Innovative Future-Driven Initiatives unveiled by UAE Ministry of Finance Unveils | Kanebridge News
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Innovative Future-Driven Initiatives unveiled by UAE Ministry of Finance Unveils

New initiatives to drive the country’s future growth and boost its global competitiveness.

Fri, Jun 21, 2024 3:42pmGrey Clock 3 min

The UAE Ministry of Finance has introduced a series of innovative initiatives aimed at propelling the country towards future growth and boosting its global competitiveness. These initiatives align with the ‘We the UAE 2031’ vision and support the UAE’s ambition to establish itself as a global hub for the new economy over the next decade.

These initiatives are designed to create significant positive impacts across all sectors in a short timeframe. They play a crucial role in accelerating the UAE Government’s strategic foresight objectives, with a strong emphasis on financial outcomes that align with the ‘We the UAE 2031’ vision. This vision requires intensified efforts to meet key national indicators, which will positively influence society and the country’s diverse industries and sectors.

The UAE Ministry of Finance today announced the implementation of transformational projects that support the country’s efforts to transition towards the future and enhance its competitiveness, in line with the ‘We the UAE 2031’ vision and the UAE’s efforts to become the global hub for the new economy over the next ten years.

These projects are unique in achieving a significant positive impact in all sectors within short periods of time. These projects support the UAE Government’s efforts to accelerate the achievement of the government’s foresight objectives, with a focus on achieving financial results in line with the ‘We the UAE 2031’ vision, which requires doubling efforts to achieve key national indicators of the vision positively reflecting on society and the country’s various industries and sectors.

His Excellency Mohamed Hadi Al Hussaini, Minister of State for Financial Affairs, highlighted that the UAE, in its second 50-year journey, prioritizes developing governmental work to be able to meet the future requirements of the nation by adopting new methodologies and ways of working through the digital transformation. He noted that these are pursued by the UAE to achieve a quantum leap in project implementation, budget preparation, and resource management.

His Excellency emphasized the Ministry’s efforts to develop government services by focusing on areas that enhance the competitiveness of the economic environment and its ability to attract foreign investments. Among these efforts are empowering Emiratis to represent the UAE internationally.

Transformational Projects

The first project, ‘Developing the Local Debt Capital Market in the Country’, is a joint project with the Central Bank of the UAE by establishing programs for issuing local public debt instruments, represented by bonds and Islamic treasury sukuk in dirhams, and primarily trading them in the primary and secondary local markets, aiming to build and enhance the yield curve in UAE dirhams and provide reference pricing points for local financing operations carried out by financial institutions within the state, thereby enhancing market activity, expanding the investor base, and developing a highly efficient financial market in the UAE.

The Ministry of Finance is also working on implementing the project ‘Enhancing the Presence of Specialized Emirati Leadership in the Financial Field at International Forums’ which serves as the main supporter in making the UAE the most prominent in international cooperation over the next ten years. This is a joint project with the Ministry of Foreign Affairs, aimed at investing in empowering national talents to occupy Emirati memberships in leadership positions within international organizations, their committees, or federations linked to the country’s agenda. This will enhance the UAE’s presence in international forums and support its participation in shaping international strategic decisions and building economic partnerships with countries worldwide, through the leadership and membership of national talents from the Ministry of Finance in various international organizations, forums, and boards of directors.

 



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Kuwait’s Economy Faces Continued Challenges Amid Oil Production Cuts and Non-Oil Sector Decline

The oil sector remained constrained by Opec-mandated crude oil production cuts, while the non-oil sector recorded a steeper decline than in the previous quarter

Fri, Jul 12, 2024 4 min

The Preliminary estimates from National Bank of Kuwait (NBK) Economic Research reveal a 4.4% year-on-year decline in Kuwait’s GDP for Q4 2023, slightly improving from Q3’s -5.8% outcome.

The oil sector remained constrained by OPEC-mandated crude oil production cuts, while the non-oil sector recorded a steeper decline than in the previous quarter.

For 2023 as a whole, the non-oil economy contracted for the second consecutive year. Parallel data on the expenditure side of the national accounts showed that investment’s share of GDP stood at a modest 17% of GDP in 2022 (the latest year available). This figure could rise significantly as the new government pursues its diversification and development goals.

Oil GDP Contraction

The figures indicated a 6.4% year-on-year decline in oil GDP in Q4, a slight improvement over Q3. Kuwait maintained crude oil production at 2.55 mbpd, in line with its OPEC+ production cut obligations. For the full year, oil GDP contracted by 4.3%, a marked turnaround from the robust expansion witnessed in 2022, when a tighter oil market prompted Kuwait and its OPEC counterparts to raise production.

However, oil’s positive performance in 2022 largely defied the trend, as oil GDP growth has been negative in seven of the last ten years, fluctuating with OPEC supply policy adjustments in response to the post-US shale landscape of ample supply and downward oil price pressures. Kuwait’s crude oil production in 2023 (2.59 mbpd) is about 10% lower than in 2014 (2.87 mbpd).

Looking ahead, oil GDP growth is expected to rise from Q4 2024 after OPEC+ announced in June that members’ 2024 voluntary production cuts, including Kuwait’s 135 kbpd, will be gradually unwound over the course of a year starting in October. “We estimate Kuwait’s oil GDP will rise by 0.9% q/q in Q4 and by 4.0% y/y in 2025 if this production is restored fully as planned, though Opec has left open the possibility that it could pause and even reverse these supply gains if market conditions dictate,” NBK said.

Non-Oil Sector

Meanwhile, GDP in the non-oil sector remained in contraction territory at -2.3% year-on-year in Q4 2023, extending a sequence that has lasted for five consecutive quarters. For 2023 as a whole, non-oil activity fell by 2.9%, marking a second consecutive annual decline following 2022’s fall of 0.1% (downwardly revised from +0.3%). This is the weakest reading in the available series and well below the 2011-2019 average of +3.3% per year.

Performance at the sectoral level in 2023 was led by transportation & storage (+20%), hotels & restaurants (+17.4%), and household employment (+13.1%). The latter pointed to burgeoning demand for domestic labor, while the increase in hospitality sector output, for the second consecutive year, signifies strong consumption and efforts to develop and expand local dining and tourism capacity.

However, larger sectors such as manufacturing (-17% year-on-year), trade (-2.8%), and other services & real estate (-2%) performed markedly worse in 2023 compared to 2022.

The Central Statistical Bureau (CSB) also published GDP data characterized by expenditure up until 2022, offering a different perspective on Kuwait’s economy. In 2020, amidst the pandemic, private consumption (-11%) and total investment (-36%) fell sharply, contributing to that year’s near-5% decline in real GDP.

Private and government consumption led the recovery in 2021, while investment saw little change (+1.8%). Exports drove the continued recovery in 2022, a year when Kuwait’s oil output and exports recorded double-digit increases amid a tight market impacted by Russia’s invasion of Ukraine.

Cuts to Capex

Investment surged 44% in 2022 from a low, Covid-affected base, but in real terms, it remained below pre-Covid levels. This trend was reflected in successive government budget cuts to capex, which fell from a peak of KD3.8 billion ($12.43 billion) in FY19/20 to KD2.5 billion in FY23/24.

This trend reinforces what other figures suggest about Kuwait’s post-Covid economic recovery, largely driven by consumer spending and oil exports. Gross investment (public and private), at 17% of GDP in 2022, will need to increase substantially if the government is to succeed in its reform and economic diversification goals.

The release confirms previous indications that Kuwait’s economy recovered to its pre-pandemic size more quickly than originally thought. Nominal GDP reached KD42.9 billion ($143 billion) in 2021 from KD33.6 billion in 2020, increasing by 28% year-on-year, largely due to surging oil prices which propelled oil GDP up by more than 67%. However, GDP declined to KD50.3 billion (-9.8%) in 2023, reflecting changes in oil GDP. Consequently, per capita income dropped to $33.7k in 2023, partly due to this fall and an increase in population (+2.3% year-on-year according to PACI data).

External Shocks

The modest growth in the non-oil economy since the Covid-19 pandemic, averaging +0.8% per year compared to a pre-pandemic average of 3.3% (2010-2019), highlights a sector performing well below its potential in recent years. This underperformance reflects a succession of challenging external shocks, including the pandemic, oil price volatility, and aggressive global central bank monetary tightening. Despite traditionally high levels of government spending, non-oil performance in Kuwait has lagged behind some of its GCC peers.

To close the performance gap with neighboring Gulf economies, changes in the composition of public spending, emphasizing capital investment, will be necessary. The private sector‘s role must be significantly enhanced, with the government providing regulatory tools, incentives, and initial capital to help businesses expand and deepen the non-oil base, driving long-term productivity gains. The new government has stated its intention to prioritize structural fiscal and economic reforms and accelerate the implementation of development plan projects.

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