Kuwait Boosts National Economy Amid COVID-19 Shocks, Falling Oil Prices

Kuwaiti officials outlined a strategy to boost the country’s economy, which faces dual challenges from the coronavirus pandemic and declining oil prices.

  • By externalwire | April 1, 2020,5:56 pm
Kuwait Boosts National Economy Amid COVID-19 Shocks, Falling Oil Prices

Kuwait was quick to implement anti-COVID-19 measures, and lead the Gulf states in its decisions to suspend international flights and implement a partial curfew to curb the spread of the deadly virus. The government has now moved to buffer the economy from the harmful repercussions of COVID-19. 

After an extraordinary meeting of the Kuwaiti Cabinet on March 31, government officials announced a raft of socio-economic measures aimed at keeping the national economy ticking over, limiting costs and negative effects from COVID-19, and preserving the country’s strong international credit rating.

The cabinet committed to implement eleven different socio-economic protections, ranging from price control mechanisms for essential commodities, to expediting government payments towards the private sector. 

The recommendations were strongly focused on reinforcing social security provisions, as well as the provision of “soft and long-term loans,” and a suspension of repayments on government funded credit. 

The measures primarily target small- to medium-size enterprises, and individuals working in sectors like aviation, real estate, and hospitality which have been badly affected by the COVID-19 outbreak. 

Kuwait has committed to “ensure the safety of the citizens working in the sectors affected by the repercussions of the crisis,” through “establishing a mechanism to secure the minimum income that ensures facing the cost of living for workers affected by the current crisis and linked to contracts,” an official statement relayed through state-run KUNA News said on April 1. 

Kuwait’s robust and decisive containment measures appear to be working. The country reports 237 active cases including 14 patients in intensive care. Another 80 patients have recovered in full and 911 more left quarantine on April 1, according to KUNA News. 

The country’s oil price has taken a sharp dive in recent weeks, following global trends, due to a lack of global demand and OPEC ructions. The price of Kuwaiti oil recovered slightly today, April 1, rising by $1.37 to reach a price of $25.70 per barrel. 

The International Monetary Fund (IMF) reports that the country’s “ample financial buffers and strong financial sector allow Kuwait to face these shocks from a position of strength.”  

Kuwait’s Central Bank (CBK) followed the US Federal Reserve’s lead in early March and reduced interest rates by 1% point to ease monetary policy and increase liquidity.  

The government has already committed $1.6 billion, or 1.4% of GDP, to the coronavirus fight. Amir Sheikh Sabah al-Ahmad al-Jaber al-Sabah donated approximately $16 million to a fund set aside to address the economic repercussions of COVID-19. 

Nevertheless, Standard and Poor’s lowered Kuwait’s credit rating from AA to AA- on March 28, and Moody’s has also flagged the country’s rating for review in light of a “significant” reduction in government revenues. 

S&P agreed with the IMF’s outlook, saying the Kuwaiti economy appeared stable and relatively well prepared to handle the economic repercussions of COVID-19 and the oil price fall. 

“We forecast that, in line with lower oil prices, Kuwait’s general government balance will be in deficit exceeding 10 percent of GDP in 2020 before gradually returning to surpluses over the medium term,” the international ratings agency said.

Read also: Saudi Arabia and Kuwait Elevate COVID-19 Measures With Strict Curfews

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