed their pre-invasion levels in 1993 with production levels only constrained by OPEC quotas.

Other statistics[edit]

Investment (gross fixed): 6.6% of GDP (2005 est.)

Household income or consumption by percentage share:

  • lowest 10%: NA
  • highest 10%: NA

Agriculture - products: practically no crops; fish

Industrial production growth rate: -5% (2002 est.)

Electricity:

  • production: 38.19 billion kWh (2003)
  • consumption: 35.52 billion kWh (2003)
  • exports: 0 kWh (2002)
  • imports: 0 kWh (2002)

Electricity - production by source:

  • fossil fuel: 100%
  • hydro: 0%
  • other: 0% (2001)
  • nuclear: 0%

Oil:

  • production: 2,418,000 bbl/d (384,400 m3/d) (2005 est.)
  • consumption: 400,000 bbl/d (64,000 m3/d) (2006 est.)
  • exports: 2.57 million barrels per day (409×10^3 m3/d) (2008)
  • imports: NA
  • proved reserves: 105.0 billion barrels (16.69×10^9 m3) (2005 est.), including the divided zone.

Natural gas:

  • production: 8.3 billion cu m (2003 est.)
  • consumption: 8.3 billion cu m (2003 est.)
  • exports: 0 m³ (2002 est.)
  • imports: 0 m³ (2002 est.)
  • proved reserves: 1.572 trillion cu m (2005)

Current account balance: $31.51 billion (2005 est.)

Exports - commodities: oil and refined products, fertilizers

Imports - commodities: food, construction materials, vehicles and parts, clothing

Reserves of foreign exchange & gold: $9.296 billion (2005 est.)

Exchange rates: Kuwaiti dinars per US dollar - 0.3014 (2004), 0.298 (2003), 0.3039 (2002), 0.3067 (2001), 0.3068 (2000)

See also[edit]

References[edit]

  1. ^ a b "Kuwait". International Monetary Fund. Retrieved 21 April 2010. 
  2. ^ "Kuwait inflation rate up 2.54 pct in Aug on annual basis". Arab Times. 25 September 2013. Retrieved 2 November 2013. 
  3. ^ "Doing Business in Kuwait 2012". World Bank. Retrieved 21 November 2011. 
  4. ^ "Exports Partners of Kuwait". CIA World Factbook. 2012. Retrieved 2013-07-22. 
  5. ^ "Import Partners of Kuwait". CIA World Factbook. 2012. Retrieved 2013-07-22. 
  6. ^ "Sovereigns rating list". Standard & Poor's. Retrieved 26 May 2011. 
  7. ^ a b c Rogers, Simon; Sedghi, Ami (15 April 2011). "How Fitch, Moody's and S&P rate each country's credit rating". The Guardian. Retrieved 31 May 2011. 
  8. ^ http://www.siliconindia.com/finance/news/10-Most-Valuable-Currencies-in-the-World-nid-109953.html
  9. ^ a b c "The World Factbook". CIA Factbook. 
  10. ^ "Kuwait National Bank". Q8daily.com. 13 August 2010. Retrieved 24 October 2010. 
  11. ^ http://webcache.googleusercontent.com/search?q=cache:bU1BhkTmKQEJ:neareast.fao.org/Download.ashx%3FFile%3DFCKupload/File/NENAPGRN/kuwait.pdf+&cd=7&hl=en&ct=clnk&gl=kw
  12. ^ Select Country or Country Groups

External links[edit]