Kuwait: 2002 economic data (page 2 of 2)

Together with trade they account for more than 60% of private sector activities.

The manufacturing sector, which had been shrinking over the previous three years, finally saw positive growth of 4.7%. Growth came mainly from chemicals (excluding refining), non-metallic minerals and fabricated metallic products, reporting increases of 14%, 7% and 3.2%, respectively.

Meanwhile, food, beverages and tobacco saw a limited recovery following a sharp drop in 2001, with value added increasing by 1.5%.

The communications sector, which had seen strong growth throughout the last ten years and a 29% increase in value added in 2001, experienced a slowdown registering an increase of 2.2% only. This sector had undergone a rapid expansion on the back of strong demand for mobile and internet services in Kuwait over the last decade.

Another sector experiencing slower growth was construction whose value added rose by 1.3% despite indicators pointing to an increase in building activity. Growth over the last five years has averaged 1.9%, well below the 5.9% in non-oil GDP.

Domestic demand increased by 11.3%, well above the revised 6.0% growth seen during 2001 and the average of the previous five years of 4.6%. The bulk of this increase came from strong growth in private and government consumption. Increased investment spending also made a contribution albeit a smaller one.

Private consumption has seen substantial growth in recent years reaching 11.3% in 2002, the highest since 1996. Increased hiring of Kuwaitis by the government and an improved economy has helped boost household spending in general. This was further facilitated by a rapid expansion in consumer loans, and supported by demographic trends of a fast growing population and acceleration in household formation that had been key drivers of growth in recent years.

A long awaited pick-up in government spending was finally visible in 200. The recovery reflects a shift in focus of fiscal policy to play a more expansionary role in the economy, made possible by relatively high oil prices and record budget surpluses over the past three years. Government consumption increased by 12.6% compared to 0.9% in 2000 and 1.5% in 2001.

An even bigger increased in spending on public infrastructure projects resulted in a 7.6% increase in gross capital formation. Still the share of investment spending in domestic demand was relatively small. At KD 979 million, gross investment represented 9.1% of GDP while net capital formation was a mere 4.9%.

Gross national product (GNP) declined by 2.2% to KD 11.74 billion. The decline was due to a sharp drop in net factor income from abroad (NFIA) which decreased by 34% to KD 1 billion, its second consecutive sharp decline. NFIA has been hurt by the drop in interest rates in most economies as well as the continued weakness in equity returns in the US and Europe.

As a consequence, net national savings fell sharply, declining by 41% to KD 1.81 billion following a 39% drop the previous year. Net savings in 1999 had peaked at KD 4.97 billion.
Per capita GNP fell by 7.2% to KD 4,966. The decline exceeded the drop in GNP due to a rapid 5.4% growth in the population.

A swell in then number of expatriate workers driven by a pick-up in non-oil domestic activity was a main factor behind the jump in the size of the population.

Still, per capita GNP as a measure of household income in Kuwait is limited by the fact that it includes income to the public sector. Per capita private consumption may be a better measure instead. During 2002 per capita private consumption increased by 5.7%, near the five-year average of 5.6%. The figure, standing at KD 2,533 during 2002, is the highest on record.