Plans to cut CAPEX have been approved, with public spending on salaries maintained
B2C demand will continue to be driven by further increases in salaries and subsidies, but annual growth figures will ease in 2023 as pandemic base effects fade and tighter monetary policy persists. Some increase in the lower-income expat population is possible as some project implementation returns in 2023. However, Kuwaitization policies will limit high-income expat numbers next year. While the 2022 budget limits B2B and B2G demand growth due to cuts to CAPEX, we expect that higher oil revenues alongside the launch of the Al Zour refinery, which began commercial operations last month, will translate into slightly higher public sector spending growth next year.
Overview
- Kuwait’s parliament has approved a delayed budget for FY 2022/2023, based on an oil price assumption of US$ 80 a barrel.
- Revenues are set at KWD 23.4 billion, up 24.4% from the previously expected KWD 18.8 billion, and up 114% from 2021/2022’s revenues of KWD 10.9 billion.
- Expenditures are set at KWD 23.5 billion, up 7.3% from the previously expected KWD 21.9 billion, and up 2.1% from 2021/2022’s expenditures of KWD 23 billion.
- Planned cuts to CAPEX have been approved, with spending decreasing by 15.2% YOY.
- Spending on salaries and subsidies has increased 4.4% and 8.8%, respectively.
Our View
The increase in oil prices has substantially improved Kuwait’s fiscal balance. Despite this, the government will remain committed to fiscal restraint, with most of the surplus directed toward the country’s General Reserve Fund. An improvement in relations between the government and parliament could mean the passing of a much needed debt law in 2023, alongside long-delayed economic reform.
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