The growth in Kuwait’s non-oil economy slowed to 2.1 per cent in real terms in 2014, according to a report by National Bank of Kuwait (NBK).

The real growth in overall gross domestic product (GDP) declined by 1.6 per cent, pulled down by the oil sector, stated the top lender citing preliminary data recently published by the Central Statistical Bureau (CSB).

Growth in domestic demand also slowed during the year, though to a still very decent 4.4 per cent, it stated.

There was a notable slowdown in investment expenditures, though this is likely to be temporary. Private consumption growth also slowed for a second consecutive year, as the sector has been moderating, it added.

The oil sector, which includes crude and oil refining, shrank by 1.7 per cent during 2014. The decline, which follows a similar decrease the year before, was due in part to a similar drop in crude oil production, which
fell to an average of 2.88 million barrels per day, said the report.

According to NBK, the oil output has been declining gradually since 2012, after seeing a large hike in 2011. Meanwhile, a larger 16 per cent decline was recorded in refining activity during 2014.

While 2014 saw oil prices plunge, this is not reflected in the real GDP figures, which are computed at constant 2010 prices. Oil GDP in nominal terms was down by 10.6 per cent during 2014, most of it a result of the
decline in the price of oil, said the country's top bank.

The surprise was in the nonoil sector, where growth slowed to 2.1 per cent from 4.2 per cent the year before, it stated.

The largest decline was in the government-dominated “public administration and defense” sector, whose growth
slowed to 3.2 per cent from double digit growth the year before, it added.

Weakness also came from “transport, storage and communication”, education, “wholesale and retail trade”, and “health and social work”, all of which saw growth slow notably, accoridng to the report.

By contrast, “financial institutions and insurance” and “real estate and business services” were among the few
sectors to see an acceleration in growth, with the former seeing real growth accelerate to 5.3 per cent.

Growth in domestic demand moderated for a second consecutive year in 2014, but maintained a healthy pace. Domestic demand, which includes final consumption by households and government as well as investment, grew by 4.4 per cent compared to 6.4 per cent the year before.

The slowdown was largely due to slower growth in investment spending. Gross investment grew by only 2.1 per cent in real terms during the year; this compares to growth of 8.9 per cent the year before.

There was also a deceleration in consumer spending growth, which eased to 2.8 per cent from 4.9 per cent the year before. The cooling off in investment spending growth during 2014 appears to be temporary and should turn around in 2015.

The preliminary data, which contradicts indications that implementation of the government’s Development Plan projects is picking up pace, appears to reflect a lull in capital spending during late 2013 and early 2014.

This is particularly visible in quarterly capital goods imports, which saw growth slow to 2.3 per cent y/y in the first quarter of 2014 from 23 per cent y/y a year before.-TradeArabia News Service