Economy, Income, And Trade of in Kuwait
The discovery of oil in 1934 transformed the economy. Kuwait's enormous oil reserve of 94 billion barrels and huge quantities of natural gas have provided the base for an economic presence of worldwide significance. The Kuwaiti standard of living was among the highest in the Middle East and in the world by the early 1980s. Oil wealth has stimulated trade, fishery development, and service industries. The government has used its oil revenues to build ports, roads, an international airport, a seawater distillation plant, and modern government and office buildings. The public has also been served by the large-scale construction of public works, free public services, and highly subsidized public utilities, transforming Kuwait into a fully developed welfare state. Prudent management of budgetary allocations and development priorities, as well as substantial interest from overseas investment, helped cushion the adverse impact of the collapse of the Souk al-Manakh—an unregulated curbside securities market—in 1982, the collapse in world oil prices during the mid-1980s, and the 1980–88 Iran-Iraq War. In addition, acquisition of 5,000 retail outlets in Western Europe (marketed under the name "Q-8") and expansion into the manufacture and sale of refined oil products have bolstered the Kuwaiti economy.
Oil extraction and processing accounts for about 50% of GDP, 95% of export earnings, and 75% of government revenues. Kuwait's economy suffered enormously from the effects of the Gulf War and the Iraqi occupation, which ended in February 1991 with the destruction of much of Kuwait's oil production capacity and other economic infrastructure. The damage inflicted on the economy was estimated at $20 billion. Real growth in GDP was estimated at 9% in 1994. Economic improvement from 1994 to 1997 came largely from growth in the industrial and financial sectors. the Difficult Debts Law, which aided investors with losses incurred during the Iraqi invasion and an informal stock crash in the early 1980s, significantly improved investor confidence. Reversing this trend, GDP shrank 16% due to a large decline in world oil prices. The loss was more than restored by the recovery of oil prices beginning in the second half of 1999. GDP rose 17.22% in 1999, and then an extraordinary 26.88% in 2000. Inflation rose to 4.7% in 1999, but declined to 2.7% in 2000. GDP growth in 2001 was 5.43% and inflation was down to 2%. From 1999 to 2001, per capita GDP rose from $13,082 to $17,880. Kuwait's portfolio investments have generally served to double the income it receives from its basic oil industry.
While the GDP growth rate slumped in the negatives in 2001 and 2002 (-1.0% and–0.4% respectively), it quickly recovered, jumping to 9.9% in 2003, and 7.2% in 2004; in 2005, the economy was expected to expand by 4.0%. As a result of this boom, income per capita has also improved, reaching $20,088 in 2004, and an estimated $23,347 in 2005. Inflation and unemployment have been kept under control (reaching 1.2% and 2.2%, respectively, in 2004) and do not pose a major problem to the economy. Although Kuwait is a country with a high standard of living, it is still dependent on food and water imports. In the future, it plans to open up oil exploitations in the northern part of the country.
The US Central Intelligence Agency (CIA) reports that in 2005, Kuwait's gross domestic product (GDP) was estimated at $51.6 billion. The CIA defines GDP as the value of all final goods and services produced within a nation in a given year and computed on the basis of purchasing power parity (PPP) rather than value as measured on the basis of the rate of exchange based on current dollars. The per capita GDP was estimated at $22,100. the annual growth rate of GDP was estimated at 4.5%. the average inflation rate in 2005 was 3.5%. It was estimated that agriculture accounted for 0.5% of GDP, industry 52.1%, and services 47.4%.
Foreign aid receipts amounted to $4 million or about $2 per capita.
The World Bank reports that in 2003, household consumption in Kuwait totaled $20.70 billion or about $8,637 per capita based on a GDP of $41.7 billion, measured in current dollars rather than PPP. Household consumption includes expenditures of individuals, households, and nongovernmental organizations on goods and services, excluding purchases of dwellings. It was estimated that for the period 1980 to 1990, household consumption grew at an average annual rate of -1.4%.
Until the early 1960s, the traditional small shop or market stall dominated retail trade. In recent decades, however, modern business centers with hundreds of new shops and offices have opened, and some smaller villages have developed retail stores with impressive stocks of foreign goods. Franchising is also becoming well established, though most of the franchise market is currently held by American fast-food and restaurant firms. The city of Kuwait is the distribution center for the emirate and serves the transit trade of nearby states.
Usual business hours in summer (May to October) are from 6 am to 12 noon and from 4 pm to 6 pm; and during the rest of the year, from 7 am to 12 noon and from 3 pm to 6 pm. Stores are closed Fridays.
For many years, Kuwait maintained a boycott of imports from Israel. However, after liberation from Iraqi occupation in 1991, Kuwait relaxed its trade policies so that Israeli companies previously subject to boycott were permitted to do business in Kuwait. Kuwait also announced a trade embargo against the countries it regarded as having supported Iraq during the occupation—Jordan, Yemen, Tunisia, Sudan, Algeria, and Mauritania. Major export partners in 1997 were Japan (24%), India (16%), the United States (13%), South Korea (11%), and Singapore (8%). Imports came primarily from the United States (22%), Japan (15%), the United Kingdom (13%), Germany (8%), and Italy (6%).
The export of fuels sustains Kuwait, accounting for the vast majority of commodity exports (91%). Kuwait is the source of 3.3% of the world's crude petroleum exports. Polymers are another important export (4.8% of Kuwait's exports).
In 2004, Kuwait's exports grew to $27.4 billion (FOB—Free on Board), while its imports were more than half that, at $11.1 billion (FOB). The bulk of exports went to Japan (20.5%), South Korea (13.7%), the United States (12.4%), Singapore (11.3%), Taiwan
|Other Asia nes||621.7||91.1||530.6|
|United Arab Emirates||129.6||282.1||-152.5|
(9.9%), Pakistan (3.3%), and the Netherlands (3.3%). Imports included food, construction materials, vehicles and parts, and clothing and mainly came from the United States (12.9%), Germany (11.9%), Japan (7.9%), the United Kingdom (5.5%), Saudi Arabia (5.5%), Italy (5%), France (4.5%), and China (4.1%).