Economic growth in Kuwait to strengthen on the back of oil prices: IMF

Kuwait announced a 2019/20 budget that included a 4.7 percent rise in spending to 22.5 billion dinars ($74.15 billion). (AFP)
Updated 29 January 2019

Economic growth in Kuwait to strengthen on the back of oil prices: IMF

  • Inflation rate is expected to rise in 2019–20 to about 2.5 percent as deflationary factors seen in 2018 unwind
  • Last week, Kuwait announced a 2019/20 budget that included a 4.7 percent rise in spending to 22.5 billion dinars

DUBAI: The International Monetary Fund said on Monday Kuwait’s non-oil growth is projected to increase to about 3.5 percent in 2020, from 2.5 percent last year, as higher oil prices will boost capital spending.
“The mission has assumed an average oil price of $57 per barrel in 2019–20, increasing to $60 per barrel over the medium term,” the IMF said in a statement at the end of an official staff visit to the OPEC member.
“As capital project implementation accelerates, non-oil growth is projected to increase to about 3.5 percent in 2020.”
The IMF also said the recent OPEC decision to cut production is expected to hold oil output to 2 percent growth in 2019, which could rebound to 2.5 percent in 2020 given spare capacity.
The inflation rate is expected to rise in 2019–20 to about 2.5 percent as deflationary factors seen in 2018 unwind, the fund said.
It said higher oil revenues and investment income helped improve the overall fiscal balance in 2017/18 to an estimated surplus of 8 percent of GDP, which will reach almost 12 percent of GDP in fiscal year 2018/19.
Delays to the passage of a new debt law have left the government unable to issue debt since October 2017, forcing it to draw on the state General Reserve Fund for financing, including to repay maturing debt, the IMF said.
“Continued fiscal consolidation will be needed to reduce financing needs over the medium term,” the Fund added.
Last week, Kuwait announced a 2019/20 budget that included a 4.7 percent rise in spending to 22.5 billion dinars ($74.15 billion). Salaries and subsidies accounted for 71 percent of the budget.


Japan lower house passes US trade deal but auto tariffs still in limbo

Updated 19 November 2019

Japan lower house passes US trade deal but auto tariffs still in limbo

  • There is uncertainty over how much progress Japan can make in negotiating the elimination of US tariffs on its cars and car parts
  • Japan has estimated the initial deal will boost its economy by about 0.8 percent over the next 10-20 years

TOKYO: Japan’s lower house of parliament approved on Tuesday a limited trade deal Prime Minister Shinzo Abe agreed with the United States, clearing the way for tariff cuts next year on items including US farm goods and Japanese machine tools.
But there is uncertainty over how much progress Japan can make in negotiating the elimination of US tariffs on its cars and car parts, casting doubt on Abe’s assurances the deal he signed with US President Donald Trump was “win-win.”
Japan and the United States last month formally signed the limited trade deal to cut tariffs on US farm goods, Japanese machine tools and other products while staving off the threat of higher US car duties.
The government’s proposal to ratify the trade deal will next be brought to the upper house for a vote but its passage in the powerful lower house increases the chances it will come into force in January.
The deal will give Trump a success he can trumpet to voters but Abe has said it will bring as much benefit to Japan as to the United States.
Japan has estimated the initial deal will boost its economy by about 0.8 percent over the next 10-20 years, when the benefits fully kick in. It also estimated ¥212.8 billion of overall tariffs on Japan’s exports to the United States will be reduced.
But the figures were based on the assumption the United States would eliminate its tariffs on Japanese autos and auto parts — a major sticking point.
Without those tariff cuts, the reduction in overall US tariffs on Japanese goods would be a little over 10 percent of the government’s projection, according to an estimate by Japan’s Asahi newspaper and Mitsubishi UFJ Research and Consulting.
After the deal is ratified, Japan and the United States have four months to consult on further talks, and Trump has said he wants more trade talks with Japan after the initial deal.
But Japanese government sources familiar with the talks say the momentum to negotiate a deeper deal appears to have waned for now with Washington preoccupied with talks with Beijing.
“It’s unclear whether Washington seriously wants to continue trade talks,” one of the sources said.
“The question is how much time the United States can allocate for talks with Japan, even if we start negotiations. There’s limited time to conclude talks before the presidential elections.”
Japan and the United States already appear to have different interpretations of what was agreed on car tariffs.
Japan has said it has received US assurance that it would scrap tariffs on Japanese cars and car parts, and that the only remaining issue was the timing.
But Washington has not confirmed that.
US Trade Representative Robert Lighthizer has said cars were not included in the agreement, and that it was only Japan’s ambition to discuss car tariffs in the future.
A US document only said customs duties on autos and auto parts “will be subject to further negotiations with respect to the elimination of customs duties.”
“The deal was left vague on the issue of tariff cuts on Japanese auto and auto parts. Otherwise, we couldn’t have reached the agreement,” another source said.
There is also uncertainty on whether Trump will drop threats to impose steep tariffs on Japanese car imports under “Section 232” that gives him authority to do so on national security grounds.
Abe said he had got an assurance from Trump that he would not do that, though analysts say the president could always change his mind, or at least keep Japan guessing.
Opposition parties have attacked Abe for a deal they say is unfair. Critics say Trump could drag his feet on further negotiations unless he is sure he can win more concessions.
“There’s a chance Trump will put pressure on Japan on trade to appeal to his voters,” said Junichi Sugawara, senior research officer at Mizuho Research Institute. “There’s a possibility he could renew his threat over auto tariffs.”