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Kuwait current account surplus improves in Strong import growth weighs on trade balance

Kuwait current account surplus improves in Strong import growth weighs on trade balance

KUWAIT CITY: Kuwait’s current account surplus improved in 3Q17, as easing remittances and resilient exports countered a larger deficit in services. The surplus rose to KD 0.42 billion, versus KD 0.26 billion in 2Q17, reaching an annualized 4.8% of GDP. Overall, the preliminary current account figures for the quarter had vastly improved from 2016 levels as the oil price rose from lows in 1Q16.

The current account is likely to have continued to rise in 4Q17, given the pickup in oil prices. The current account balance advanced to a KD 1.13 billion surplus during the first three quarters of 2017, compared to a KD 0.43 billion deficit during the same period in 2016, boosted by a rally in oil prices. Kuwait’s export crude price averaged $58.2 during the period, up 36% from the same period in 2016. Still, higher oil prices in 4Q17 should further benefit the current account with the balance for 2017 as a whole expected to be around 4-5% of GDP.

Rising investment income and shrinking remittances further bolstered the current account surplus in 3Q17. Investment income showed healthy growth growing by 16% y/y to KD 1.5 billion in 3Q17. Investment income has been resilient in the past several quarters, bouncing back after some weakness in 1Q15. Meanwhile, Kuwait continued to accumulate financial assets overseas, supported by the recovery in oil income.

Declining worker remittances has also lent support to the current account surplus. Worker remittances fell by 8.1% to KD 0.94 billion in 3Q17, falling below KD 1 billion for the first time since 1Q12. Cuts in subsidies and increases in various fees have increased the cost of living for expatriate workers. At the same time, an increased emphasis on Kuwaitization has reduced demand for foreign labor.