Kuwait’s Fiscal Year: Exceeding Oil Revenue Expectations
The closure of Kuwait’s 2023/2024 fiscal year marked a significant achievement, with oil revenues surpassing expectations.
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According to the Al-Shall weekly report, the state’s budgeted expenditures were around 26.32 billion dinars, with total revenues estimated at 19.46 billion dinars. Oil and gas revenues were a major contributor, accounting for approximately 88.2% of total revenues, or about 17.16 billion dinars. The report underscored the delay typically seen in final account actual results, emphasizing their critical importance for fiscal assessment.
Oil Revenue Performance and Market Dynamics
The average price for a barrel of Kuwaiti oil in March 2024 was noted at $84.4, significantly over the budgeted forecast of $70 per barrel by $14.4 or 20.6%. This average price, however, fell by 13.1% compared to the previous fiscal year’s average of $97.1 per barrel.
The reduction in production, as per the “OPEC+” agreements, saw Kuwait’s oil output stabilizing at 2.41 million barrels per day from January 1, 2024, about 9.8% less than budgeted figures.
Al-Shall projected Kuwait‘s oil revenues for the fiscal year to be around 21.28 billion dinars, surpassing budget estimates by approximately 24%, leading to total expected revenues nearing 23.58 billion dinars. This projection, however, indicated a potential deficit against the expenditure allocations, highlighting the need for fiscal adjustment.
Banking Sector Growth
The Kuwaiti banking sector witnessed considerable growth in net profits for the year 2023, achieving approximately 1.53 billion dinars, a 30.4% increase from 2022. This growth occurred despite a downturn in profits during the fourth quarter compared to the same period in 2022.
The report detailed that traditional banks constituted 54.2% of the total net profits, with Islamic banks contributing the remaining 45.8%. Significant profitability improvements were observed, including enhancements in return on total assets and equity.
The banking sector’s price-to-earnings ratio also saw a decrease, further illustrating the sector’s robust performance. Notably, Kuwait Finance House and the National Bank of Kuwait were prominent contributors to the sector’s profits.
Principles Behind Oil Revenue Estimations
Al-Shall’s methodology for estimating oil revenues was based on several key principles: a daily crude oil production share of 2.67 million barrels, a benchmark price of $70 per barrel, and an approved exchange rate of 304 fils to the dollar. Additionally, gas revenues and production costs were meticulously calculated, providing a comprehensive financial overview for the fiscal year.
Commercial Bank of Kuwait’s Performance Metrics
The Commercial Bank of Kuwait showcased remarkable progress in its financial indicators for the year ending December 31, 2023. Notable increases were seen in return on average assets, equity, and capital, alongside a significant rise in earnings per share and an improved price-to-earnings ratio.
These advancements reflect the bank’s enhanced profitability and value proposition to shareholders, underpinning a successful fiscal year for Kuwait’s banking sector and the economy at large.
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Employment grew for the 16th consecutive month as companies expanded.
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According to a recent PMI report, Qatar experienced its fastest non-energy sector growth in almost two years in June, driven by surges in both existing and new business activities.
The Purchasing Managers’ Index (PMI) headline figure for Qatar reached 55.9 in June, up from 53.6 in May, with anything above 50.0 indicating growth in business activity. Employment also grew for the 16th month in a row, and the country’s 12-month outlook remained robust.
The inflationary pressures were muted, with input prices rising only slightly since May, while prices charged for goods and services fell, according to the Qatar Financial Centre (QFC) report.
This headline figure marked the strongest improvement in business conditions in the non-energy private sector since July 2022 and was above the long-term trend.
The report noted that new incoming work expanded at the fastest rate in 13 months, with significant growth in manufacturing and construction and sharp growth in other sectors. Despite the rising demand for goods and services, companies managed to further reduce the volume of outstanding work in June.
Companies attributed positive forecasts to new branch openings, acquiring new customers, and marketing campaigns. Prices for goods and services fell for the sixth time in the past eight months as firms offered discounts to boost competitiveness and attract new customers.
Qatari financial services companies also recorded further strengthening in growth, with the Financial Services Business Activity and New Business Indexes reaching 13- and nine-month highs of 61.1 and 59.2, respectively. These levels were above the long-term trend since 2017.
Yousuf Mohamed Al-Jaida, QFC CEO, said the June PMI index was higher than in all pre-pandemic months except for October 2017, which was 56.3. “Growth has now accelerated five times in the first half of 2024 as the non-energy economy has rebounded from a moderation in the second half of 2023,” he said.
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