(MENAFN - Arab News) Total exports of goods and services (FOB) witnessed a 43 percent increase in the first nine months of 2011 to reach KWD20.1 billion which is already 4.5 percent above the 2010 full year figure. Hydrocarbon exports equaled KWD18.8bn, or 93.6 percent of total exports, which was a 44.8 percent growth. On the other hand, total imports of goods and services increased 7.5 percent to reach KWD5.0 billion, compared to KWD4.7 billion during nine months of 2010. Consequently, the trade balance for nine months of 2011 grew 61.2 percent to a surplus of KWD15.1 billion. This growth is relatively high given that the trade balance grew at a CAGR of 25 percent from 2005 to 2008, according a report by Global Investment House (Global).
With the exception of 2009, trade balance has continued to grow in the past five years. In 2010, the trade balance increased by 31 percent to reach KWD12.8 billion, compared to decline of 44 percent during 2009. The strong growth in the trade balance in 2010 was mainly attributed to the strong growth in oil exports along with ethylene products and re-exports. The trade balance, which was a key factor in Kuwait's increasing government revenues in recent years, represented 35.9 percent of total GDP in 2010 and is expected to increase to around 44 percent for 2011.
As expected, oil continued to dominate total exports of Kuwait in nine months of 2011, as it did with total government revenues. On average, oil exports have accounted for 94 percent of total exports from 2005 to nine months of 2011. Since 2003, oil prices have witnessed rapid growth which enabled Kuwait to reach high level of exports during that time.
According to the figures from the Central Bank of Kuwait, the country's nonoil exports mainly consist of chemicals (which are a byproduct of oil), machinery and equipment, manufactured goods, and re-exports. Nonoil exports, which are consistently overshadowed by the large contribution of oil exports, have experienced growth over past years due to the government's ongoing efforts to diversify the economy away from oil. Nonoil exports represented 6.4 percent of total exports in nine months of 2011, while representing an average of 5.5 percent from 2005-2010. Nonoil exports increased by 25 percent to reach KWD1,295 million in nine months of 2011, compared to KWD1,034 million during nine months of 2010. After representing the largest share of nonoil exports in 2010, ethylene product exports grew by 35 percent during nine months of 2011. It is important to note that re-exports have experienced sustainable growth since 2003 due to the increased trade with Iraq. Re-exports at 36 percent accounted for the second largest share in 2010 nonoil exports. For nine months of 2011, re-exports increased by 7.5 percent to reach KWD372.1 million; re-exports are expected to maintain healthy gains and increase by 6 percent in 2011, according to IMF projections.
Based on reports from CBK, Kuwait's imports include machinery & equipment, manufactured goods, and food & live animals. Kuwait's imports have increased steadily in recent years as local demand and government revenues increase. Imports have grown at a CAGR of 7 percent from 2005 to 2010. Total imports (FOB) of Kuwait for nine months of 2011 increased 7.5 percent and stood at KWD5.0 billion after growing by 25 percent in 2010, the Global report said.
Details of imports and how much each category consumed have not been released by the CBK since 2007. However based on EIU estimates, Asia continued to be the largest importer from Kuwait in 2010. Japan was the main importer as it accounted for 14.0 percent of Kuwait's total exports. India was the second largest individual importer at 12.9 percent followed by South Korea and China at 11.6 percent and 9.1 percent respectively. United States was the only main importer outside the Asian continent with a total share of 7.2 percent of Kuwait exports. In terms of the origin of Kuwait's imports, United States were the largest exporter to Kuwait representing 13.6 percent of total imports in 2010. China was the largest Asian exporter as it represented 9.1 percent of Kuwait's imports followed by Japan at 7.0 percent. The largest European exporter was Germany as it accounted for 5.9 percent of total imports, while Saudi Arabia was the largest Arab exporter as it represented 6.6 percent of Kuwait's imports.
According to the reports by CBK, the current account has witnessed solid surpluses in the past mainly due to the balance of goods which is expected to continue in 2011 as well due to much higher oil prices. During 2010, the current account surplus stood at KWD10.6 billion and was up by 42.3 percent. As a percentage of GDP, current account surplus stood at 29.6 percent. It is important to note that the investment income and current transfers accounts witnessed slight changes in 2010 compared to the figures of the previous year, illustrating the large impact of goods and services to the current account, in particular that of oil prices. Based on the latest IMF projections, Kuwait's Current Account is expected to grow by over 55 percent during 2011 backed by a large surplus in the balance of goods due to much higher oil prices.
Looking at the components of the current account, while balance of goods registered a growth of 31 percent, net services deficit jumped by over 130% in 2010. Travel contributed the most to Services as it was responsible for a net KWD1.9 billion on the debit side. Travel grew by 6.7 percent during 2010 compared to a decline of 10.9 percent during the previous year. On the other hand, government and other services contributed a net of KWD0.73 billion on the credit side during 2010 which was half of 2009 figure. Transportation and Insurance deficit both, however, increased by 25 percent and 11 percent respectively, the report added.
The two other components, Income (net) and current transfers, had a marginal impact on the current account. Income (net) was up by 12 percent to reach KWD2.2 billion during 2010, compared to KWD2.0 billion during the previous year. The general government account, which includes income generated though investments by Kuwait Investment Authority, Kuwait Petroleum Corporation, and Public Authority of Social Security, compromises 93 percent of total Income (net). In 2010, the general government account is up by 18 percent. Income from the CBK, local banks, and financial sector make up the remaining 7 percent of Investment Income.
Current transfers remained stagnant and stood at KWD3.73bn. Being a debit account, it is considered an outflow and has a negative effect on the current account. Among its sub parts, worker's remittances grew at a CAGR of 34 percent from 2005-10 due to the growing expatriate population in Kuwait and represented almost 90 percent of Current Transfers in 2010. With oil prices remaining high for 2011, the current account is expected to record a surplus of over KWD20bn or 44 percent of 2011 GDP.
Kuwait's financial account's deficit after contracting by 45 percent in 2009, grew by 31 percent to reach KWD9.96 billion in 2010, compared to KWD7.6 billion during the previous year. Portfolio investment (net) deficit contracted by 6 percent to reach KWD2.2 billion, compared to a deficit of KWD2.4 billion during the previous year.
A debit in the assets of portfolio investments entails that Kuwait invested more in portfolio assets abroad. In 2010, the general government and investment companies sold KWD512 million of their foreign assets under portfolio investments which resulted in a credit in that account. The liabilities account under portfolio investment ended 2010 with a KWD234 million surplus, compared to a KWD138 million deficit at the end of 2009, the Global report said.