The Kuwait economy has bounced back reasonably well in the post-crisis period, Kuwait National Bank (NBK) said, noting that the growth in six out of eight non-oil sectors has been higher over the last three years than before the global financial crisis. The nominal GDP growth has in fact bounced back reasonably well in the post-crisis period.
Output rose by 21 percent per year on average between 2009 and 2011, only slightly below the pre-crisis average of 23 percent recorded during the boom years between 2002 and 2008
The increase has not just been attributable to rising oil prices and output in six out of eight non-oil sectors, growth has recently been faster than during the pre-crisis years.
Given low levels of business confidence, the need for financial consolidation and the fragile global environment, this can reasonably be seen as an encouraging development, reads the report.
The NBK, however, cautioned that the picture is not quite as strong. Some of this recent growth can be attributed to the tendency for activity to bounce back naturally after a fall.
Nominal GDP fell by a huge 23 percent in 2008 and 2009, largely due to a 33 percent decline in oil prices
Nominal GDP fell by a huge 23 percent in 2008 and 2009, largely due to a 33 percent decline in oil prices as the global financial system buckled and the world economy shrank.
Non-oil GDP fell by four percent in 2009 as asset prices plunged, businesses tightened their belts and government spending fell.
Once 2009 is included, the average annual growth rate over the past few years falls back from 21 percent to just four percent – much less impressive. The number of non-oil sectors that have enjoyed superior growth of late falls from six to two.
The performance of some of larger sectors have limited the impacts of the growth
However, many of the sectors that have performed well of late – such as utilities and construction – are comparatively small, so their strength contributes little to the health of the economy overall.
Similarly, in the larger sectors that have performed better – such as trade and "other services" – the improvement has been marginal. Again, this limits their overall impact, the report said.
It noted that the sectors that have performed badly in recent years – notably finance and business services (which includes real estate) and communications – are large and the dip in performance has been huge.
The gap between the pre and post-crisis contributions to growth from these two sectors of the economy far outweighs the gains in all of the other sectors combined.
For the financial and real estate sectors, whose combined output is still 33 percent below its peak of 2007, this reveals the scale and enduring legacy of the financial crisis.
The report noted that the government need to take a series of aggressive measures to back the national economy
A combination of higher government investment spending and a much more aggressive approach to economic reforms in areas such as privatization, the labor market, and competition policy are needed in order to put the economy on a stronger growth path, NBK said in the report.
The Saudi Gazette