Kuwait may project KD 6-6.5bn budget deficit for 2017/18

By the end of August 2017, the 5th month of the current fiscal year 2017/2018 ended and the average Kuwaiti oil price for most of August scored $48.5 per barrel, up by $2.6 per barrel, 5.7 percent, from July’s average price of $45.9 per barrel. It is also higher by $3.5 per barrel, 7.8 percent, than the new budget hypothetical price of $45 per barrel. The last fiscal year 2016/2017 which ended on March 31, 2017 scored an average price for Kuwaiti oil by $44.7 per barrel. The average price of oil for August 2017 is 8.5 percent higher than the barrel average price for the past fiscal year but it is lower by $-22.5 per barrel than the parity price for the current budget at $71 per barrel, according to the Ministry of Finance estimates after deducting the 10 percent for the Future Generations Fund.

According to the monthly follow up report of the State’s Financial Administration Accounts -July 2017/2018- issued by Ministry of Finance, Kuwait has received about KD 4.335 billion in actual oil revenues until the end of July. Therefore, Kuwait would achieve oil revenues in the amount of KD 12 billion for the entire current fiscal year, which is higher by KD 0.3 billion than the estimated amount of oil revenues for the budget at KD 11.7 billion. Adding KD 1.6 billion in non-oil revenues, projected budget revenues would score KD 13.6 billion for the current fiscal year. Comparing this figure with KD 19.9 billion for expenditures allocations, it is likely that the budget for 2017/2018 would face hypothetical deficit by KD 6-6.5 billion. If we assume saving by 6.3 percent in public expenditures, like last fiscal year, actual expenditures would drop to KD 18.6 billion, which is mere estimate, the public budget then would face a KD 5 billion deficit.

Population and labor force
According to the latest demographics and labor force statistics issued by the Public Authority for Civil Information (PACI), Kuwait’s total population has scored approximately 4.438 million in the end of June 2017. This means the population increased in half a year by 0.6 percent (1.2 percent annual growth). The total population increased positively by 4.1 percent in 2016 versus 3.6 percent, 3.2 percent, and 3.7 percent in the years of 2015, 2014, and 2013 respectively. The absolute increase of population in half a year scored about 26.5 thousand (172.1 thousand for 2016). Kuwaitis increased by 14.3 thousand during the first half of 2017, 1.1 percent growth rate (2.2 percent on annual basis), bringing their total to 1.352 million. As such, Kuwaitis percentage out of the total population increased from 30.3 percent in the end of 2016 to about 30.5 percent according to the latest figures.

Kuwaiti females whose number is 689 thousand outnumber the 662.9 thousand males. On the other hand, the number of non-Kuwaitis increased by about 12.2 thousand, a 0.4 percent growth rate, the lowest growth rate since 2010, bringing their total to 3.086 million with an annual compound growth rate of 2.9 percent during the years June/2007 – June/2017.
Total number of workers in Kuwait scored approximately 2.733 million workers, or about 61.6 percent of the total population.

This percentage scored 33.2 percent for Kuwaitis of the total Kuwaiti population. But the non-Kuwaiti workers’ percentage out of non-Kuwaiti population amounted to 74 percent. The Kuwaiti labor force percentage, out of total number of workers in Kuwait, dropped from 16.5 percent in December 2016 to 16.4 percent in June 2017. Proportion of female workers in the total Kuwaiti workforce rose to approximately 48.4 percent in the 1st half of 2017 (48.3 percent in the end of 2016).

This percentage formed 25.7 percent out of the total labor force in Kuwait. Number of Kuwaiti workers increased by 2.1 thousand workers bringing their number to about 449.2 thousand workers in the 1st half of 2017 up from 447.1 thousand workers in the end of 2016. About 345.1 thousand of them are employed in the government (76.8 percent of total Kuwaiti workers). About 575 jobs were made for Kuwaitis outside the public sector, a growth rate by 0.6 percent (1.2 percent on annual basis). It is believed that Kuwaiti’s unveiled unemployment rate dropped to about 14.3 thousand workers, 3.2 percent of total Kuwaiti workers on 30/6/2017 versus 3.3 percent in the end of 2016. Total workers (Kuwaiti and non-Kuwaiti) in the government sector scored about 489.7 thousand workers, about 11 percent, of the total population. Kuwaitis percentage-of the government labor force- formed 70.5 percent.

Performance of Boursa Kuwait
Boursa Kuwait performance during August was more active compared with July 2017, where all indexes showed an increase in liquidity and number of transactions. The value of general index (AlShall) rose and so did the three Boursa indexes. Market capitalization value of listed companies -investors’ wealth in it- rose in eight months by KD 3.7 billion. Boursa’s liquidity in August 2017 scored KD 320.4 million vis-à-vis KD 300.5 million in July 2017, it increased by 6.6 percent. Average daily trading value for August scored about KD 14.6 million, rose by 6.6 percent from July and it rose by 121 percent if compared with August 2016. Number of listed companies decreased from 161 companies to 160 (Kuwait Building Materials Manufacturing Co withdrew its listing).

Boursa liquidity in eight months (167 working days) scored KD 4.295 billion, average daily trading value scored KD 25.566 million, rose by 2.2 times compared with the average daily trading value for 2016 and about 2.3 times if compared with the average daily trading value for the first eight months of 2016. Liquidity trends since the beginning of the year still indicate that half of the listed companies got only 4.1 percent of that liquidity, including 50 companies there from which got about 0.5 percent only out of that liquidity and one company was not traded. As for liquid companies, 15 of  them whose market capitalization value is equal to 1.8 percent only of the capitalization value of all listed companies got 21.5 percent of the Boursa liquidity. Liquidity distribution among the 4 categories of companies in the first eight months of the current year was as follows:

The Highest 10 percent in Liquidity: 18 listed companies contributed by 48.9 percent to Boursa market capitalization while they captured about 57.4 percent of the Boursa liquidity, including 11 large companies which contributed by about 48.1 percent of the market capitalization of all companies in the market, took about 80.1 percent of the liquidity of that category, 7 small companies, which took 19.9 percent of the liquidity of that category, while their market capitalization was about
0.8 percent only of all Boursa companies value. While some large companies obtained high deserved liquidity, deviation is still significant towards small companies.

The Highest 10 percent in Market Capitalization: That category contributed by about 72.1 percent of the Boursa capitalization and took 38.1 percent of the Boursa liquidity. However, there was obvious liquidity deviation in favor of 9 companies, which captured about 90.5 percent of the liquidity of that category leaving approximately 9.5 percent of that category, liquidity for 9 other large companies. The Lowest 10 percent in Market Capitalization: That category contributed by 0.3 percent to the Boursa capitalization, but it took 4.8 percent of the Boursa liquidity. 13 companies within this category captured 97.3 percent liquidity of this category, while 5 other small companies got only 2.7 percent of that category’s liquidity. That liquidity deviation in this category suggests a very high dose of speculation on some of its companies. This deviation may begin to recede with the weak liquidity but it revives appearance whenever liquidity revives.

Liquidity of Boursa Sectors: There are 5 active sectors in the Boursa that contribute 87.9 percent to its capitalization. It acquired 92.3 percent of liquidity suggesting consistence between liquidity and the weight of those sectors in the Boursa capitalization. But there was deviation within those sectors in the trend of liquidity. The banking sector got 26.5 percent of Boursa liquidity which accounts for 49.2 percent only of its contribution to its capitalization value. This means its share
of liquidity is less than half of its contribution to its capitalization value. The financial services sector got 25.2 percent of Boursa liquidity, which equals 2.9 times its contribution to its capitalization value. While the real estate sector got 19.3 percent of Boursa liquidity which equals 2.6 times its contribution to its value, and both sectors are speculative ones. The remaining 7 sectors, liquid and non-liquid, acquired liquidity ratios close to their contribution to the Boursa capitalization.

AL-SHALL WEEKLY REPORT

This article was published on 04/09/2017