_The Gulf's urban hot spot series: Kuwait
Supply is expected to be constricted going forward, as demand remains weak. Meanwhile, prime rental costs were stable throughout 2017 at KWD100 per square meter per annum. Costs are highly variable depending on location and accessibility but prime space is likely to remain stable over the next 12 months on account of pent up demand for quality space.
OPEC related oil production cuts have affected Kuwaiti GDP growth in 2017, resulting in a decline in GDP of 1.6%, down from 3.5% growth in 2016. Whilst the decline in oil prices from 2014 highs have been a strong headwind for the economy (Hydrocarbons account for almost half of GDP), Kuwait has been able to deal with this from a position of strength given its large fiscal buffers and low levels of debt.
Despite this, we have seen a weakened fiscal position develop with a growing need for external financing therefore there is a clear requirement for an accelerated fiscal reform package alongside the five year development plan which looks to diversify economic activity.
Overall, the outlook for GDP growth remains positive; this is underpinned by the implementation of the five-year development plan, increased oil and non-oil growth in 2018 and the recent moderation in inflation.
Forecasts anticipate GDP growth of 2.4% in 2018 and 6% in 2019. The recent IMF mission also notes that whilst concentrated fiscal consolidation would mean a short term slowdown for the non-oil economy it would results in growth rates of well above 5% in the medium to long run.