Kuwait Insurance Report Q3 2012

BMI View: The Kuwaiti government continues to drive growth in the construction sector with ambitious development programmes, although foreign investors remain wary. The announcement of a US$12.6bn investment by the government, for 320 projects by 2013, has helped to generate growth, but the year on year (y-o-y) growth rate is still relatively low, with just 3.5% anticipated for 2012. Construction industry value is expected to rise from US$2.5bn in 2012 to US$3.3bn by 2016.
Key developments in Kuwait’s infrastructure sector include: 􀂃 The Kuwaiti Ministry of Public Works and Municipality Affairs has announced that it will invest US$12.6bn in an infrastructure development programme by 2013. The programme will involve more than 320 projects, and include the construction of bridges, government buildings and roads. A US$1.8bn water and power project is being developed at Al Zour North, which will have an overall capacity of 1,500MW and be capable of producing up to 107 gallons of potable water daily. It is believed that Kuwait will require an additional 9,000MW of production capacity by 2020.
􀂃 The Kuwaiti government announced that its development programme includes a total of 324 infrastructure projects worth KWD3.5bn (US$12.6bn) for FY12/13. Minister of Public Works and Municipality Fadel Safar Ali Safar said that the government would initiate an aggressive road development programme that would ensure improvements to the country''s roads and highways. He added that the Ministry of Public Works and Municipality would be responsible for around 146 of the projects.
􀂃 The Kuwaiti government announced that it will start a US$2.5-2.9bn tender for the construction of a new second terminal at Kuwait International Airport. The proposed terminal will have an annual handling capacity of 25mn passengers. Construction is scheduled to begin in mid-2013, with an expected completion date of 2016. A total of 16 international companies have already expressed an initial interest in the project.
Kuwait''s political backdrop is complicated by labour and population imbalances and a parliament that has consistently blocked the government''s reform efforts. With three elections in the space of four years, the prospect of new polls and policy instability is always on the horizon. We expect the Kuwaiti economy to continue growing robustly in 2012. Elevated global hydrocarbon prices will allow the government to keep fiscal spending high, driving domestic consumption, while oil production looks set to remain near capacity. While our outlook on fixed investment is less positive, we nevertheless forecast real GDP growth of 5.4% in 2012, down only modestly on estimated growth of 6.1% in 2011.