Kuwait is facing “lower-for-longer” oil prices from a location of strength given great financial buffers, low debt, and sound financial sector, as per the International Monetary Fund (IMF).
Directors mentioned that non-oil growth is predicted to proceed to recover slowly over the medium term, with the fiscal and external positions remaining widely balanced.
They admired the government’s latest efforts to streamline present spending, diversify revenue, and improve the business climate, adding that the new environment calls for deep and sustained reforms.
IMF directors cheered the authorities to continue with the planned introduction of excises and the VAT and to further curtail present expenditure. They also suggested further steps to contain the wage bill.
In its Article IV consultation with Kuwait, the IMF focused that better aligning public and private sector compensation would improve nationals’ incentive to consider private sector jobs and support competitiveness, and suggested restricting public sector employment growth as more private sector jobs are generated.
Kuwait was advised to move from a public sector-led growth model to one driven by the private sector, stating that it needs creating incentives for risk-taking and entrepreneurship.
The IMF stated that non-oil growth in Kuwait has picked up smartly over the past two years, and inflation has moderated. After coming to a standstill in 2015, real non-hydrocarbon growth has improved and is set to reach 2.5 percent this year, driven by improved confidence.
It also mentioned that the government’s underlying fiscal position has improved on the back of spending restraint, but financing requirements have remained bigger.
The banking sector has remained sound, although deposit and credit growth have slowed, they stated.
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