30 Sep 2020
Posted in Construction
Kuwait’s new emir faces unprecedented economic upheaval and a struggling construction industry, says GlobalData
Following the death of the emir of Kuwait, Sheikh Sabah al-Ahmad al- Jaber al-Sabah;
Yasmine Ghozzi, Economist at GlobalData, a leading data and analytics company offers her view on the multiple challenges the new emir faces, including a struggling construction sector:
“The change in leadership to Sheikh Nawaf al-Ahmad al-Sabah is not expected to cause any forthcoming changes to the country’s oil policy, which has seen Kuwait firmly back OPEC+ production cuts. However, being at an age of 83 suggests his tenure is likely to be short and there will be a struggle for power within the al-Sabah family.
“This comes at a critical time where parliamentary (National Assembly) election is scheduled in November 2020 and it is expected a respectable win for opposition groups reinforcing exiting political tensions between the government and the parliament. The COVID-19 pandemic and plunging oil prices have taken a toll on Kuwait’s economy, a deteriorating liquidity crunch, and a delay in legal authorization to issue a new debt law has resulted in the country’s first ever credit rating downgrade from Moody’s.
“The short-term outlook for the construction industry is gloomy and GlobalData expects it to contract by 9.5% and 4.2% in 2020 and 2021, respectively. Kuwait’s priority should be focused to fast-track economic reforms and diversify the economy away from its dependence on hydrocarbons.
“These plans are part of the country’s long-term New Kuwait 2035 National Development Plan, however, progress on implementing this plan has been sluggish – partly because of political tensions between the government and the parliament and partly because of an incompetent bureaucratic environment, which constitute a challenge when pursuing mega infrastructure projects. The slow-moving bureaucracy in the gulf state could also deter investors and slow the push for PPP deals. Investment opportunities outside of the hydrocarbons sector would remain limited, due to parliamentary opposition and red tape.”