Regaining momentum? Non-oil activity raises Kuwait's GDP to $175 billion
Kuwait’s non-oil sector grew a strong 10.6 per cent in 2013, driving the country’s nominal GDP to KD49.8 billion ($175.4 billion), a growth of 2.3 per cent over the previous year, according to national accounts data.
The sector continued to recover from the 2008 crisis and its related weakness that lingered until 2010, said the latest Economic Update released by the National Bank of Kuwait (NBK).
The data show a gradual improvement since 2011 with 2013 the strongest year so far. The increase was driven by three sectors: manufacturing (excluding refining, but including petrochemicals) which saw a huge 33.5 per cent rise, ‘government and other services’ which gained 10.9 per cent, and the trade sector which posted a 12.3 per cent gain.
The oil sector corrected lower, -1.5 per cent in 2013, following strong growth that averaged 31 per cent in 2011-12, said the update.
Crude oil output fell in 2013 to an average 2.9 million barrels per day while KEC prices fell as well, from an average $108.7 per barrel in 2012 to $104.6 last year. The oil share of GDP remained however near its recent highs at 66 per cent (including refining). This strong and stubborn share reflects both the lack of progress on expanding the non-oil sector in Kuwait but also the strength of the oil market/sector in recent years, according to the report.
“The new set of numbers does not affect our outlook for real GDP growth at this point,” said Elias Bikhazi, Group chief economist at NBK.
“We still look for real growth of about 4.5 per cent in the non-oil sector for this year and next.”
GDP data were revised back to 2010. The earlier GDP levels were revised down, primarily because of lower investment spending estimates. Investment spending was revised down by an average KD1.3 billion for 2010-2012 (or 3 per cent of GDP).
“These large revisions are not very surprising, given what we knew about projects execution over that time frame. The revisions impacted primarily growth rates in the non-oil sector which grew 7 per cent, instead of 9.3 per cent, for the two years 2011-12,” said Bikhazi.
The update also indicated that private sector activity continues to gradually improve. As a proxy, the combined output of the construction, trade, transport & communication, and finance sectors grew by 6.5 per cent in 2013, up from 1 per cent in 2011 and 4.5 per cent in 2012. These sectors ought to be the prime beneficiaries of wider growth ahead and of the fuller execution of the development plan.
On the expenditure/demand side, growth was supported by the always steady and reliable government expenditures, up 12.8 per cent, said NBK.
Other sectors were a bit more volatile. Consumer spending rose 4.9 per cent following two strong years of double digit growth.
Exports, in line with oil production, fell 2 per cent last year. Gross capital formation, or the spending on investment and infrastructure, posted a solid 12.7 per cent gain.
However investment, at KD7 billion in 2013, is still at 14 per cent of GDP and needs to move higher (18-22 per cent) to match Kuwait’s recent highs, if not the performance of other GCC countries.
“The hope there is pinned down on accelerating non-oil growth ahead and on the implementation in earnest of the new 5-year (development) plan of 2015-2020,” said Bikhazi.