Kuwait's C/A surplus soars to record $77bn
Kuwait, May 28, 2013
Kuwait's current account surplus climbed to an all-time high of KD22.2 billion (77.4 billion) in 2012, which is equivalent to 45 per cent of 2012 GDP, said a report.
A measure of net international trade in goods, services, factor income and transfers, the current surplus surpassed the previously set record of KD18.5 billion in 2011, stated the National Bank of Kuwait in its report.
Financial outflows also climbed to a record high on the back of a KD 5.2 billion increase in Kuwaiti investments in foreign debt securities, it added.
The surplus boom was mainly driven by strong oil revenues which pushed the goods trade surplus to a record high, offsetting record deficits in services and remittances, the top Kuwaiti lender said in the review.
Central Bank of Kuwait reserves rose by under KD1 billion in 2012. Once changes in the value of government overseas assets are included, the broader balance of payments witnessed a surplus of KD20.7 billion.
According to NBK, the strong oil revenues lifted the surplus in the current account to a new high, and financial flows to investments abroad continued their post-financial crisis growth.
A record goods trade surplus more than offset record deficits in services and remittance outflows. As a percentage of GDP, the surplus stood at 45 per cent, up from 42 per cent in 2011.
The rise in the current account surplus was mainly attributed to a KD 4.8 billion surge in the balance of goods.
Goods exports rose by 18 per cent to KD33.4 billion on the back of a 12 per cent y/y expansion in oil production levels and record oil prices, which averaged $109 per barrel in 2012. Meanwhile, goods imports rose at a much slower pace of 3 per cent y/y to KD6.3 billion.
The services account deficit continued to widen to KD2.7 billion, led by KD2.4 billion imports of travel services. Year-on-year, imports of construction services saw the largest rise of around KD 0.3 billion – and could rise even further this year as the government speeds up execution of projects, said the Kuwaiti lender.
Meanwhile, net investment income edged up slightly to KD2.6 billion – up KD 0.1 billion from the previous year.
These inflows comprise receipts from income-generating assets primarily held by the government. Income from portfolio and direct investments were down slightly, but these were more than offset by a large 50 per cent y/y rise in inflows from ‘other investments’.
Outflows from current transfers rose by some KD0.8 billion in 2012, as workers’ remittances surged by 21 per cent y/y to a record KD4.4 billion.
The rise is much stronger than expected given the 3 per cent increase in the number of expatriates in the workforce during the year. The reasons for this are not clear, but it is possible that it reflects increased remittances from Kuwait’s large Egyptian diaspora in light of the weak Egyptian economy, and larger transfers by Indian expatriates taking advantage of the weak rupee, said the NBK report.
"Looking forward, this year we expect the surplus in the current account to be trimmed to around 35 - 40 per cent of GDP as a result of softer exports and stronger imports. Lower oil prices and cutbacks in production levels are likely to limit oil exports. Meanwhile, an improvement in non-oil sector growth is likely to help imports pick-up in 2013," it added.-TradeArabia News Service