Kuwait macro | Momentary relief; Reforms a priority
2022 temporary foothold, on favourable base effect. We forecast a fiscal surplus in FY22/23 – the first since 2014 – of 12% of GDP vs. -9.2% in FY21/22e. We assume oil-GDP growth of 10% in FY22/23e vs. 0.6% in 2021e, on 11.3% y-o-y higher production. Higher oil proceeds should bolster liquidity in the GRF, provided 10% of revenue is not transferred to the FGF. Medium-term growth continues to hinge on the legislation of the debt law, the 5% VAT, and the mortgage law. It remains to be seen whether there will be policy follow-through with increased representation of opposition in the latest Cabinet formed in Dec-21.
Limited exposure to Russia-Ukraine conflict to maximise HC trade gains. The conflict presents minimum downside risks to Kuwait, on relatively low exposure to tourism and import activity from Russia and Ukraine. We project a current account surplus of 29.2% of GDP in 2022 vs. 19.6% in 2021e. Global food price pressures will spur headline inflation to 4.0% in 2022e vs. 3.4% in 2021, due to heavy reliance on food imports (17% of CPI basket). This compares to benign levels of 2.0% and 2.2% for the UAE and Saudi Arabia, respectively, on our numbers.
Credit growth to drive domestic recovery in 2022. We forecast continued healthy credit growth of 6.0% in 2022 vs. 6.3% in 2021. Improved business confidence should mitigate the impact of potential hikes by the CBK, provided they mimic the six upcoming Fed hikes in 2022. Further upside for business credit comes from the c4x y-o-y pick-up in 2022 project activity to USD19.8bn, the highest since 2015, and likely to rise further thanks to oil windfall.
Accelerated reform key for growth alignment. Saudi Arabia and the UAE will continue to precede Kuwait, in our view, in terms of investment and non-oil revenue growth potential. We do not see the 5% VAT being implemented in the short-term, given mounting inflation pressures. Approval of the debt law has become less urgent with the rise in oil revenue, and we believe that, similar to VAT, could be delayed. Accordingly, we see the mortgage law as the most probable.
CI Capital is a diversified financial services group and Egypt’s leading provider of leasing, microfinance, and investment banking products and services.
Through its headquarters in Cairo and presence in New York and Dubai, CI Capital offers a wide range of financial solutions to a diversified client base that include global and regional institutions and family offices, large corporates, SMEs, and high net worth and individual investors.
CI Capital leverages its full-fledged investment banking platform to provide market leading capital raising and M&A advisory, asset management, securities brokerage, custody and research. Through its subsidiary Corplease, CI Capital offers comprehensive leasing solutions, including finance and operating leases, and sale and leaseback, serving a wide range of corporate clients and SMEs. In addition, CI Capital offers microfinance lending through Egypt’s first licensed MFI, Reefy.
The Group has over 1,700 employees, led by a team of professionals who are among the most experienced in the industry, with complementary backgrounds and skill sets and a deep understanding of local market dynamics.
CI Capital has been recognized as the “Best Investment Bank in Egypt” by EMEA Finance for four years running from 2013-2016, and by Global Finance in 2014 and 2015.
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