June 2010

Kuwait: 3.0% growth this year, all

eyes on government projects...
An update of recent developments
in select sectors in Kuwait
published by Economic Research
at NBK

Kuwait Economic Brief

Economic Brief - June 2010


Economic Brief - June 2010

Introduction...........................................Page 4 Kuwait’s crude oil price and production

Kuwait: 3.0% growth this year, all eyes on 2.30 90
government projects
2.28 80

Oil Market...............................................Page 6

dollars per barrel

mn barrels/day
2.26
Crude prices fall sharply on global financial 70

turmoil... Kuwait could see a KD6 bn budget 2.24 60

surplus in FY10/11…
2.22 50

Public Finance.......................................Page 8
FY09/10 preliminary accounts: Stronger capital 2.20 40

spending… Large KD 6.0 bn surplus expected May-09 Aug-09 Nov-09 Feb-10 May-10

Oil Output (left) Oil Price (right)

Monetary Developments....................Page 10
April credit picks up mildly, led by a small monetary indicators
advance in the “productive” sectors (y/y percent growth)
25

Real Estate...........................................Page 11 20

Slight increase in real estate sales during April,

15
led by commercial and appartments sales.
10
Corporate Earnings.............................Page 13
Improved profits in the first quarter 5

0
Kuwait Stock Exchange......................Page 17 Apr-09 Jul-09 Oct-09 Jan-10 Apr-10
Hurt by deteriorating international markets. Money Supply (M2) Credit Facilities

Kuwait’s Population & Labor Force...Page 18

2009: surge in private sector Kuwaiti Real estate sales activity
employment… 1200 150

1000
Balance of Payments..........................Page 20 100

Large drop in current account surplus limited 800

50
the accumulation of foreign assets in 2009 …
number

% y/y
600
Higher surplus projected this year 0
400

-50
200

0 -100
2007 2008 2009 2010
Sales Volume (LHS) Sales values (RHS)

KUWAIT STOCK EXCHANGE

200 9000

8000
150

7000
million KD

index

100
6000

50
5000

0 4000
May-09 Aug-09 Nov-09 Feb-10 May-10

Value of Traded Shares (left) KSE Index (right)

3
Economic Brief - June 2010

Kuwait: 3.0% growth this year, all eyes on government

projects

Kuwait’s economy is improving and set to grow 3.0% The Consumer

in real terms this year. Most sectors are steady and/or
improving:
- the consumer sector which had been the steadier
through last year’s weakness is still holding up well.
- the real estate sector is showing improvement in recent
months and is returning to levels of activity not seen
since 2007-08, except in commercial real estate, where
oversupply is weighing on the sector.
- the so-called “productive” sectors (trade, industry,
construction, etc) are finally and tentatively showing signs
of life, after a protracted period of stagnation. It is no
surprise that these sectors were the most impacted by the
crisis/weakness of 2008-09.
- the oil sector is recovering along with world demand, and
is expected to grow 1.4% this year in real terms.
- the non-oil sector should grow 4.0% this year, to yield
the 3.0% overall performance we project.
Data for the first few months of this year support this view
of gradual improvement, and we expect the 2010 pace
of growth to accelerate toward a 4-5% clip by 2011-12,
depending on the government’s ability to deliver on large
plans and projects in coming months.
The world economy which had looked stable for some
time is now again raising concerns around Greece, and
other over indebted states and their macroeconomic
impact on Europe and beyond. Now, the GCC economies
have little direct exposure to Greek debt or Greek banks,
and similarly for other distressed borrowers (Portugal,
Spain, etc). However, we have seen in recent weeks that
these remote events have pressured oil/energy prices and
stock markets worldwide. Oil prices are still around USD
70 pb and the Kuwait stock market is still up slightly on a
year-to-date basis, even after the severe correction of the
last two weeks.
Consumer confidence (ARA index) is back near its best
levels of 2009 following a dip in the third quarter. The
improvement of the past few months coincided with the
passage of the 5-year plan and other legislation. There
has also been, until very recently at least, better world
economic news and the announcement of Zain going
through with the sale of its African assets.
Better sentiment is reflected in plans to purchase durables
(chart 1) and continued spending and borrowing by
consumers (chart 2). Consumer debt did slow in April
for special reasons, but the trend should remain steady,
supported by a moderate growth outlook and expectations
of improvement next year.
Investors
Similar improved sentiment is witnessed on the investor
side. The stock market (KSE) did have a good run prior
to the last (Greece/Europe related) correction. Investors
did put some money to work in the market as well as in
real estate investment/apartments property, in search of
yield (chart 3). Sales have returned to pre-crisis volumes
for residential and investment property. The commercial
side of real estate still lags, in particular the office building
segment where oversupply remains a problem.
Business
More generally business sentiment has also been on a
steady improvement in the last few quarters (Dunn and
Bradstreet (chart 4)), again perhaps in part thanks to the
improved world economy and to anticipation related to
the 5-year plan. The business sector is of course more
sensitive to the economic cycle than the consumer, and
the business slowdown was marked during the recession
of 2009.
Business or corporate loans, which did slow significantly
last year (chart 1), have stabilized in recent months. They
may be about to recover the rest of this year. April data
did show better business lending activity. For example,
lending to trade/industry/construction (together) was up

CONSUMER CONFIDENCE INDEX (ARA) personal facilities vs corporate credit (%y/y)

120 160 40 40

115 150 35 35

110 140 30 30

105 130 25 25

100 120 20 20

95 110 15 15

90 100 10 10

85 90 5 5

80 80 0 0
Apr-09 Jun-09 Aug-09 Oct-09 Dec-09 Feb-10 Apr-10 Apr-07 Oct-07 Apr-08 Oct-08 Apr-09 Oct-09 Apr-10
-5 -5
Consumer confidence index (LHS) Durable Goods (RHS) Personal Facilities Excluding Securities (LHS) Corporate (Ind., Trd & Const)


KD 60 million in April, matching its best performance of
the past 7 months.
Inflation
Inflation has dwindled over the course of 2009 from a high
of 11.6% y/y (Aug 2008) to 2.1% in December 2009 (chart
5). The most recent data, January 2010, show a rate of
2.8% y/y. With the economy and commodity prices rising,
we expect that inflation will average 4.2% this year, almost
the same as last year. This would be near the average of
the past few years and, by itself, should not prompt any
policy changes.
Budget and government finances
The preliminary budget numbers for FY 2009/10 show a
surplus of KD 8.2 billion. We expect that number will be
revised, close to KD 6.0 billion, when the final accounts
are released. It would be the 12th consecutive surplus
and would leave the state’s finances in superb shape,
giving it flexibility and latitude to stand behind the projects
of the 5-year plan. (One half of the KD 31 billion worth of
projects for the next 4 years is expected to be financed by
the public sector.)
though, the speed of execution on the government’s
projects remains crucial. Of the major projects, the Sabiya
power plant, Jaber el Ahmad Hospital, and the Jahra
motor way were awarded in 4Q2009, worth a total of KD
948 million (USD 3.3 billion). More similar projects are in
the process of being tendered and awarded this year. This
type of spending will affect the economy once financed,
and the project actually started. The money will of course
be spent and enter the economy over time. These large
projects are multi-year projects. Nonetheless as more
of the projects, large and small, in the 5-year plan are
tendered, awarded, financed, etc. the more they will add
to growth and the sooner we will get to the 5% or better
GDP growth rate expected beyond 2010.

Government and conclusion

Official action continues apace. After passage the 5-year
plan and the Capital Markets Authority law, we now have
the new privatization law. For growth the next few years

real estate sales (3-mos avg. mmkd) consumer price index (%y/y)
140 40 20 20

35 18 18
120
16 16
30
100
14 14
25
80 12 12
20
10 10
60
15 8 8
40 6 6
10

20 4 4
5
2 2
0 0
0 0
Apr-08 Jul-08 Oct-08 Jan-09 Apr-09 Jul-09 Oct-09 Jan-10 Apr-10
Jan-08 May-08 Sep-08 Jan-09 May-09 Sep-09 Jan-10
Residential (LHS) Apartments (LHS) Commercial (RHS) CPI Housing (27% of CPI)

business confidence index (d&B) data on the kuwaiti economy

70
Variable 2008 2009e 2010f
60
Economy
50 Nominal GDP KD bn 39.8 31.1 35.0
Nominal GDP % y/y 22.0 -22.0 13.0
40
Real GDP % y/y 3.0 -3.3 3.0
30 Hydrocarbon % y/y 1.7 -10.0 1.4
20 Non-Hydrocarbon % y/y 4.0 1.4 4.0
Budget balance % GDP 19.7 19.0 9.0
10
Current account % GDP 43.7 25.9 37.2
0 Prices
Sales Net Profits New Orders Level Of Level of Number of Crude oil prices1 USD 97.2 61.6 70
-10
Volume Received Selling Stocks Employees Consumer prices % y/y 10.6 4.0 4.2
-20 Prices
Source: CBK, NBK/ThomsonReuters Ecowin; forecasts are NBK
3Q09 4Q09
1
Brent crude
1Q10 2Q10


Economic Brief - June 2010

Oil Market & Budget Developments

Crude prices fall sharply on global financial turmoil...
Kuwait could see a KD6 bn budget surplus in
FY10/11…
Flight to US dollar may have assisted crude sell-off…
Crude oil prices fell sharply in May, posting their biggest
correction since the crash of 2008. The price of Kuwait
Export Crude (KEC) fell some USD 18 from a peak of USD
84.3 per barrel (pb) in early May to a low of USD 66.0 pb
on May 26th, its lowest since September last year. Some
of these losses were quickly reversed, however, with the
price bouncing back above USD 70 by the end of the
month.
The catalyst for the fall was intensifying fears over
the escalating debt burden of various governments
– especially in Europe – and the associated risks of both
economic relapse and financial turmoil. Such fears also
helped generate a sharp rise in the US dollar – a traditional
safe haven. The trade-weighted dollar index leapt 4%
in the first three weeks of May to its highest level in ten
months. A rising dollar tends to put downward pressure
on crude prices.
Deepwater oil spill could continue through August…
This crisis atmosphere played out alongside growing
concern about the impact of the oil spill at BP’s Deepwater
Horizon operations in the Gulf of Mexico. Although
estimates of the size of the spill differ greatly, the US
government puts the volume of leaking oil at 12,000-
19,000 barrels per day (bpd). While the immediate focus
of attention is on the calamitous environmental fallout
of the spill – which it is now thought could last until
August - some observers have identified the crisis as a
potential obstacle for plans to expand US offshore drilling
operations.
…but no visible impact on crude prices so far…
So far, the impact of the oil spill has been felt more on BP’s
share price – which has fallen by one-quarter - than on
crude oil prices, probably because the quantities of oil lost
are relatively small. The price of West Texas Intermediate
(WTI) crude fell by even more than KEC in May – a peak-
to-trough drop of USD 21 – while the year-end 2012
futures contract price fell by USD 18 to USD 58 pb.
Analysts see solid rise in global oil demand in 2010…
Analysts continue to tweak their forecasts for 2010 global
oil demand growth, though most agree that this year
will see a solid increase. The Centre for Global Energy
Studies (CGES) has revised up its forecast for demand
growth by 0.2 mbpd, to a strong 1.8 mbpd (2.1%). It
brushed off the impact of the European debt crisis on the
global economy (though acknowledging the rising risk of
a further slump). The International Energy Agency (IEA),
meanwhile, sees oil demand growth of 1.6 mbpd, slightly
lower than last month, owing to their adoption of a higher
oil price assumption. Although not extreme, these figures
are at the stronger end of forecasts. OPEC, for example,
expects more sedate growth of 1 mbpd this year, thanks
to what it sees as vulnerabilities relating to the withdrawal
of government stimulus packages. As in previous months,
non-OECD countries are expected to account for most of
– if not all - the increase in demand.
OPEC sees output rise; plays down drop in oil
prices…
Crude output of the OPEC-11 (i.e. excluding Iraq) continued
its steady rise in April, increasing by 58,000 bpd on the
month, to 26.905 mbpd. Overall production stands nearly
2.1 mbpd above its official quota levels. Both Nigeria and
Iran – already producing well in excess of their official
targets - saw month-on-month increases of around
25,000 bpd. Although OPEC representatives played
down the sharp May fall in prices, the drop may move the
cartel to try and restrain any further creeping production
increases. For now at least, officials have declared that the
organization has no plans to discuss output levels before
the next scheduled gathering in October. If it remains at
current levels, OPEC crude output should average around
0.6 mbpd higher this year than in 2009.
Solid gains in both demand and supply seen in
2010…
Although both the demand and supply of oil are expected to
see decent sized gains this year, there remain considerable

kuwait export crude KEC PRICE SCENARIOS

(dollars per barrel)
(dollars per barrel)
95 Scenario
90 Low Price Base Case High Price
85
80 2009 60.4 60.4 60.4
75 1Q10 74.4 74.4 74.4
70 FY09/10 68.6 68.6 68.6
65 2Q10f 74.7 76.8 77.7
60 3Q10f 67.6 75.9 80.8
55 4Q10f 58.0 74.6 87.0
50 2010f 68.7 75.4 80.0
4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 1Q11f 57.0 73.9 89.2
FY10/11f 64.3 75.3 83.7
Future price projections correspond to NBK’s price scenarios.


risks on both sides. On the demand side, problems in the
Euro zone could – even without a ‘double dip’ recession
– generate enough uncertainty to significantly downgrade
global demand. There are also concerns about the
possibility of an abrupt slowdown in Chinese economic
growth, which could be of even greater significance for
oil prices. On the supply side, meanwhile, the main risk
could be that the solid increases expected in both non-
OPEC crude (+0.6 mbpd) and OPEC natural gas liquids
(+0.6 mbpd) disappoint, as they have sometimes done in
the past.
…which could leave prices range bound…
Assuming that neither of these events occurs, increases
in demand and supply – at around 1.8 mbpd - may turn
out to be broadly offsetting, implying no great changes
in market fundamentals for the year as a whole. In that
case, prices might remain more or less range bound, at
between USD 70-75 pb, dipping slightly in 2H10 as the
big year-on-year gains in demand fall away. The price of
KEC would average USD75 for FY2010/11.
KD 6bn budget surplus possible in FY10/11…
The While the government’s spending plans have not
yet been finalized, the above scenarios could yield the
Kuwaiti government another large fiscal surplus this fiscal
year. Total revenues would be between 15% lower and
16% higher than our estimates for FY2009/10. Public
spending, on the other hand, could rise by between 26-
48% this year, partly due to big increases in spending
under the 5-year development plan and partly due to a
large transfer to the Public Institute for Social Security.
Based upon these assumptions, the government’s budget
position for FY2010/11 would end-up between balance
and a surplus of KD 6.3 billion. This comes on top of what
may have been a KD 7 billion surplus in FY2009/10 (official
figures are not yet available).

Weaker global economic growth could send prices

lower…
Under a softer global economy scenario, demand growth
could come in some 0.3 mbpd lower than expected, at
1.5 mbpd. Unless OPEC withdraws some supplies from
the market, prices would tumble to below USD 60 pb at
the end of this year – and perhaps lower still in 1Q11. For
FY2010/11 as a whole, they average USD 64.

Upside risk to prices if non-OPEC supply increases

fail to materialize…
But should the anticipated sizeable increase in non-OPEC
oil supply fail to materialise – leaving output 0.2 mbpd
lower - crude prices would quickly recover from their
recent stumble and push on towards the USD 90 pb mark
by early next year. The price of KEC would average USD
84 pb in FY2010/11.

BUDGET FORECAST
(million KD, unless otherwise noted)
Under Alternative Oil Price Scenarios
FY 2009/10 FY 2010/11
Official Low Base High Possible Low Base High
Budget Price Case Price Budget Price Case Price

Oil Price ($/barrel) 35.0 68.6 68.6 68.6 43.0 64.3 75.3 83.7

Total Revenues 8,075 17,998 17,998 17,998 9,719 15,358 18,019 20,868
Oil Revenues 6,925 16,848 16,848 16,848 8,617 14,256 16,917 19,766
Non-Oil Revenues 1,150 1,150 1,150 1,150 1,102 1,102 1,102 1,102

Expenditures (official) 12,116 12,116 12,116 12,116 16,162 16,162 16,162 16,162
Surplus (deficit) -4,041 5,882 5,882 5,882 -6,443 -804 1,857 4,706
After RFFG -4,849 4,083 4,083 4,083 -7,415 -2,339 55 2,619

Expenditures (NBK estimate) 11,150 11,207 10,904 15,354 14,950 14,546

Surplus (deficit), NBK estimate 6,488 6,791 7,094 5 3,069 6,322
After RFFG 4,688 4,991 5,294 -1,531 1,267 4,236


Economic Brief - June 2010

Public Finance

FY09/10 preliminary accounts: Stronger capi-
tal spending… Large KD 6.0 bn surplus expected
The 12-month follow up statement for the fiscal year
2009/10 (FY09/10) reveals a preliminary surplus of KD 8.2
billion (bn), compared to the KD 4 bn deficit projected in
the budget. We expect the final number to be near KD 6.0
billion when the closing accounts are released very soon.
The surplus would be the 11th consecutive surplus for Ku-
wait.
Total revenues reached KD 17.9 bn, more than double the
amount expected, thanks to higher than assumed oil pric-
es. At KD 9.7 billion, preliminary expenditures were 81%
of budgeted, versus a historical average of 74%, indicat-
ing better reporting and/or faster disbursement by govern-
ment agencies. Though total reported expenditures were
down 35% from a year ago, the drop reflects the absence
of an extra-ordinary transfer to the social security fund
that amounted to KD 5.5 bn in the previous fiscal year.
Excluding this transfer, and all other transfers and spend-
ing categories that do not affect domestic demand, such
as spending on military hardware and the cost of fuel used
in power generation, demand-impacting expenditures
saw a significant increase of 18% (y/y). These expendi-
tures, which have more impact on economic growth, rep-
resented roughly two thirds of the total. The final accounts
are likely to reveal significantly different figures since most
categories of expenditure are typically revised higher when
the closing figures are released.
These revenues, which reflect only the value of crude oil
produced, represented 94% of total revenues, in line with
the previous 5 years.
Reflecting the slump in economic activity last year, non-oil
revenues were also down, 14.3% y/y. By the end of 2009
(3QFY2009/10), however, these revenues had been down
26%. The apparent “improvement” in non-oil revenues in
the first quarter of 2010 may indicate improving business
conditions, especially in the real estate market. For the
whole fiscal year, “income tax revenues” (-23%) were hit
by lower proceeds from corporate income taxes (-42%).
“Property fees” fell 9.3%, reflecting waning real estate ac-
tivity last year.
In contrast, “Service charges”, more related to consumer
activity, ended the fiscal year up 11%. We know the con-
sumer sector held out relatively well throughout the slow-
down. The major contributor to the drop in non-oil reve-
nues was “miscellaneous revenues and fees”, down 44%.
demand-impacting expenditureS (12 months into fy)
1,200 80
1,000
70
800
60
KDmn

600

%
50
400
The price of Kuwait Export Crude (KEC) averaged USD
68.3 pb during FY2009/10, well ahead of the USD 35 pb 200
40

number assumed in the budget. As a result, oil revenues

came at 243% of the amount budgeted, reaching KD 16.8 0 30
2002/03 2003/04 2004/05 2005/06 2006/07 2007/08 2008/09 2009/10
bn. Compared to FY2008/09, however, oil revenues were
down 15.2% as oil prices and production fell last year. Capital Expenditure (LHS) Capital Expenditures/Budgeted (% RHS)

REVENUES AND EXPENDITURES - FISCAL YEAR 2009/10 - 12-MONTH COMPARISON

(million KD)
12 Months
Interim Report Budget Change Actual / Budget (%)
FY08/09 FY09/10 08/09 09/10 (%) FY09/10 Historical*

Total Revenues 21,133 17,925 12,679 8,074 -15 222 228

Oil Revenues 19,878 16,848 11,653 6,924 -15 243 245
Non-Oil Revenues 1,254 1,077 1,026 1,150 14 94 124

Total Expenditures 15,040 9,747 18,966 12,115 -35 80 74

Excluding Transfer to PIFSS 8,765 9,030 12,656 11,377 3 79 69
Wages and Salaries 2,131 2,669 3,210 3,476 25 77 74
Goods and Services 2,415 2,071 3,077 2,354 -14 88 75
Vehicles and Equipment 62 174 179 344 182 51 31
Projects, Maintenance and Land Purchases 945 989 1,665 1,265 5 78 43
of which: Electricity and Water 591 584 699 560 -1 104 59
Public Works 193 266 385 371 38 72 56
Misc. Exp. and Transfers 9,488 3,844 10,836 4,676 -59 82 82
Miscellaneous Expenditures 1,041 1,254 1,345 1,354 20 93 82
Transfers to Public Institutions 7,175 1,691 7,537 1,925 -76 88 85
of which: Social Security (PIFSS) 6,276 717 6,310 738 -89 97 96
Surplus (deficit) 6,092 8,178 -6,287 -4,041 34 ... ...
After RFFG 3,979 6,386 -7,555 -4,848 60 ... ...
* 5-year average


In fact, excluding those, non-oil revenues would have been ever, we reiterate that the official closing numbers for the
flat. fiscal year are due soon and are likely to show upward revi-
sions to spending. We could end up with a surplus close to
Spending on “development projects, maintenance, and KD 6 bn, or 19% of our estimate of 2009 GDP.
land purchases” was running faster than usual and contrib-
uted to the stronger spending picture. Despite being cut
24% in the budget, “Chapter 4” expenditures were actually
up 4.7% y/y (KD 989 million). More importantly, they were
running at 78% of the amount budgeted compared to their
43% average of the past five years. We expect the closing
accounts to show an even higher spending rate as this
chapter receives the largest adjustments in relative terms.
Capital spending is set to grow further in FY10/11 as the
government has budgeted KD 2.1 bn (perhaps more) for
this chapter (+66%) and has reiterated its dedication and
commitment to development projects and their execution.
“Wages and salaries” saw the largest increase in spending
this year, up 25% y/y (to KD 2.7 bn).

In conclusion, much higher-than-expected revenues and

lower-than-projected expenditures led to a KD 8.2 bn sur-
plus in FY2009/10, before allocations of 10% of revenues
to the Reserve Fund for Future Generations (RFFG). How-

demand-impacting expenditureS (12 months into fy)

12 30

10 25

8 20
KDbn

6 15
%

4 10

2 5

0 0
2002/03 2003/04 2004/05 2005/06 2006/07 2007/08 2008/09 2009/10
Other Capital Serv. & Eqpt. Total Salaries
Growth in demand-impacting spending (RHS)

NON-OIL REVENUES - FISCAL YEAR 2009/10 - 12-MONTH COMPARISON

(million KD)
12 Months
Interim Report Budget Change Actual / Budget (%)
FY08/09 FY09/10 08/09 09/10 (%) FY09/10 Historical *

Non-Oil Revenues 1,254 1,077 1,026 1,150 -14 94 124

Income & Profit Taxes 122 94 114 109 -23 87 137
Property Transfer Fees 10 9 14 16 -9 58 112
Customs Taxes and Fees 215 191 209 230 -11 83 122
Service Charges 493 547 581 633 11 87 95
Law Enforcement and Justice 50 67 56 62 33 107 113
Education and Culture 3 3 5 4 -8 75 100
Healthcare 63 68 63 87 8 78 110
Housing and Public Facilities 41 47 38 43 14 108 112
Water and Electricity 103 120 179 191 16 63 72
Transportation and Communication 164 173 176 176 6 98 98
Fiscal Stamp Fees 68 70 63 68 3 103 115
Miscellaneous Revenues 411 231 104 159 -44 145 296
* 5-year average


Economic Brief - June 2010

Monetary Developments

April credit picks up mildly, led by a small advance in
the “productive” sectors
April credit got a small boost from loans to the industrial
sector. This offset sluggishness in lending to the real estate
sector and a drop in personal facilities. Meanwhile, private
deposits in foreign currencies fell considerably in April. As
a result, money supply (M2) fell KD 293 million (-1.1%) in
April, pushing year on year (y/y) growth down to 1.7%.
Credit shows some form after a 4- month slump
Outstanding credit extended to residents rose KD 47
million m/m (+0.2%) in April, breaking a four month slump
that saw credit fall a combined KD 25 million. April’s upturn
pushed up y/y growth to 4.5% from 3.9% in March, the
first improvement in that rate in ten months.
The bulk of the increase in April came from increasing
loans to the industrial sector, up KD 68 million, and
unclassified loans, up KD 51 million. Some of this increase
in lending could have fallen under the umbrella of the
financial stability law.
remaining maturities fell between 1 and 3 bps. Rates
averaged 1.08%, 1.29%, 1.52%, and 1.77%, for the 1, 3,
6, and 12-month maturities, respectively.
Comfortable liquidity in system
Total bank assets fell KD 40 million in April. Banks’ liquid
assets (including net interbank deposits) also fell KD 72
million, reducing its ratio to total assets 20 bps to 11.3%.
Despite the drop in liquid assets, banks remained very
comfortably liquid as average KIBOR (Kuwait interbank
offer rate) remained close to its lows during the month.
Dinar strengthens versus Euro
Since November of last year, the dinar has been gaining
steadily vis-à-vis the Euro, reflecting the growing trouble in
the Euro Zone. This trend only accelerated since the start
of April, leading to an 8% appreciation of the dinar to the
Euro by mid May. Meanwhile, the dinar is holding relatively
steady against the dollar.

Meanwhile, personal facilities (excluding loans for the

purchase of securities) were flat in April, following a gain of
KD 86 million in March. Personal loans for the purchase of
securities fell KD 54 million, the fifth consecutive decline.
Other sectors were either flat or down slightly.

Resident deposits in foreign currency fall

considerably
Private resident deposits fell KD 314 million in April, due monetary indicators
to a KD 383 million drop in foreign currency deposits. (year-on-year percent growth)
Banks had adopted a relaxed attitude towards the 40
building of deposits, which should explain the large
drop in y/y deposits growth over the previous months 30
as the system remains comfortably liquid and incoming
funds linked to the Zain deal are expected to add further
20
liquidity. However, it is also possible that individuals and
businesses have experienced growing aversion in April to
holding funds in foreign currencies amid volatile markets. 10

Meanwhile, interest rates changes were somewhat mixed 0

in April. Average rates offered on 1-month KD private Apr-08 Aug-08 Dec-08 Apr-09 Aug-09 Dec-09 Apr-10

deposits rose 1 basis point in April, while rates on Money Supply (M2) KD Resident Deposits Credit Facilities

MONETARY HIGHLIGHTS - APRIL 2010 exchange rates

Change
0.32 0.45
Apr 2010 mom 3-mnth yoy
mn KD % % %
0.31 0.43

Local Bank Assets 40,545 -0.1 1.0 3.2

0.30 0.41
of which:
Claims on Government 1,892 1.5 -1.6 -16.5
0.29 0.39
Credit to Residents 25,176 0.2 0.3 4.5
Foreign Assets 7,157 -1.5 -0.7 -14.2
0.28 0.37

Money Supply (M2) 25,345 -1.1 0.8 1.7

0.27 0.35
Private Deposits 24,521 -1.3 0.7 1.5
KD Sight Deposits 4,539 2.1 7.8 14.5
KD Savings Deposits 2,962 0.9 6.6 10.9 0.26 0.33
KD Time Deposits & CDs 14,846 -0.3 1.3 4.1 Aug-08 Nov-08 Feb-09 May-09 Aug-09 Nov-09 Feb-10 May-10
FC Deposits 2,175 -15.0 -19.9 -33.3
Dollar/Dinar (LHS) Euro/Dinar (RHS)

10
Real Estate

Slight increase in real estate sales during April, led by
commercial and apartments sales
The value of real estate sales increased slightly in April.
A total of KD 96.7 million worth of transactions was
registered, up by 8% from March. Year on year, sales fell
by 42.6% in number and by 53% value. The rise in the
value of sales was led by the commercial sector, which
surged by 51%. Sales of apartments also rose by 13%,
while residential sales dropped by 8%.
More detailed data from the Ministry of Justice (MoJ,
not shown in the tables) reveal that more than half of
all residential sector transactions were accounted for by
sales of existing homes, rather than new plots. Meanwhile,
two areas that are among the most active markets for
privately held vacant plots, Abu Futaira and Ishbilya, both
represented 58% of the total traded vacant residential
plots. Despite the fact that these areas are relatively far
from Kuwait City, there has been an increased interest in
them, perhaps due to the completion of infrastructure.
Real estate sales have fallen significantly thus far in 2009,
with the average value of sales during the first four months
of the year 56% lower than the same period last year. The
number of transactions was also 54% lower. Most of the
decline in sales during the period occurred in residential
property with their sales values and transactions down by
62% and 63%, respectively.
The apartments sector was also weaker, with the average
of monthly sales values dropping by 62%. Meanwhile,
the average transaction size rose 19.7% for commercial
property, but declined by 57% for apartments.
The number of Savings and Credit Bank (SCB) loans
approved increased moderately by 2% to 460 in April over

sales activity, residential sector sales activity, apartments sector

1000 250 200 250

900 180
200 200
800 160
150 140 150
700
600 120
100 100
number
number

% y/y
% y/y

500 100
50 50
400 80

300 60 0
0
200 40
-50 -50
100 20

0 -100 0 -100
2007 2008 2009 2010
2007 2008 2009 2010
Sales Volume (LHS)
Sales Volume (LHS) Sales Value (RHS)
Sales values (RHS)

REAL ESTATE SALES & SCB HOUSING LOANS

Monthly Avg. Feb Mar Apr % %
Real Estate Sales 2008 2009 2010 2010 2010 M/M Y/Y

Sales Values (mn KD) 156.2 108.7 99.5 205.8 177.2 -13.9 83.3
Residential Property 74.8 55.5 53.0 141.6 97.4 -31.2 119.3
Apartments 56.7 36.9 42.6 49.6 69.8 40.8 136.9
Commercial 24.7 16.3 3.9 14.6 9.9 -32.1 -56.4
Number of Transactions 514 382 383 760 744 -2.1 135.4
Residential Property 381 277 255 598 558 -6.7 141.6
Apartments 121 100 124 154 168 9.1 121.1
Commercial 11 6 4 8 18 125.0 100.0
Average Transaction Size (000 KD) 320.3 281.2 259.7 270.8 238.1 -12.1 -22.2
Residential Property 203.3 199.3 207.6 236.8 174.6 -26.3 -9.2
Apartments 477.2 373.3 343.8 321.9 415.5 29.1 7.2
Commercial 2563.4 2880.6 972.5 1830.0 552.2 -69.8 -78.2

Monthly Avg. Feb Mar Apr % %

SCB Housing Loans 2008 2009 2010 2010 2010 M/ M Y/Y

Value of Approved Loans (mn KD) 15.0 13.5 7.6 9.0 10.2 13.3 -42.5
New Construction 10.2 8.0 2.6 3.1 3.1 -1.8 -71.6
Purchase of Existing Homes 3.2 3.9 3.3 4.4 5.3 20.0 9.6
Additions & Renovations 1.5 1.6 1.7 1.4 1.8 26.0 -10.8
Number of Approved Loans 412 371 274 309 345 11.7 -25.0
New Construction 195 126 50 60 53 -11.7 -68.6
Purchase of Existing Homes 89 77 68 92 112 21.7 24.4
Additions & Renovations 128 167 156 157 180 14.6 -10.4
Value of Disbursed Loans (mn KD) 12.1 12.8 11.8 16.3 13.4 -18.1 -10.5
New Construction 7.0 7.8 6.5 7.6 7.4 -3.2 -26.5
Purchase of Existing Homes 3.6 3.3 3.7 6.8 4.2 -38.8 36.2
Additions & Renovations 1.5 1.6 1.5 1.9 1.8 -2.8 -1.7

11
Economic Brief - June 2010

March, though the value of loans approved by the bank was

down by 10.7%. Compared with March, approved loans
for purchasing existing homes rose sharply, with number
and value increasing by 84% and 146%, respectively. This
increase is consistent with MoJ data showing a jump in
purchases of existing homes during the month. Approved
loans during the first four months of 2009 were up 158%
in value and 43% in number compared with the same
period last year.

Meanwhile, the SCB disbursed KD 15 million in loans

during April, 4% more than the previous month, though
the year-to-date average was up by 12% compared to a
year before.

SALES ACTIVITY, COMMERCIAL SECTOR approved and disbursed loans by s&cb

25 600 600 250

500 550 200

20
400 500
150

300 450
15 100
number

% y/y

200 400
number

50
% y/y

10 100 350
0
300
5 0
250 -50
-100
200 -100
0 -200
2007 2008 2009 2010 2007 2008 2009 2010

Sales Volume (LHS) Sales Value (RHS) Volume of loans (LHS) Value of loans (RHS)

12
Corporate Earnings

Improved profits in the first quarter

Reported earnings for 199 listed companies stood at
KD 411 million in 1Q10. Again, several companies failed
to announce their results before the mandated deadline
and trading on their shares was subsequently halted.
Combined earnings of 168 companies that were listed
in 2009 (same-company earnings) amounted to KD 372
million, a remarkable 206% above last year’s first quarter.
While results of Kuwait Stock Exchange listed companies
improved markedly compared to the same period last year,
they remain well below pre-crisis levels.
Of the companies that announced first quarter results, 125
reported profits while 52 suffered negative earnings. Banks
were the best performing sector accounting for 32% of total
profits. Kuwait’s two largest banks, National Bank of Kuwait
(NBK) and Kuwait Finance House (KFH), were among the
top five performers with the former making up 19% of total
earnings.
“Real estate” was by far the worst performer in terms
of year-on-year growth. At KD 11.1 million of aggregate
earnings, the sector is down 63% on the year, reflecting
the continued slowdown in the property market.
While “Investment” was the only sector that posted a loss
overall, the magnitude of the loss shrank considerably
compared to large losses endured in the same period
last year. Global Investment House, one of the country’s
biggest investment companies (by assets), still tops the
worst performers list with losses of KD 14.2 million. The
company managed, however, to trim losses by 80% year-
on-year.
Profits for “Insurance” and “Food” also recorded two of
the best year-on-year growth rates while profits for listed
“Non-Kuwaiti” companies were almost flat.

Though in second place with aggregate reported earnings

slightly above KD 100 million, “Services” was one of only
two sectors posting negative growth.

Two of the sector’s biggest companies by market cap,

Zain and Agility, were down 32% and 52%, respectively.
Nevertheless, Zain remained one of the top performers.
The sector is the second largest contributor to total profits
accounting for over a quarter of total earnings.

CORPORATE Earnings history

(this period)
3,000

2,500

2,000
million KD

1,500

1,000

500

0
1Q07 1Q08 1Q09 1Q10

Net Profits

SECTOR PERFORMANCE COMPANY PROFITS - Q1 2010

(million KD) Net Profits Growth % Highest Earnings million KD
Q1 2010 Q1 2009 Q12010 1. National Bank of Kuwait 76.3
2. Zain 51.5
Banking 132 130 1
3. National Industries 41.3
Investment -1 -176 ...
4. Kuwait Finance House 30.9
Insurance 11 -1 ...
5. Commercial International Bank (EGP) 27.9
Real Estate 11 30 -63
Lowest Earnings million KD
Industrial 61 -41 ...
1. Global Investment House -14.2
Services 101 133 -24
Food 19 7 158 2. Kuwait Business Town Real Estate -7.4

Non-Kuwaiti Companies 39 39 2 3. IKARUS Petroleum Industries -6.5

Total Market 372 122 302 4. Qurain Petrochemical Industries -5.5
Kuwaiti Companies 333 83 206 5. IFA Hotels & Resorts -4.6

13
Economic Brief - June 2010

CORPORATE EARNINGS - 1Q 2010

(thousand KD)
Code Company Name First Quarter Growth
2010 2009 %
Banking
101 National Bank of Kuwait 76,260 63,525 20
102 Gulf Bank 524 1,593 -67
103 Commercial Bank -1,414 3,139 …
104 Al-Ahli Bank 15,283 15,116 1
105 Ahli United Bank 6,244 10,220 -39
106 Kuwait International Bank 291 -2,204 …
107 Burgan Bank 1,874 11,345 -83
108 Kuwait Finance House 30,905 39,294 -21
109 Boubyan Bank 1,620 -11,699 …
Investment
201 Kuwait Investment Co. 5,988 2,819 112
202 Commercial Facilities 5,283 -3,822 …
203 International Financial Advisors -3,372 -5,861 …
204 National Investments 3,456 -3,856 …
205 Kuwait Projects Company (Holding) 4,722 9,200 -49
206 Al-Ahlia Investment … -5,956 …
207 Coast Investment & Development 5,414 -12,817 …
208 The International Investor … -2,138 …
209 Securities House … -6,461 …
210 Industrial & Financial Investments -161 -2,005 …
211 Securities Group … … …
212 International Finance Co. -947 -1,476 …
213 Kuwait Financial Centre 3,721 -3,365 …
214 KMEFIC -1,718 103 …
215 International Investment Group … -8,079 …
216 Aref Investment Group -4,464 -17,550 …
217 Al-Dar Investment … … …
218 Al-Aman Investment 1,509 -5,668 …
219 First Investment Co. -2,128 -3,203 …
220 Al-Mal Investment -1,405 -961 …
221 Gulf Investment House -1,232 … …
222 A’ayan Leasing & Investment Co. … -12,553 …
223 Bayan Investment Co. -1,862 -6,324 …
224 Global Investment House -14,173 -69,518 …
225 Osoul Leasing & Investment Co. -251 … …
226 GulfInvest … -3,641 …
227 Kuwait Finance & Investments Co. 1,095 -6,090 …
228 KIPCO Asset Management Co. 1,023 252 306
229 International Leasing & Investment Co. … … …
230 Kuwait Invest Co. (Holding) 131 -3,685 …
231 National International Co. (Holding) 153 -1,927 …
232 Housing Finance 30 -6,696 …
233 Al Madar Finance & Investment -3,224 … …
234 Al-Deera Holding Co. -1,331 -5,691 …
235 Al Safat Investment 1,231 -1,959 …
236 Al Salam Group Holding Company -314 … …
237 EKTTITAB Holding Company -335 -2,475 …
238 Al Qurain Holding Company -2,588 -3,433 …
239 Sokouk Holding -588 1,749 …
240 Al Madina for Finance & Investment -181 … …
241 Noor Financial Investment 658 -16,858 …
242 Al Tamdeen Investment 3,334 2,097 59
243 Kuwait Bahrain International Exchange 241 207 16
244 DAMAC Kuwaiti Holding 1,535 -5,737 …
245 Kuwait Syrian Holding 350 -325 …
246 Strategia Investment co. -27 -1,040 …
247 Kuwait China Investment Co. 1,073 … …
248 Manafae Investment Co. 24 … …
249 Gulf North Africa Holding Co. 509 … …
250 Amwal International Investment Co. 143 … …
251 Al-Masar Leasing & Investment Co. K.S.C … … …
Insurance
301 Kuwait Insurance 2,500 -5,952 …
302 Gulf Insurance 2,568 2,287 12
303 Al-Ahlia Insurance 2,413 2,724 -11
304 Warba Insurance 1,975 1,501 32
305 Kuwait Re-Insurance 558 -190 …
306 First Takaful Insurance 28 48 -42
307 Wethaq Takaful Insurance Co. 788 -1,000 …
Real Estate
401 Kuwait Real Estate 975 1,183 -18
402 United Real Estate 2,394 -3,786 …
403 National Real Estate 5,982 5,739 4
404 Salhia Real Estate 2,528 165 1,434

14
CORPORATE EARNINGS - 1Q 2010
(thousand KD)
Code Company Name First Quarter Growth
2010 2009 %
405 Pearl of Kuwait Real Estate - … …
406 Al-Tamdeen Real Estate 2,059 1,099 87
408 Ajyal Real Estate Entertainment Co. 34 -4,537 …
409 Al-Massaleh Real Estate Co. 217 -430 …
410 Arab Real Estate -2,758 80 …
411 Union Real Estate 315 277 14
412 Enma’a Real Estate - 382 …
413 Mabanee Co. 5,251 4,776 10
414 Injazzat Real Estate Development 3 1,373 -100
415 Jeezan Holding -50 -84 …
416 Investors Holding Group - 285 …
417 International Resorts Co. -488 -132 …
418 Commercial Real Estate Co. 2,851 7,169 -60
419 Sanam Real Estate Co. 215 -224 …
420 A’ayan Real Estate Co. 274 1,536 -82
421 Aqar Real Estate 47 34 36
422 Kuwait Real Estate Holding 146 -415 …
423 Al Mazaya Holding 2,120 5,051 -58
424 Al Dar National Real Estate -1,130 … …
425 Al-Themar International Holding - … …
426 Grand Real Estate Projects - 244 …
427 Tijara & Real Estate Investment 40 -835 …
428 Tameer Real Estate Investment -314 -600 …
429 Arkan Al-Kuwait Real Estate - 417 …
430 Safat Global Holding - … …
431 Al-Argan International Real Estate 341 811 -58
432 Abyarr Real Estate Development Co. -911 3,300 …
433 Munshaat Real Estate Projects Co. -3,434 570 …
434 First Dubai For Real Estate Development 1,235 7,047 -82
435 Kuwait Business Town real estate -7,420 370 …
436 Manazel Holding Co. -524 -1,140 …
437 Real Estate Asset Managemnet Co - Ream 163 … …
438 Mena Real Estate Co. - … …
439 Al Mudon International Real Estate 4 … …
Industrial
501 National Industries 41,322 -36,610 …
502 Kwt Pipes Industries & Oil Services - -7,021 …
503 Kuwait Cement 13,928 -8,939 …
504 Refrigeration Industries 134 -192 …
505 Gulf Cable & Electrical Industries - 6,365 …
506 Heavy Engineering Ind. & Shipbuilding -754 1,005 …
507 Contracting & Marine Services -332 1,225 …
508 Kuwait Portland Cement 4,308 2,045 111
509 Shuaiba Paper Products 103 283 -64
510 Metal & Recycling 119 67 77
511 Kuwait Foundry 492 557 -12
512 Aerated Concrete Industries 663 2,146 -69
513 United Industries 2,991 -201 …
514 Boubyan Petrochemical Co. - … …
515 Gulf Glass Manufacturing - 880 …
516 Al-Hilal Cement 799 -599 …
517 Al Kout Industrial Projects Co. - 787 …
518 Kuwait Packaging Materials Manufac. -64 402 …
519 Kuwait Building Materials Manufac. - 245 …
520 National Industries Co. for Bldg. 9,024 -6,811 …
521 Gulf Rocks Co. - 352 …
522 Equipment Holding 1,295 -656 …
523 Mena Holding -306 501 …
524 National Co. for Consumer Industries -47 … …
525 Kuwait Gypsum Manuf. & Trading -12 126 …
526 Qurain Petrochemical Industries -5,538 8,789 …
527 Salbookh Trading Co. -319 -839 …
528 IKARUS Petroleum Industries -6,490 -4,437 …
Services
601 Kuwait Cinema 1,604 576 178
602 Kuwait Hotels 353 736 -52
603 Agility 17,588 36,952 -52
604 Kuwait Commercial Markets Complex -1,609 -699 …
605 Zain Kuwait 51,542 75,728 -32
606 Al Safat Energy Holding Company 504 … …
607 Educational Holding Group - … …
608 Independent Petroleum Group 1,792 1,482 21
609 National Cleaning Co. 310 -402 …
610 The Sultan Center 2,571 2,198 17
611 Al-Arabi Holding 175 106 65

15
Economic Brief - June 2010

CORPORATE EARNINGS - 1Q 2010

(thousand KD)
Code Company Name First Quarter Growth
2010 2009 %

612 City Group Company 642 3,382 -81

613 Wataniya 16,206 15,306 6
614 Kuwait & Gulf Link Transport Co. 1,906 1,282 49
615 Kuwait Cable Vision -107 -382 …
616 Automated Systems Co. 433 444 -3
617 National Petroleum Services Co. 293 252 16
618 Kuwait Co. For Process Plant Cons.& Cont. 1,004 642 56
619 Kuwait Slaughter House 134 111 21
620 EYAS for Higher & Technical Education - … …
621 Nibras Holding Co 53 193 -73
622 Al Safwa Group 2,058 -2,509 …
623 Human Soft Holding -10 13 …
624 Kuwait Privatization Project Holding 1,008 -2,628 …
625 Nafais Holding Company -737 … …
626 National Slaughter House 37 24 55
627 Aref Energy Holding 13,347 … …
628 Safwan Trading & Contracting 366 336 9
629 Gulf Petroleum Investment -819 -1,569 …
630 Gulf Franchising -282 -1,527 …
631 Credit Rating and Collection 23 25 -9
632 National Ranges Co. -951 … …
633 Burgan Co. for Well Drilling - … …
634 IFA Hotels & Resorts -4,570 … …
635 Combined Group Contracting 2,400 2,739 -12
636 Jeeran Holding - … …
637 Palms Agro Production 361 447 -19
638 Al-Safat Tec Holding Co. 626 46 1,264
639 Mushrif Trading & Contracting 377 … …
640 United Projects Group 1,354 1,309 3
641 Al Abraj Holding - -2,087 …
642 Aviation Lease & Finance - … …
643 Al-Mowasat Holding 127 201 -37
644 Mashaer Holding Company 605 832 -27
645 Oula Fuel Marketing Company 927 786 18
646 Villa Moda Life Style - … …
647 Future Communications 633 612 3
648 Network Holding Company - … …
649 Hayat Communication Co. -344 -122 …
650 Mubarrad Transport Co. -114 -593 …
651 Kuwait Resorts Co. 9 -949 …
652 Advanced Technology Co. 1,112 901 23
653 Yiaco Medical Company 1,794 1,781 1
654 Jazeera Airways Co. -4,499 -982 …
655 Al Sour 1,313 520 153
656 Wataniya Airways -3,074 -2,710 …
657 Future Kid 30 -160 …
658 KGL Logistics Company 1,979 -160 …
659 Al-Nawadi Holding C0. (K.S.C.Holding) … … …
Food
701 Livestock Trading & Transport 1,059 4,196 -75
702 Danah Alsafat Foodstuff Company 2,303 -420 …
703 United Poultry 306 -34 …
704 Kuwait Food Co (Americana) 13,870 3,230 329
705 United Foodstuff Industries 135 155 -13
706 Kout Food Group 913 80 1,045
Non Kuwaities
804 Sharjah Cement & Industrial Dev. 1,866 4,109 -55
805 Gulf Cement 4,525 -918 …
806 Umm Al-Qaiwain Cement Industries 1,314 -1,344 …
807 Fujairah Cement Industries 17 3,906 -100
808 Ras Al-Khaimah for White Cement 1,690 1,029 64
809 Arab Insurance Group 1,301 427 205
810 United Gulf Bank 2,166 2,671 -19
811 Egypt Kuwait Holding 9,429 9,103 4
812 Bahrain Kuwait Insurance 1,001 1,182 -15
813 Gulf Finance House -2,164 -10,839 …
814 Commercial International Bank 27,850 … …
817 Inovest -1,440 3,158 …
818 Ahli United Bank 18,696 25,053 -25
820 Ithmaar Bank 962 1,100 -13

16
Kuwait Stock Exchange

Hurt by deteriorating international markets suspended from trading and further eroded sentiment.
May was a bad month for equity markets globally and Delay concerns in Zain’s anticipated dividend payout also
the Kuwait Stock Exchange (KSE) was far from immune. weighed on the market, as had Tamdeen’s postponed sale
Like other regional markets, the KSE was hit by the global of its shares in Bahrain-based Ahli United Bank shares.
turmoil, suffering major losses. The price index was down Market “talk” of KIA selling its 24.6% stake in Zain was an
more than 8% on the month, falling below its level at the added negative. Meanwhile, positive news from the recent
beginning of the year by more than 4%. The market index passing of a number of long-awaited laws appeared to
ended the month at 6700, less than 300 points above the have little impact on market sentiment.
market bottom in Mar08. On a value weighted basis, while
the market was down almost 7% in May, it maintained The KSE had moved higher following the announcement of
modest gains made since the beginning of the year. The the EU’s 750 billion euro rescue package for Greece in the
market shed almost KD 3.5 billion of its capitalization middle of May, only to be hit again by news of the collapse
during the month (to KD 31 billion). of a Spanish bank and a downgrade of Spain’s sovereign
debt (by Fitch). Falling oil prices and a tense political scene
The market decline was accompanied by a sharp drop in further exacerbated market concerns.
market liquidity, which hit a record low. Average daily value
traded was KD 34.5 million in May, 50% lower than the Indexes for all sectors were down on the month.
previous month. Going forward, traders anticipate a boost “Investment” and “Non-Kuwaiti” companies were the
in market liquidity and a shift in sentiment because of an worst performers, dropping 11.2% and 9.4%, respectively.
extraordinary Zain dividend payout related to the sale of its “Banks” fared the best losing a smaller 5.3% in May.
African assets.

With market sentiment already weak, the impact of the

wave of negative news from Europe (Greece, Spain, the
Euro etc) was pronounced. Delays in 1Q10 earnings
announcements led to a number of companies being

kse Daily performance REBASED performance

100 7400 140
90
120
80
7200
70 100
million KD

60
80
index

50 7000
40 60

30 40
6800
20
20
10
0 6600 0
2 5 10 13 18 23 26 31
May-07 Feb-08 Nov-08 Aug-09 May-10
May 2010
Value of Traded Shares (left) KSE Index (right) MSCI Emerging MSCI Kuwait MSCI GCC

KSE PERFORMANCE BY SECTOR, may 2010

Price- % Change in KSE Index Market Cap. % of Trading Activity Price to

KSE Index Price-Weighted Value-Weighted (million KD) Market (daily average) Earnings +
31-May-10 May-10 YTD 09 May-10 YTD 09 31-May-10 31-May-10 mn shares mn KD 31-May-10

Banking 8764 -5.4 5.0 -5.3 8.7 11011 35.7% 16.8 9.5 17
Investment 5011 -11.2 -10.6 -11.8 -12.2 2826 9.2% 49.9 6.0 ...
Insurance 2436 -6.2 -15.7 -3.3 -11.5 288 0.9% 0.1 0.0 15
Real Estate 2459 -7.4 -12.0 -10.5 -13.7 1733 5.6% 27.7 2.0 ...
Industrial 5317 -7.5 -2.2 -9.1 4.3 2650 8.6% 14.7 4.0 11
Services 14723 -8.3 0.2 -3.4 15.3 9532 30.9% 40.1 10.8 17
Food 4686 -3.1 11.9 -5.3 3.6 736 2.4% 0.5 0.1 12
Non-Kuwaiti 6853 -9.4 -6.4 -12.2 1.9 2109 6.8% 35.8 2.2 15
Total Market 6700 -8.2 -4.4 -6.6 5.5 30885 100.0% 185.6 34.5 15
Kuwaiti Companies 28776
Source: Kuwait Stock Exchange and Zawya.
Note: * PE is calculated using market cap as of month close and 12 months trailing earnings, ending Q12010.

17
Economic Brief - June 2010

Kuwait’s Population & Labor Force

2009: surge in private sector Kuwaiti employment… waitis working in the private sector with the same benefits
available in the public sector. Of course, the expansion of
Population continues modest expansion in 2009… the private sector during the boom years was also a help-
Kuwait’s population reached 3.48 million at the end of ing factor.
2009 according to the Public Authority for Civil Informa-
tion (PACI). The population grew by 1.3% on the year. The The services industry employs more than 66% of Kuwait’s
number of Kuwaiti nationals continued to increase but at labor force. Most of it is in the community, social and per-
a slower rate than the average of the previous five years. sonal services sector, which includes the government/
The number of non-Kuwaiti residents increased by 0.5%. public sector. Services also accounted for 71% of the net
There were 1.11 million Kuwaitis, or 32% of the total popu-
lation.
ABSOLUTE CHANGE IN KWT’S LABOR FORCE (DEC 08-09)
The slow growth of Kuwait’s population since 2008 was
caused in large part by the much slower growth of the (in 000)
13
expatriate population, due to the fallout from the eco- 10
nomic crisis. The number of expatriates grew only 11,700 7
in 2009, versus an average yearly gain of 109,000 in the 4
years 2001-08. Nearly 1.2 million people were added to 1
Kuwait’s population over the last ten years, of which 73% -2
were expatriates, reflecting the strong economy of the -5

Fin. RE & Bus.Serv.

boom years.

Soc. & Pers. Serv.

Trans. & Comns.
-8

Trade & Hosp.

Construction
Agric & Fish.
-11

Manufact.
Kuwait’s total adult population (over 20 years of age)

Utilities
Mining
reached 2.25 million, 65% of the total population. For Ku-
waitis, the data show that 49% are under 20-years old. Non-Kuwaiti Kuwaiti

Also the Kuwaiti population splits almost evenly into men

and women at 51%-49%.

Total labor force numbers edge upwards… POPULATION (END YEAR)

In 2009, labor force growth in Kuwait remained weak, with Population (‘000) % Growth
the number increasing by a small 0.3% to reach 2.1 mil- Non-
Kuwaiti Non-Kuwaiti Total Kuwaiti Total
lion. For expatriate workers, the numbers were up in the Kuwaiti
public and domestic (household) sectors, while they fell
1999 812.3 1,442.7 2,255.0 3.3 -2.8 -0.7
slightly in the private sector. 2000 841.8 1,375.5 2,217.3 3.6 -4.7 -1.7
2001 870.3 1,438.8 2,309.1 3.4 4.6 4.1
The number of employed Kuwaitis rose by over 19,000 2002 898.3 1,521.6 2,419.9 3.2 5.8 4.8
compared with 15,000 in 2008. Nearly 60% of these jobs 2003 927.7 1,619.0 2,546.7 3.3 6.4 5.2
were in the private sector with Kuwaitis employed in the 2004 956.2 1,797.4 2,753.7 3.1 11.0 8.1
sector reaching 68,200. Thus in 2009, 20% of Kuwaitis 2005 992.2 1,999.0 2,991.2 3.8 11.2 8.6
worked in the private sector, up from 18% in 2008 and 2006 1,023.3 2,159.6 3,183.0 3.1 8.0 6.4
16% in 2007. 2007 1,054.6 2,345.0 3,399.6 3.1 8.6 6.8
2008 1,087.6 2,354.3 3,441.8 3.1 0.4 1.2
2009 1,118.9 2,366.0 3,484.9 2.9 0.5 1.3
The rising private sector share is partly the result of the
Source: Public Authority for Civil Information (www.paci.gov.kw).
National Labor Support law of 2000. The law provides Ku-

GROWTH IN KUWAIT’S POPULATION, % (END YEAR( LABOR FORCE BY SECTOR (END YEAR)
15 (in thousands)

12
Kuwaiti Non-Kuwaiti
Public Private Public Private Domestic
Total Total
9 Sector Sector Sector Sector Sector

6
2005 276.1 31.9 308.2 93.4 911.4 478.7 1,483.4
3 2006 241.3 42.4 283.7 96.9 1,010.5 501.0 1,608.4

0 2007 255.3 49.1 304.4 103.7 1,104.5 544.3 1,752.5

1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
2008 262.7 57.0 319.7 111.8 1,120.6 501.1 1,733.5
-3
2009 270.6 68.2 338.8 114.8 1,086.0 519.3 1,720.1
-6
Source: Public Authority for Civil Information (www.paci.gov.kw).
Kuwaitis Non-Kuwaitis Total

18
increase in jobs during 2009. The wholesale and retail to rise further as the trend continues and as it is reinforced
trade and restaurant sector is another major employer ac- by upcoming measures mentioned in the current 5-year
counting for over 15% of the country’s labor force. economic plan.

The construction and industrial sectors, 8% and 7% of the

labor force, respectively, are the sectors most heavily reli-
ant on expatriate labor; 95% of workers in the construc-
tion sector are non-Kuwaiti. The number of non-Kuwaitis
working in the construction sector fell by 2% in 2008 and
4% in 2009. This trend appears to be a result primarily of
a contracting construction sector with many new projects
on hold. Companies seem to have reduced their staff.

Crude oil production and manufacturing, including refining,

employ 8% of nationals in the workforce. The electricity,
water and gas (‘Utilities’) industries mainly employ Kuwaiti
nationals, who represent 83% of the workforce in this sec-
tor.

Meanwhile, 37% of the expatriate labor force works in the

community, social and personal services sector. These
total over 649,000 non-Kuwaitis and include household
workers, drivers, and unskilled domestic labor. More than
308,000 expatriates are employed in trade and hospitality
sector, down 1% from 2008. The number of expatriates
employed in the financial and business services sector
also fell by 2%, and this sector now employs 89,000 non-
Kuwaitis. Meanwhile, the construction sector employs 9%
of the total expatriate labor force, down 4% from the previ-
ous year. Almost 113,000 non-Kuwaitis work in the manu-
facturing industry, including refining.

A breakdown of the top ten largest jobs by professions

shows that the biggest gains by Kuwaitis, 88% of total
OCCUPATION PROFILE OF 10 LARGEST JOBS (END YEAR)
net gains, were in clerical and secretarial positions, which
Annual change
represent one-third of all jobs held by Kuwaitis.
(Levels in ‘000) (‘000) (%)
2007 2008 2009 2009 2008 2009
In conclusion, the Kuwaiti national population is still grow-
ing near its 3% trend rate. On the employment side, private Kuwaitis (000)
sector employment of Kuwaitis continues apace. The cur- Clerks and Secretaries 95 104 120 16 9.5 15.4
Government Executives 44 45 46 1 2.3 2.2
rent 20% share of Kuwaitis in the private sector is bound Teachers 37 36 36 0 -2.7 0.0
Engineers 19 20 21 1 5.3 5.0
Police & Security personnel 14 14 13 -1 0.0 -7.1
Technicians 8 9 9 0 12.5 0.0
LABOR FORCE BY ECONOMIC SECTOR
Doctors and Vaterinarians 8 8 9 1 0.0 12.5
(Dec 2009) Cashiers / book keepers 7 7 8 1 0.0 14.3
Labor Force (in ‘000) Annual growth (%) Managers 4 5 5 0 25.0 0.0
Statisticians and System Analysts 3 4 4 0 33.3 0.0
Non- Non-
Kwti Total Kwti Total Others 85 84 81 -3 -1.2 -3.6
Kwti Kwti
Total 324 336 352 16 3.7 4.8
Agriculture & Fishing 0.3 38 38 6.9 6.3 6.3 Non-Kuwaitis (000)
Industry 24 113 137 8.1 -2.3 -0.6 Domestic Household 391 328 334 6 -16.1 1.8
Mining & Quarrying 5 2 6 9.4 2.2 7.4 Unskilled laborers 341 317 300 -17 -7.0 -5.4
Manufacturing (incl. refining) 9 109 118 7.6 -2.2 -1.5 Drivers 231 228 224 -4 -1.3 -1.8
Electricity, Water & Gas 10 2 12 8.0 -8.5 4.8 Sales 60 64 65 1 6.7 1.6
Construction 8 161 170 22.4 -3.5 -2.5 Electricians and Electonics 52 58 56 -2 11.5 -3.4
Services 285 1,105 1,390 3.9 -1.2 -0.2 Office supervisors 41 47 49 2 14.6 4.3
Trade & Restaurants 11 308 320 13.0 -1.4 -1.0 Clerks 36 38 38 0 5.6 0.0
Transport & Communication 9 58 67 7.3 3.7 4.2 Engineers 36 37 37 0 2.8 0.0
Fin. & Bus. Services 18 89 107 14.3 -2.0 0.4 Construction builders 33 32 28 -4 -3.0 -12.5
Com., Soc. & Pers. Services 247 649 896 2.7 -1.5 -0.4 Teachers 24 24 25 1 0.0 4.2
Other 34 325 359 3.5 3.2 3.2 Others 523 579 584 5 10.7 0.9
Total 351 1,742 2,093 4.5 -0.6 0.2 Total 1,768 1,752 1,740 -12 -0.9 -0.7

19
Economic Brief - June 2010

Balance of Payments

Large drop in current account surplus limited the
accumulation of foreign assets in 2009 … Higher
surplus projected this year
The impact of the global financial crisis on the Kuwaiti
economy is well evident in the recently-released balance
of payments figures for 2009. The current account
surplus dropped by 50% in 2009 on the back of lower
oil prices, reduced oil production, and lower returns on
the country’s investments abroad. The impact of the
domestic economic slowdown was also visible in the 20%
drop in merchandise imports. Overall, Kuwait continued
to accumulate foreign assets, though at a much slower
pace than in the previous four years. With the ongoing
recovery in the global economy and financial markets,
however, 2009 may prove to be the low point for Kuwait’s
external position. We project a substantial improvement in
the current account surplus this year and possibly further
improvements over the medium term.
Current Account
According to preliminary data released by the Central
Bank of Kuwait (CBK), the current account surplus shrank
from KD 16.2 billion (40.7% of GDP) in 2008 to KD 8.1
billion (25.9% of GDP) in 2009. In the case of Kuwait, the
trade balance and investment income remain the major
determinants of the current account position. The former
item was responsible for 94% of the drop in the current
account surplus in 2009, while investment income was
responsible for the remaining 6%. Meanwhile, the services
and the current transfer accounts recorded modest
changes from last year.
Sharp deterioration in trade balance triggered by
lower oil exports
At KD 9.6 billion in 2009, the trade balance surplus was
down 45% from its peak level in 2008. Falling exports
drove the deterioration. Oil exports were down 40% in
2009, compared to a 32% increase in the previous year.
Indeed, this was the first drop in oil exports since 2002,
and is attributed to two major factors. Firstly, the price of
Kuwait export crude (KEC) oil averaged USD 60 per barrel
in 2009, 33% lower than its level in the previous year.
Secondly, oil production dropped by 11% in 2009 as a
result of Kuwait’s adherence to OPEC quota cuts. So far in
2010, the price of KEC has held above USD 75 per barrel
which supports an improved exports outlook.
Non-oil exports, however, saw more satisfactory
performance in 2009 despite the weak external
environment. Non-oil exports were down by only 9%
from the previous year, primarily from a drop in re-export
activity. Other exports, comprising fertilizers and ethylene
products were little changed.
Imports, on the other hand, which are usually reflect overall
domestic activity, declined by 20% in 2009. Besides the
slowdown in domestic demand, a significant portion of the
drop in imports may be attributed to declining international
prices of raw materials and finished commodities as a
result of the global recession.
Lower deficit in service account despite rising
spending on travel abroad
The services account deficit fell 6.3% in 2009 to KD -961
million. This account suffers from a persistent travel/
tourism deficit. At KD 2.1 billion in 2009, outflows for
travel services were up 5.2% from 2008, and accounted
for 55% of total payments for all services provided by
non-residents. On the other hand, the drop in oil prices
and imports has reduced payments on transportation
services by 18.1% to KD 1 billion after rising by 21% in
2008. Net government outflows for services were also
down by 16.6%.
Investment income suffers for the second consecutive
year
Lower returns on Kuwait’s massive foreign assets were
the second major contributor to the drop in the current
account surplus. Investment income declined for the
second year in row, dropping by 17.3% to KD 2.4 billion.
Indeed, this outcome was anticipated given the worsening
global economic and financial scene since late 2008, and
given low interest rates. The government’s income was
responsible for 60% of the drop in investment income, yet
its share in Kuwait’s total investment income rose to 87%
from 82% in the prior year.

CURRENT ACCOUNT CURRENT ACCOUNT

20 50
Million KD % growth 18
16 40
2007 2008 2009 2008 2009
14
Current Account 11,987 16,195 8,065 35 -50
12
Percentage
Billion KD

30
1 - Balance on goods 12,338 17,206 9,555 39.5 -44.5
10
Merchandise exports 17,771 23,373 14,471 31.5 -38.1 8 20
Oil exports 16,780 22,200 13,398 32.3 -39.6 6
4 10
Merchandise imports -5,433 -6,167 -4,916 13.5 -20.3
2
2 - Services (net) -902 -1,026 -961 13.7 -6.3
0 0
3 - Investment income (net) 3,523 2,888 2,387 -18.0 -17.3
2005 2006 2007 2008 2009E 2010F 2011F 2012F
4 - Current transfers (net) -2,971 -2,874 -2,916 -3.3 1.5
Current account balance (LHS) Percentage of GDP (RHS)

20
Local banks were the only sector to see a significant
improvement in investment income, from KD 161 million
in 2008 to a record KD 191 million in 2009, while growth
in investment companies’ income was more modest at
5.5%. On the other hand, other private sector companies
saw a sharp drop in their income for the second year in
row, reaching almost zero in 2009, down from KD 136
million achieved in the previous year, and KD 741 million
in 2007.
Workers’ remittances continues their upward trend
The «current transfers» account - which consists basically
of worker remittances and government assistance to other
countries - saw its deficit rising slightly to KD 2.9 billion.
Worker remittances rose by only 2.8%, and accounted
for 98% of current outflows. This result reflects the weak
growth of 2.6% in the number of expatriates in Kuwait
in 2009. It is worth mentioning that the CBK changed
the methodology used in estimating worker remittances
in 2009. As a result, the size of remittances has almost
doubled from the previous estimates. To avoid a break
in the series, the CBK revised its previous estimates for
remittances for the years 2007 and 2008.
Capital and financial account
After peaking in 2008, capital account inflows shrank by
36% in 2009 to KD 298 million on the back of lower flows
to the government by the UN Compensation Commission
(UNCC). Net capital inflows received by the government
amounted to KD 311 million, down from KD 475 million in
the prior year. Meanwhile, private capital flows continued
their downtrend that started in 2006, and recorded a
modest net outflow.
Net financial outflows dropped by 45%
The 2009 financial account reflects the impact of the
financial crisis. At KD 7.5 billion, the financial account
deficit was roughly halved on the year. The government’s
policy of injecting liquidity in the financial sector caused
a sharp drop in the balance of portfolio investments
abroad, following 15 consecutive annual increases in
these assets.
Net increase in banks’ portfolio investments abroad
Portfolio investments, the chief contributor to the financial
SUMMARY OF FOREIGN TRADE (KD MILLION)
9000
113 110
7500
89
6000
67
59
4500 51
41
3000
1500
0
1Q08 2Q08 3Q08 4Q08 1Q09 2Q09 3Q09
Oil exports Imports Non-oil exports Oil prices in USD
account deficit, recorded their first net inflows in 15 years.
From a net outflow of KD 7.6 billion in 2008, portfolio
investments saw KD 2.2 billion net inflows in 2009. This
switch in the portfolio position likely reflects the massive
injection of liquidity locally, from government and quasi-
government entities. Government portfolio investment
abroad was down by KD 1.8 billion in 2009. This new
trend may come to an end this year given the ongoing
recovery in global financial markets and the ample liquidity
in the Kuwaiti banking system.
Investment companies also showed similar behavior,
moving from a net outflow of KD 795 million (investments
abroad) in 2007 to a net inflows of KD 14 million and KD
667 million in 2008 and 2009, respectively. On the other
hand, local banks continued their accumulation of portfolio
investments abroad, though at a substantially slower pace
than in the previous two years. This may be due to the
comfortable levels of liquidity at local banks following the
injection of liquidity by the government.
Higher FDI outflows while inflows remain minimal
Direct investments saw a net outflow of KD 2.6 billion,
15.2% larger than in the prior year. The government was
the largest source of this increase, as the government
sector’s direct investment rose by 18.8% to KD 2.4 billion.
Investment companies also added a KD 370 million to
their foreign direct investment abroad. Meanwhile, flows of
foreign direct investment into Kuwait remained insignificant
(KD 23 million). This indicates that the reduction in tax rates
imposed on foreign investments which was introduced in
December 2007 had virtually no positive effect. If Kuwait
intends to attract higher volumes of FDI, it may need to
take further steps to make the investment environment
more lucrative and friendlier to foreign investors.
Foreign banks reduce their currency and deposits in
Kuwait
Outflows associated with other investments, which
comprise mainly trade credit, loans, and currency and
deposits increased substantially in 2009. The net figure
was 86% higher than the prior year, reaching KD 7.1
billion. The government was responsible for 97% of the
increase in these outflows; especially in the form of trade
credit which reached KD 592 million in 2009 compared
net investment income (kd million)
4000
3000
74
2000
1000
0
2005 2006 2007 2008 2009
4Q09 -1000
General govt. Local banks Central Bank of Kwt Invt. Co’s Other sectors
21
Economic Brief - June 2010

to KD 928 million inflows in the previous year. In addition, account and the capital and financial account - which
the government continued in 2009 the accumulation amounted to KD 1 billion - was reflected in higher outflows
of foreign assets in the form of currency and deposits from the “other (net)” item.
abroad, as well as extending more loans to non-residents.
This reflects the cautious approach adopted by the
government during the global financial crisis by focusing
on lower risk investments.

Local banks recorded KD 1.2 billion net outflows in 2009,

KD 395 million lower than the previous year. This was
the result of KD 1.8 decline in local banks’ currency and
deposits abroad, and a KD 2.7 billion decrease in foreign
banks’ deposits at Kuwaiti banks.

Financial flows by sector

Government sector outflows declined by 48% in 2009
to KD 6.4 billion, accounting for 85% of total outflows.
At KD 1.3 billion, local banks were the second major
source of outflows. Meanwhile, net investment outflows
by investment companies were modest at a mere KD 63
million. FINANCIAL FLOW (KD MILLION)

CBK reserves rose by KD 1.1 billion in 2009 compared 2005 2006 2007 2008 2009
with a KD 172 million increase seen the prior year. Financial Account (Net) -9,567 -14,382 -9,812 -13,602 -7,495
Meanwhile, the “other (net)” item which accounts for errors
General government -6,405 -11,308 -9,704 -12,199 -6,392
and omissions in the balance of payments transactions
recorded a KD 0.2 billion net inflow, the smallest since Local Banks -93 -553 805 -2,060 -1,295
2005. This figure could reflect unregistered private capital
Central Bank of Kwt 76 27 14 -45 -33
inflows.
Investment Co’s -250 -705 -594 101 -63
Appendix: Revisions to balance of payments Other sectors -2,895 -1,845 -334 599 287
accounts
The 2008 current account surplus was revised downward
by KD 1.2 billion due to an increase in workers’ remittances other investment by sector (kd million)
abroad and overseas transportation payments by KD 1.3 5000

billion and KD 53 million, respectively. This was partially

offset by upward revisions in investment income and 2000

current transfers of KD 168 million and KD 47 million,

respectively. -1000
2005 2006 2007 2008 2009

Meanwhile, the capital and financial account deficit was -4000

reduced by KD 2.2 billion, including downward revisions

in the trade credit and portfolio investment outflows of -7000

KD 1.7 billion and KD 444 million, respectively. Direct

-10000
investment abroad was also revised downward by KD 117
million. The difference between the revisions in the current General govt. Local banks Invt. Co’s Other sectors Central Bank of Kwt

CAPITAL AND FINANCIAL ACCOUNT portfolio investment by sector (kd million)

5000
Million KD % change
2007 2008 2009 2008 2009 2000

Capital Account 423 465 298 10 -36

-1000 2005 2006 2007 2008 2009
Financial Account -9,812 -13,602 -7,495 39 -45
-4000
FDI (net) -2,749 -2,218 -2,554 -19 15

Portfolio investment (net) -9,920 -7,557 2,187 -24 -129 -7000

Other investments (net) 2,857 -3,827 -7,128 -234 86

-10000

General govt. Local banks Invt. Co’s Other sectors

22
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