A number of indicators should be of concern to Kuwait’s financial and economic policy makers. For example, the local economy achieved negative real growth of -1.9% in the first quarter of this year compared to the fourth quarter of last year, including an OPEC report that expects its countries to lose a new share of the oil market in 2020. Two other examples are on a global level: one is the growing concern about the future of economic growth in the United States, which is the world’s largest economy, and has started its stimulation by cutting down the interest rates. Another one is China the world’s second-largest economy, which scored its lowest growth rate in 27 years at 6.2% in the second quarter of 2019. These are just models.
In Kuwait, the real negative growth of the local economy was accompanied by increased contribution of oil in its composition to 53% which means that talking about an economic development project which reduces the dominance of oil on the economy by diversifying sources of income either achieves nothing or achieves negative results. On the other hand, OPEC’s expectations of a decline in its members’ quotas due to the competition of non-conventional oil reserves even at this falling price level means that oil will not be able to float the public finance which suffer from deficit. This means that neither is an economic policy useful nor is there ability to buy time with temporary support from oil revenues.
On a global level, all institutions that publish their forecasts of global economic growth are reducing these rates with every new report, and the growth of the global economy, particularly the Asian, is a major factor in the demand for oil. In the short term, negative pressure on growth rates may have unsustainable justifications, such as the US-China trade war, the disagreed BREXIT from the EU, and a change in China’s development model to the dominance of the domestic consumption. However, in the medium to long terms, the negative impact on traditional oil demand will continue due to improvement in the economics of non-traditional oil alternatives, the development of alternative energy markets and even the reduction of oil consumption due to environmental concerns.
In Kuwait, economic and financial policy makers do not appear to have any concerns about these indicators. Economic policy has big slogans and negative results. The fiscal policy continues to expand in the current and inflexible part of spending. There is one of two possibilities: either the public administration has visions and perceptions contradictory to the negative effects of the mentioned indicators, and many others, and it should initiate by submitting its visions and it should be supported if it is right. The second possibility that it is not concerned about the fate of the country and its concern is limited to staying in power for the longest term possible. Such a gamble carries more risks by any time that passes without remedy.