KUWAIT: Kuwait’s trade surplus shrank further in 1Q15, as oil export revenues continued to tumble. The surplus fell to a six year low of KD 1.7 billion in 1Q15, or an annualized 20 percent of projected GDP in 2015. The fall is mainly attributed to the decline in export receipts as a result of lower oil prices. The trade balance is unlikely to have deteriorated further in 2Q15 given that oil prices improved slightly.
Oil export revenues declined by 49 percent year-on-year (y/y) in 1Q15 to KD 3.6 billion, their lowest level in five years. Oil export earnings were bruised by lower oil prices. The international oil price benchmark, Brent, slipped by 50 percent y/y in 1Q15 to $54 per barrel. Oil export receipts may see a slight uptick in 2Q15, on the back of a slight recovery in oil prices in 2Q15. Brent averaged $64 in 2Q15.
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Non-oil export growth also contracted in 1Q15, declining by 11 percent y/y to KD 0.3 billion. Non-oil exports were stung by a fall in ethylene prices and a stronger Kuwaiti dinar against most major currencies (with the exception of the US dollar). We may see non-oil exports inch higher in the near-term thanks to a recovery in ethylene prices in the second and third quarter of this year.
Import growth edged up in 1Q15 boosted by growth in capital goods imports. Import growth has been gradually trending upwards for almost a year now. In the first quarter of 2015, imports rose by 11 percent y/y, up from 8 percent y/y in 4Q14. Rising spending on capital projects appears to be a key factor boosting import growth. Capital goods imports were up a robust 23 percent y/y in 1Q15. Transport equipment imports also witnessed a strong rebound, growing by 6.6 percent y/y after contracting by 5.6 percent y/y in the previous quarter.
