Kuwait’s trade sur­plus ex­pands on oil price gain

Kuwait Times - - BUSINESS -

KUWAIT: Kuwait’s trade sur­plus ex­panded for the first time in a year in the sec­ond quar­ter of 2016, amid a healthy bounce in oil prices, though it re­mains at his­tor­i­cally low lev­els. The sur­plus widened from a mere KD 0.4 bil­lion in the first quar­ter of 2016 to KD 1.2 bil­lion in 2Q16, as a pickup in oil prices helped push oil ex­port earn­ings higher. The av­er­age oil price continued to edge up­wards in 3Q16, thus we ex­pect the sur­plus to widen slightly fur­ther dur­ing the same pe­riod.

Oil ex­port rev­enues rose from KD 2.4 bil­lion in 1Q16 to KD 3.2 bil­lion in 2Q16, on the back of a healthy re­cov­ery in oil prices. The Kuwait ex­port crude (KEC) price was up by 48 per­cent quar­ter-on-quar­ter (q/q) in 2Q16, ris­ing from an av­er­age of $27 per barrel in 1Q16 to $40 in 2Q16. Oil prices av­er­aged marginally higher in 3Q16 so we ex­pect to see oil ex­port earn­ings to con­tinue to edge higher as well. Whilst we did see gains in both oil prices and oil ex­port earn­ings on a quar­terly ba­sis, they were still down sig­nif­i­cantly compared to a year be­fore, fall­ing by 31 per­cent and 26 per­cent year-on-year (y/y), re­spec­tively.

Non-oil ex­port rev­enues also im­proved from the pre­vi­ous quar­ter, though they were down by 23 per­cent y/y. Non-oil ex­port rev­enues rose by 5 per­cent after eth­yl­ene prices re­bounded, ris­ing by 11 per­cent q/q. Non-oil ex­port earn­ings are ex­pected to con­tinue to rise on a quar­terly ba­sis in 3Q16, as eth­yl­ene prices continued to log in pos­i­tive q/q growth.

Cen­tral Sta­tis­ti­cal Bureau

Im­ports con­tracted by 1.3 per­cent y/y in 2Q16 on the back of lower con­sumer goods prices. Con­sumer goods fell by 12.7 per­cent y/y, the first con­trac­tion in at least six years, as all the sub­com­po­nents wit­nessed de­clines. Pas­sen­ger mo­tor cars and food & bev­er­ages, which to­gether make up 40 per­cent of to­tal con­sumer goods, were down 13 per­cent y/y and 29 per­cent y/y, re­spec­tively. Th­ese de­clines can be largely at­trib­uted to lower prices. In real terms, food & bev­er­age im­ports were down by 8.2 per­cent y/y in 2Q16. Mean­while, im­ports of man­u­fac­tured goods, which in­clude pas­sen­ger mo­tor cars, were up by 8.1 per­cent y/y in 2Q16.

Cap­i­tal and in­dus­trial goods im­ports wit­nessed dou­ble digit growth, likely re­flect­ing the gov­ern­ment’s im­proved im­ple­men­ta­tion of its devel­op­ment projects. Im­ports of cap­i­tal goods, which are a good gauge of the level of in­vest­ment in the econ­omy, and in­dus­trial goods, rose by 12 per­cent and 16 per­cent y/y, re­spec­tively, in 2Q16.

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