Kuwait household spending to grow 6.7% in 2022

It is expected to reach $31.9b, surpassing pre-pandemic spending levels.

Household spending in Kuwait is expected to increase by 6.7% over 2022, slowing down from the 8.2% growth in the previous year “as favourable base effects fade,” according to Fitch Solutions.

In a report, Fitch said that household spending in 2022 is expected to reach $31.9b (KWD9.7b), exceeding the pre-pandemic levels of spending recorded in 2019 at around $27.7b (KWD8.4b).

“As a result, we believe that starting from 2022, consumer spending growth in Kuwait will return to a more conventional growth trajectory,” it said.

“We note that the deceleration of real consumer spending growth in 2022 is underpinned by our expectation that the introduction of VAT (value-added tax) will be postponed until 2023,” it added.

Fitch said the country’s latest budget does not include reference to VAT, and its Country Risk team expects that Kuwaiti government’s improved fiscal flexibility “will limit the need for a new tax over 2022.”

Meanwhile, it also said that the latest high frequency point-of-sale data for Kuwait which transactions reached $11.2b (KWD3.4b) in the third quarter of 2021, higher than the $4.3b (KWD1.3b) in the second quarter of 2020, shows that “a recovery is well underway.”

Vaccine rollout for COVID-19 would also support consumer confidence and spending growth throughout the year, it said.

Fitch added that its forecast of partial recovery in real consumer spending in the country for 2022 is in line with the Country Risk team’s forecast of economic growth rate of 5%  for Kuwait this year, from the estimated 1% growth last year.

“Kuwait’s economy stands to benefit from the rising oil price, with our Oil & Gas team projecting Brent crude prices to rise to USD82.00 per barrel (/bbl) in 2022, an improvement from the low of USD43.20/bbl in 2020,” Fitch said.

“In Kuwait, oil is a key source of government revenue, and therefore determines to what extent the government is able to afford high employment levels in the public sector, while it also dictates the country's federal budget and fiscal policy,” it added.

It added that the expected 3.2% YoY inflation rate over 2022, a decrease from the estimated 3.4% in 2021 will not derail the consumer outlook over the year.

$3.29 = KWD1