World Bank expects Kuwait to achieve 5.7% growth in 2022

Mixed performance for Boursa Kuwait in April

KUWAIT: The World Bank issued its April 2022 MENA Economic Update report titled “forecasting growth in the Middle East and north Africa in Times of Uncertainty”. The World Bank expects sustained positive growth for the GCC countries between 2021 and 2023. For an understandable reason, these economies’ highest expected growth rates occur in 2022 at a 5.4 percent rate. From a negative growth of -3.6 percent in 2020, the six countries recovered to a positive growth of 3.1 percent buoyed by the increase in oil prices in 2021.

Oil prices have increased significantly in 2022, with the Brent average price reaching $100.3 per barrel during the first quarter ($60.8 per barrel for the first quarter of 2021).

However, as these forecasts are for an environment of uncertainty, they are negatively reflected in the estimates of the global economic performance. This fact was indicated by the International Monetary Fund IMF) report two weeks ago. Therefore, we have to be careful in adopting these forecasts because of the high margin of error. The World Bank is undoubtedly aware of this and thus lowers its estimates for the growth rate of these countries to 3.3 percent in 2023.

The soundness of these forecasts depends on critical assumptions, such as the oil market in the short term. Kuwait is the most dependent on oil in the Gulf region; its losses were the highest in the pandemic year, and its economy lost about -8.9 percent of its volume.

Nevertheless, the World Bank expects Kuwait to achieve the second-highest growth rate in 2022, about 5.7 percent, which is the year of the record rise in oil prices. The World Bank also expects Kuwait to achieve the highest trade surplus in 2022, ie, its net exports, at 42.4 percent of its GDP volume. It will, however, record the highest deficit in its public budget at 11.4 percent of its GDP.

Comparative figures and indictors confirm that the other five GCC countries have succeeded in reducing their dependence on oil, albeit their gradual and varying degrees. On the contrary, Kuwait remains highly dependent on oil revenues despite the declared goals of decreasing the reliance on oil and diversifying its sources of income. Even in liquidity shortage, Kuwait deepened its crisis with joint parliamentary-government decisions such as postponing the payments of bank loan installments, bonuses for more than 200,000 workers (performance rewards at a time when most public services are becoming increasingly worse), legalizing the principle of cash-purchase of leave-days, the nine-dayvacations for each of the two Eid vacations, and an intentional negligence in confronting corruption and waste of resources. These and similar decisions mean further and more deep dependence on oil, that is gradually losing its importance in the energy market.

GCC economies

In a paragraph of our current report, we mentioned the World Bank’s forecasts the performance of the GCC economies. Last week’s report also noted that using the growth estimates of either the global economy or the regional and individual countries’ economies requires caution for any decision. The assumptions of the forecasts reports are not solid due to unprecedented high uncertainty. We present the growth forecasts of the GCC economies as per the IMF, comparing their recent forecasts with their forecasts in October 2021. Then we compare the forecasts of the World Bank and the International Monetary Fund. The purpose of the comparison is to show the estimation differences between two close dates and two twin institutions that have the same information base.

Surprisingly, these differences in expectations are material differences, whether between those estimated in a short period for the same institution or between the estimates of two international institutions at the same time. Nonetheless, the differences are, in fact, understandable as a result of the high uncertainty in predicting the course of economic events. The above leaves a large margin for researchers’ diligence and a large margin of error. Our purpose in noting is to warn that the global economy is passing through an unprecedented period of high uncertainty. Under such circumstances, policy and decision-makers must adopt the worst-case scenario at the local level. Let’s be hopeful!

Boursa Kuwait

The performance of the Boursa Kuwait during the month of April remained mixed compared to that of March, with a decrease in the average daily traded value coupled with a positive performance for all the indices. The Premier Market index rose by 2.7 percent, the Main Market Index by 2.2 percent, the All- Share Market index (reflective of both mentioned markets) by 2.6 percent and the BK Main 50 index by 1.9 percent.

Boursa total liquidity during April achieved a lower level than that of March’s liquidity. The traded value was at KD 1.345 billion, decreasing from KD 1.559 billion in March. The average daily trading value in April was KD 67.2 million compared to KD 70.9 million in March, reflecting a 5.1 percent decrease from March’s average. Traded value in the first 4 months of 2021 (81 trading days) totaled KD 5.492 billion, with an average daily trading value of KD 67.8 million. This represents a 49.6 percent increase compared to the average of the same period in 2021 of KD 45.3 million, and a 22.0 percent increase when compared with the same average of the entire previous year of KD 55.6 million.

Liquidity analysis indicates that, since the beginning of the year, half of the listed companies captured only 2.1 percent of the total liquidity, out of which 50 companies capturing 0.5 percent and 4 companies with no trading. As for the small liquid companies, 12 companies whose market value equals 5.4 percent of all listed companies’ value captured about 17.8 percent of total market liquidity. This means that with almost half of the listed companies deprived of market liquidity, liquidity strongly favors small-cap companies. Liquidity distribution between the two markets during April 2022 was as follows:

Premier Market (26 companies).It captured about KD 933.4 million or 69.4 percent of total Boursa liquidity. Half of its companies (13 companies) captured 86.8 percent of its liquidity and 60.3 percent of total Boursa liquidity, while the other half captured the remainder or 13.2 percent of its liquidity. Liquidity concentration rate reached a high level, as 6 companies obtained 69.1 percent of its liquidity. During the first 4 months of 2022, the Premier Market captured 67.8 percent of total Boursa liquidity.

Main Market (133 companies)

It captured KD 411 million or about 30.6 percent of Boursa liquidity. Twenty percent of its companies captured 86.4 percent of its liquidity while 80 percent of its companies captured only 13.6 percent of its liquidity. With time, listed companies that are now illiquid will have to either find a way to increase their liquidity or face withdrawal from the market. The Main Market obtained 32.2 percent of total Boursa liquidity during the first four months of 2022.

When compared to the distribution of liquidity between the Premier and the Main markets, we notice an improvement, since the main market share of liquidity for the whole of 2021 was about 40.6 percent, the distribution of liquidity indicates a return to focus on the premier market, leaving only about 32.2 percent for the main market.

The weekly performance of Boursa Kuwait

The performance of Boursa Kuwait for last week was mixed where the indices of traded value and number of transactions showed a decrease, while the index of traded volume as well as the general index (Al-Shall Index) showed an increase. Al-Shall Index (value weighted) closed at 745.4 points as of last Thursday, showing a rise by 6.2 points or by 0.8 percent compared with its level last week. While it remained higher by 122.6 points or by 19.7 percent compared with the end of 2021.