Economy of Kuwait

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Economy of Kuwait
Kuwait city cityscape.jpg
Currency Kuwaiti dinar (KD)
Fiscal year 1 April–31 March
Trade organisations WTO and OPEC
Statistics
GDP $200.062 billion1
GDP growth 8.1% (2008 est.)
GDP per capita $84,3091
GDP by sector agriculture (0.3%), industry (52.2%), services (47.5%) (2007 est.)
Inflation (CPI) 2.5%2
Population
below poverty line
NA
Labour force 2.225 million
Labour force
by occupation
N/A
Unemployment 3.2% (2012 est.)
Main industries petroleum, petrochemicals, cement, shipbuilding and repair, desalination, food processing, construction materials
Ease of doing business rank 67th3
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
Gross external debt $38.82 billion (31 December 2008 est.)
Public finances
Public debt $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
Credit rating Standard & Poor's:6
AA- (Domestic)
AA- (Foreign)
AA+ (T&C Assessment)
Outlook: Stable7
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 the second-most free economy in the Middle East.9 57% of Kuwait's GDP comes from non-oil industry (mostly business services, manufacturing, retail trade, financial institutions, construction, transport and real estate).10 Petroleum accounts for 43% of GDP, 87% of export revenues, and 75% of government income.1011 Kuwait also export plant fertilizers.12

Kuwait has little arable land, thus preventing reliance on the agriculture sector. Kuwait's first free-trade zone was inaugurated in 1999 and will continue discussions with foreign oil companies to develop fields in the northern part of the country. Kuwait's other industries include construction, cement, water desalination, agriculture, construction materials and financial services. 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.13

Economy in greater depth

Kuwait Exchange Stock in Kuwait City

Kuwait is one of the wealthiest countries in the world.14 Current GDP per capita reached astonishing peak growth of 439% in the 1970s.15 But this proved unsustainable and contracted by 58% in the 1980s. However rising global oil demand helped register growth of 91% in the 1990s. Diversification is a long-term issue for this over-exposed economy.

Macro-economic trend

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.16

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.

Kuwait is a small country with massive oil reserves, whose economy has been traditionally dominated by the state and its oil industry. 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.

Oil

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.

Social benefits

Kuwait has a fairly open economy with a lot of multi-national companies operating in the oil-rich nation. Shown here is a Burger King restaurant situated at the Kuwait International Airport.

Diversification

Industry in Kuwait consists of several large export-oriented petrochemical units, oil refineries, and a range of small manufacturers. It also includes large water desalinization, ammonia, desulfurization, fertilizer, brick, block, and cement plants. During the invasion, the Iraqis looted nearly all movable items of worth, especially high-technology items and small machinery. Much of this has been replaced with newer equipment. Kuwait also export plant fertilizers.

Diversification of the economy into manufacturing industries remain a long-term issue.

Agriculture

Agriculture accounts for 1% of Kuwait's economy and 8% of the gross domestic product.17 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

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.

External trade and finance

Kuwaiti exports in 2006

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.

Government revenues are dependent on oil revenues. Kuwait's fiscal surplus in 2000 was some 15% of GDP, while it reversed to a deficit of more than 2% of GDP in 2001 on sliding oil prices.

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]

Other statistics

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

References

External links