Kuwait's real GDP forecast is forecast to maintain at at 5.0% in 2014 (2013: 4.5%), according to a report released by Kuwait Finance House (KFH) on Friday.
Growth will be supported by resilient oil production, which forms the bulk of exports, on-going recovery in the non-oil sector, strong public and private investment in infrastructure projects and increasing foreign direct investment (FDI).
Further growth is underpinned by the expansion of fiscal policy in the form of contributions and debt relief programs introduced by the government, which will boost private consumption going forward. Kuwait's oil sector is expected to continue increasing, albeit at a slower rate by 4.0% in 2014 (2013: 4.4%) as a result of a gradual decline in oil production.
For non-oil sector, growth is likely to rebound to 5.2% in 2014 from 4.6% reported for 2013; on the back of further recovery in the manufacturing, construction and real estate sectors following strong government capital expenditure budget allocation for FY2013/14.
Examples of government expenditure budget allocation include spending approximately 50% of the Development Plan's budget by March 2014 on more than 1200 economic projects to reining in on spending on subsidies and welfare programs. In-house projection is much higher than the IMF's conservative forecasts of 2.6%.
In February 2014, Kuwait's oil production remained at 2.90mln barrels per day, similar to December 2013's output - the fourth straight month of below 3.0mln output since September 2014. Kuwait's current production capacity is 3.3mln bpd and aims to increase it to 3.5mln bpd by 2015. The slight drop in Kuwait's oil production is in line with the slowdown in recent OPEC's oil output and other member countries. OPEC crude production dropped to the lowest level in more than two years in December 2013, and has maintained the same output For the months that followed.
OPEC is expected to produce at below the group's agreed ceiling of 30mln barrels a day in the second quarter of 2014, at 29.6mln barrels a day, according to OPEC's Monthly Oil Market Report. This is a decrease of 0.3mln barrels a day from December 2013. Kuwait's efforts to develop its heavy oil capacity are part of the country's plan to increase overall crude oil output to 4mln barrels per day by 2020 from current production of approximately 3.0mln barrels per day. Kuwait has approved bids worth a total of USD12bln for major upgrades at two oil refineries, in a sign it is moving ahead with large infrastructure projects. The Clean Fuels Project is a specification upgrade and expansion of Kuwait's largest refineries as part of its economic development plan.
Meanwhile, the price of Kuwait Export Crude (KEC) declined slightly to USD103.1 per barrel as at 14 March 2014, in line with other global oil prices. This compares to a slightly higher price of USD106.33 as at 03 March 2014.