Kuwait’s consumer spending to grow 6.2% in 2022

This is due to Kuwait's recovery from COVID-19.

Kuwait is expected to post a “solid growth” in consumer spending in 2022, with its real household spending growing 6.2% in 2022, according to a report by Fitch Solutions.

“The positive growth in Kuwait's real household spending in 2022 will be due to Kuwait's improving epidemiological situation following a successful vaccination rollout,” Fitch said. “We believe that this will reduce the risk of further stringent lockdowns.”

Fitch added that whilst the estimate for 2022 is a deceleration from the estimated 8.8% growth in 2021, it is coming from a low base following the 10.1% contraction in 2020 due to COVID-19.

The total household spending forecast for the year is $36.8b (KWD11.8b), up from $35.5b (KWD10.7b) in 2021.

Aside from the lifting of COVID-1 restrictions, Fitch said that the delay in the introduction of a 5% value-added tax to 2024 will further boost consumer spending growth this year. Gradual tourism sector recovery will also drive retail sales.

Other countries in the Gulf Cooperation Council that have implemented the VAT usually saw inflationary pressures which erode consumer real purchasing power in the first year, it said.

Kuwait’s latest budget did not contain a reference to VAT, Fitch said, adding that its Country Risk team expected “government’s improved fiscal flexibility” will limit the need for a new tax this year.

Fitch noted that in the first three months of the year, point-of-sales transactions were at $12.6b (KWD3.9b), up from the $9.1b (KWD12.6b) in the same period last year, and $6.5b (KWD2b) in the first quarter of 2020.

In an earlier report, Fitch said household spending in Kuwait will rise 6.7% over 2022.