IMF reports negative view performance of global economies including GCC

Boursa Kuwait April’s performance mixed compared to March

Oil and Public Finance – April

2020

By the end of April 2020, the 1st month of the current fiscal year 2020/2021 ended and the average price for Kuwaiti oil for April scored US$ 16.7 per barrel, lower by US$ 38.3 per barrel or 69.7% than the new hypothetical price estimated in the current budget and average hypothetical price for the past fiscal year at US$ 55 per barrel. The average oil price for the Kuwaiti oil during the past fiscal year 2019/2020 scored US$ 61.6 per barrel, says AlShall Economic Report prepared by Al-Shall Consulting Co headed by Jassem Al-Saadoun.

The average price for April is lower by 72.9% than the average price for the past fiscal year and is lower by US$ 69.3 per barrel than the new budget’s parity price at US$ 86 per barrel, according to the Ministry of Finance after deducting 10% to the future generations’ reserve.

Kuwait is supposed to have achieved actual oil revenues in April of about KD 107.2 million. Assuming that production and prices would continue at the current levels – an unrealistic assumption – Kuwait’s oil revenues for the entire fiscal year would score about KD 1.3 billion, after deducting production cost for the entire year. This is KD 11.6 billion lower than the estimated for the current budget in the amount of KD 12.9 billion. Adding KD 1.9 billion in non-oil revenues, total budget revenues for the current fiscal year would score KD 3.2 billion.

Comparing this figure with the expenditures allocations in the amount of KD 22.5 billion, it would be likely that the public budget would score a deficit by KD 19.3 billion.

But one month is good enough only to be used as an indicator to the hypothetical deficit of the budget, considering the negative effect of the current pandemic on oil prices.

Actual deficit will be a variable subject to the movement of prices and oil production during the remaining part of the year, and we strongly not advise adopting the stated deficit number, and the continuation of oil prices at this low level is impossible, as this means that most conventional and unconventional oil will exit production because its cost is higher than this

level of prices.

(GCC) Growth Expectations – The International Monetary Fund

(IMF) Report

IMF proceeds with its negative view of the performance of the global economies as well as the GCC economies. Its expectations for all of them will change from positive growth in the October 2019 report to negative growth for all of them by varying degrees. The highest expected negative growth rates belonged to the State of Qatar whose economy was expected to grow by about 2.8% in 2020 as in the October 2019 report, but the April 2020 report numbers were adjusted to negative growth by -4.3%. Positive growth by about 5.0% will be achieved in the year 2021.

IMF expects the second-highest negative growth rate for Bahrain whose growth estimates were reduced by the IMF from about 2.1% in October 2019 to negative growth by -3.6% in April 2020. It, however, will achieve positive growth by about 3.0% in 2021. UAE came third with a decrease in its growth estimate from 2.5% in October 2019 to a negative growth of -3.5% in April 2020. These estimates will change to positive growth by 3.3% in 2021.

Oman comes fourth in its growth estimates which will drop from 3.7% in October 2019 to a negative growth of -2.8% in April 2020 but will rise again to 3.0% in 2021. Saudi Arabia, the region’s largest economy, comes fifth and the International Monetary Fund reduces its growth estimates for KSA from 2.2% in October 2019 to negative -2.3% in April 2020. It will then increase to 2.9% in 2021. Finally comes Kuwait whose growth estimate is reduced from 3.1% in October 2019 to a negative growth by -1.1% in April 2020, then it will rise again to positive growth of 3.4% in 2021, i.e. with the lowest reduction.

These estimates are likely to contain a high degree of error as no one now knows with an acceptable degree of certainty the course of the performance of the global economy.

Neither does anyone know the course of the oil market which is affected almost completely by the sectors that depend on it, and a bigger weakness of the more importing economies. Kuwait, as is the case with most oil countries, cannot but assume the worst-case scenario and plan its policies to confront it. There is nothing wrong in hoping for the best as it is impossible to continue the very weak level of oil prices beyond the short term, or even for the remainder of this year.

Performance of Boursa Kuwait –

April 2020

April’s performance was mixed compared with March’s performance. Traded value, i.e. Boursa’s liquidity decreased with a positive performance regarding all indices. The Premier Market index rose by 3%, Main Market index increased by 3.5% and the BK Main 50 index rose by 4.7%, the All Share Market index (the outcome of the two markets’ performance) rose by 3.2%.

Boursa liquidity during April achieved a lower level than that of

March’s liquidity. The traded value was at KD 747.4 million, decreasing from KD 986.8 million in March. The average daily trading value of April was KD 34 million versus KD 47 million in March, reflecting a 27.7% decrease below March’s average. Traded value in the first 4 months of 2020 (78 working days) totaled to KD 3.126 billion, with an average daily trading value of KD 40.1 million. This represents a 26.4% rise compared with the same average of the same period of 2019 at KD 31.7 million. It also rose by 26.2% when compared with the average of the entire previous year at KD 31.8 million.

Liquidity directions since the beginning of the year indicate that half of the listed companies obtained only 0.7% of that liquidity including 50 companies which captured only 0.1% of that liquidity, and 13 listed companies without any trades. This means that major liquidity activity still deprives almost half of the listed companies from liquidity. Liquidity distribution among the two markets during April 2020 was as follows:

The Premier Market (18 Companies)

It scored KD 685.5 million or 91.7% of Boursa liquidity, and half of its companies captured 90.3% of its liquidity and 82.8% of the entire Boursa liquidity. The other half of its companies captured what is left or 9.7% of its liquidity.

Its liquidity concentration was high as 6 of its companies obtained 80.4% of its liquidity.

The Main Market (155 Companies)

It achieved KD 61.8 million or 8.3% of Boursa liquidity, and 20% of its companies obtained 88.8% of its liquidity while 80% of its companies captured only 11.2% of its liquidity. It is good to recall that its companies’ weak liquidity was the primary factor for their classification within the Main Market which is open for an upgrade with the rise of liquidity of any of its companies.

Oil and Public Finance The performance of Boursa Kuwait for last week was more active, where the traded value, traded volume, number of transactions and the general index increased (Al-Shall Index). Al-Shall Index (value weighted) closed at 429.9 points as of last Thursday, showing an increase by 25.9 points or by 6.4% compared

with its level last week. While it remained lower by 123.3 points or by 22.3% compared with the end of 2019.