A recent government report has shed light on pressing challenges in Kuwait’s economy, prompting a call for radical and sustainable solutions. The report highlights the current rentier nature of the Kuwaiti economy as a significant future challenge. It reveals that a staggering 80% of total annual expenditures allocated to the state’s general budget are spent on salaries and subsidies. This trend is expected to result in a deficit in public spending on salaries and subsidies in the medium and long term, as reported by Al-Qabas Daily.
The report further highlights the increase in public spending percentages from 2010 to 2019. Although there was a decline in 2020 due to the COVID-19 pandemic, public spending rates rose again in 2021 and 2022, coinciding with the gradual recovery of the Kuwaiti economy.
In terms of demographics, the years 2020 to 2022 witnessed a decline in the percentage of foreigners, with citizens increasing to 34% of the total population. The government has recognized the need to address demographic imbalances and has implemented serious reforms, such as the introduction of the biometric fingerprint system, the implementation of smart worker IDs, and the formation of the National Committee to Regulate Demographics in May 2023.
Applying future oil price scenarios to the local labor market has revealed certain indicators that remain unaffected by global oil price fluctuations. Despite these fluctuations, the growth rate of the Kuwaiti population, the national workforce in the private sector, and the total workforce in the government sector have displayed consistency in the medium term.
In an optimistic scenario for oil prices, the report suggests that nominal GDP is expected to increase by approximately 10% compared to 2022. However, citizens’ reluctance to work in the private sector persists due to factors such as lower wages, job instability, and long working hours.
The report puts forward various recommendations to address these challenges and bolster Kuwait’s economic resilience. One key recommendation is the transfer of activities from the public to the private sector through privatization. This would help reduce the burden on the state’s general budget and promote efficiency in resource allocation. Additionally, increasing public-private partnerships can foster collaboration and innovation, driving economic growth.
The report also emphasizes the need to develop large-scale, efficient economies in priority sectors. By focusing on sectors with high growth potential, Kuwait can diversify its economy and reduce its reliance on oil revenues. Furthermore, improving the business environment, supporting foreign direct investment, and enhancing workforce skills are crucial steps towards transitioning to a knowledge-based economy.
Overall, the report calls for a comprehensive approach to address the challenges faced by Kuwait’s economy. By implementing the recommended solutions, Kuwait can overcome the current rentier nature of its economy and build a sustainable and resilient economic foundation for the future.
Source: TimesKuwait
