KUWAIT CITY: Kuwait’s current account surplus improved slightly in 2Q17 on lower remittances, a decline in imports, and some gain in investment income during the quarter. The surplus improved to KD 0.62 billion, up from KD 0.44 billion in 1Q17, rising to an annualized 6.9% of GDP. The balance continues to show broad improvement from a year ago, thanks in large part to the higher oil price during the first half of 2017 compared to the year before.
We expect the improvement in the current account over the last year to continue given the increase in oil prices witnessed in 3Q17 and thus far in 4Q17. The current account balance during the first half of 2017 improved to a KD 1.1 billion surplus, compared to a KD 0.7 billion deficit the year before. We expect this trend to continue for the remainder of 2017, with the current account balance rising to around 4,5% of GDP for the full year. This is due largely to higher oil prices. The price of Kuwait export crude averaged $50 per barrel during the first half of 2017, up from $34 the year before. Prices moved higher still after that, reaching $59.4 in November, a 35% increase from June’s average.
Oil exports have seen healthy growth on the back of higher oil prices, even as production declined due to OPEC cuts. Oil export receipts rose by 17% year-on-year (y/y) in 2Q17, as Kuwait oil price rose by 18%. Non-oil exports, which are dominated by petrochemicals, also rose in tandem, rising by 15%.
Imports have also continued to see solid growth, putting some pressure on the trade balance. Imports grew by 7% y/y, boosted in part by strong demand for capital goods imports. This strong growth follows some weakness in 2016, which is possibly linked to weaker consumer demand. This growth offset some of the gains from oil exports, though the trade balance still managed to increase by KD 0.5 billion y/y during the second quarter.
