Kuwait's politics will stall economic reforms

Significance

With huge financial reserves, low public debt and a small population, Kuwait is one of the Gulf Cooperation Council (GCC) states best equipped to ride out an extended period of low oil prices. However, with the country registering its first budget deficit in 16 years, concerns about Kuwait's long-term fiscal sustainability have become more pressing, and the government has introduced a reform plan aimed at restructuring the economy.

Impacts

• The government will step up capital spending, launching as many projects as possible before the 2017 election.
• The private sector is likely to face increased financial costs, eg, corporate taxes, higher utilities charges and employment of nationals.
• Kuwait will become further integrated into the international bond market, and rely more on its international assets as a source of income.
• Political tensions could rise ahead of the 2017 poll if the government takes more measures to reduce opposition electoral prospects.
• Kuwait will lag behind other GCC states in its progress on economic reforms.