The GCC region’s economic growth is projected at 2.5% in 2023 and 3.2% in 2024, while Kuwait’s non-oil sector is expected to grow by 4.4% in 2023.

 

The World Bank expects Kuwait's economic growth to slow to 1.3% in 2023, down from 7.3% in 2022. The decline in oil and gas revenues and the slowdown in global economic activity are the main reasons for the fall in Kuwait’s growth forecast, Kuwait Financial Centre Markaz recently released its Monthly Market Review report for May. 

 

On the positive side for the economy, the World Bank also expects Kuwait’s inflation to decrease to 2.6% in 2023 and the current account surplus to reach 22% of GDP, compared to 26% in 2022.

 

Markets negative

Regionally, GCC markets were negative in May, with the S&P GCC composite index down 3.1% for the month. The decline was driven by the fall in oil prices, which weighed on investor sentiment. All equity indices, except Dubai and Bahrain, were negative for the month. 

 

Bahrain market rose 3.1% in the month, due to strong Q1 2023 corporate earnings. 

 

Dubai market mildly gained 0.9% for the month, majorly driven by blue-chip stocks. Saudi markets witnessed a 2.6% monthly decline, primarily due to losses in the energy and banking sector stocks. Qatar National Bank and Emaar Properties were the top gainers among GCC blue chips, rising 4.6% and 3.7% for the month respectively.

 

Kuwait’s All Share Index falls

Kuwait’s All Share Index declined in May, posting a monthly loss of 4.8%. Among Boursa Kuwait’s sectoral indices, Telecom and Banking sector lost 6.7% and 6.0% respectively for the month. Among Premier Market stocks, Mezzan Holding and Ali Alghanim Sons saw the biggest gains for the month, up by 12.4% and 7.7% respectively, on account of stronger earnings growth in Q1 2023. National Investments Co. fell the most for the month, down by 23.4%.

 

Kuwait consumer price inflation (CPI) rose by 3.7% y-o-y in April, the same pace as in the previous month and 0.2% m-o-m primarily driven by food and clothing prices. Food inflation climbed to a nine-month high of 7.7% y-o-y. 

 

The World Bank's Gulf Economic Update report has projected the GCC economies to experience slower growth in 2023 due to lower oil and gas earnings, and a global economic slowdown. 

 

Qatar confirmed that the state's general budget recorded a surplus of QR19 billion ($5.2 billion) in Q1 2023. The surplus will be utilised for purposes such as paying public debt, supporting the reserves of the Qatar Central Bank, and strengthening the assets of the Qatar Investment Authority. 

 

Qatar LNG production

The International Monetary Fund (IMF) predicts that Qatar's medium-term growth will rise to around 4-4.5% after the expansion of the North Field boosts LNG production. Moody's Investors Service has upgraded Oman's ratings and maintained a positive outlook based on improvements in the country's fiscal surplus and spending restraint.

 

Developed markets’ performance ended marginally negative in May with MSCI World index losing 1.2% for the month. Sector performance was mixed, with most sectors posting negative returns while the technology sector was the standout, with a strong positive return of 6.3% for the month. S&P 500 marginally increased by 0.2% for the month, primarily driven by mega-cap technology and growth stocks. Global markets were volatile for the month due to concerns surrounding the US debt ceiling.

 

Earlier during the month, the US Federal Reserve announced that it would increase interest rates by 25 basis points, bringing the target range between 5.00% to 5.25%. The rate hike was widely followed by many central banks across the world including the Bank of England (BoE), the European Central Bank (ECB) and GCC Central Banks. Emerging markets’ performance ended negative in May with MSCI Emerging Market index losing 1.9% for the month.

 

Oil prices decline

Oil prices declined by 8.6% in May due to concerns about the US debt ceiling and uncertainty surrounding the supply outlook ahead of the OPEC+ meeting. According to International Energy Agency (IEA), global oil demand is projected to increase by 2.2 million barrels per day (mbpd) in 2023 compared to the previous year, reaching an average of 102 mbpd. The OECD is expected to experience growth in Q2 2023, but its average increase for the year (350 kb/d) is significantly lower than the non-OECD's gain of 1.9 mbpd. Gold prices declined 1.4% in May due to a stronger US Dollar.

 

Looking ahead, investors will be watching for data on US consumer confidence cautiously for the month of June, which fell in the month of May. The market is also expected to be sensitive to any news on the Fed's monetary policy. Opec+ meeting in June and consumption data in the US and China are likely to be key trigger points for Oil markets, which would also weigh on GCC equities as well.-- TradeArabia News Service