Oil price recovery presents new opportunity for Kuwait
Kuwait Projects 2022 is a comprehensive review of the outlook for Kuwait’s projects market at the end of 2021, taking into account the impact of the Covid-19 pandemic, and the ramifications for Kuwait of the global energy transition.
For years, Kuwait’s high level of public spending combined with its relative lack of liquid assets has led to warnings of a looming liquidity crunch. But the Covid-19 pandemic and collapse in oil prices in 2020 drained the country’s reserves more rapidly than anyone anticipated and transformed Kuwait’s perennial stand-off between government and parliament over public spending into a fiscal crisis.
In June 2021, the government and parliament finally approved the budget for 2021/22, which included the allocations of substantial future funding for strategic projects. Yet it also anticipated a deficit of $36bn. Cutting spending is the only way to quickly reduce the deficit. But cuts to the country’s public wage bill are politically unpalatable while long-term growth requires strategic investment.
Kuwait National Vison 2035
Post-Covid-19, Kuwait’s highest priority is to accelerate its Vision 2035 diversification and structural economic reform programme aimed at bringing private investment and new job-creating industries into the country. The recovery in oil prices in the second half of 2021 significantly eases the pressure on Kuwait’s finances and provides reason for renewed optimism about the outlook for project spending in the country
With about $200bn of projects planned or underway, there is no shortage of potential opportunities in Kuwait. The country’s challenge is delivery. Sadly for contractors, businesses and the economy at large, very little of what is planned is being brought to tender or contract award. As a result, with the exception of 2020, the country’s projects market has declined every year since 2015, in terms of the value of project contract awards.
Outlook for Kuwait oil
Project spending in Kuwait’s oil industry slumped in 2019 and 2020 due to Covid-19 and low oil prices. But a sector restructuring in 2021 coincided with some major contracts for oil and gas projects providing hope for the return of spending.
Outside the oil & gas sector, Kuwait Authority for Partnership Projects (KAPP) is eager to move forward with its programme of PPP projects. Kuwait’s banks appreciate the need for greater participation by local institutions in PPP projects, and increasingly see the positives in committing to long-term project finance.
Most of Kuwait’s planned projects include urgently needed infrastructure developments, following more than a decade of underspending. To expedite the process, the government launched its ambitious Kuwait Vision 2035 investment strategy. But for the plan to succeed, it is an imperative for Kuwait to figure out how to bypass the roadblocks that have prevented progress in the past.
Kuwait Projects 2022 takes a close look at the major project opportunities in Kuwait over the coming five years, analysing all key sectors including energy, power and water, transport and construction.