Abstract
The Kuwaiti automotive market is set to shrink markedly in 2009 amid rapidly
deteriorating economic
circumstances, with BMI forecasting a 5.0% drop in
car sales.
The market will mirror trends within the wider economy,
suffering from lower oil revenue and falling
consumer confidence. The
outlook for car sales has deteriorated considerably since the previous
quarter
as liquidity in the banking system has dried up and the financial
sector has been thrown into turmoil. At
the same time, the expatriate
population is shrinking as jobs are cut, thereby reducing the number of
consumers and cutting the size of the potential market. Kuwaiti residents are
also seeing their personal
wealth plummet with the sharp fall in the stock
market and property values. These will conspire to
depress the Kuwaiti car
market, which had never seen the kind of growth levels observed in the
United
Arab Emirates (UAE). Consumer spending will contract by 2.0% in
2009, with BMI forecasting
automotive sales volume to fall 5.0%. With the
economy set to shrink by 1.0% this year, despite the
government' s stimulus
package, recovery will be slow to arrive, with GDP growth of just 0.4% in
2010
providing little impetus to consumer confidence. The recovery from
2011 will not reach the same rates of
growth as pre-recession levels. BMI
forecasts consumer growth of 2.0% in 2011 and 3.0% in 2012-13,
compared
with 6.0-10.0% in 2006-08. This will translate into lower rates of car sales
growth - 2.5-3.5%
annually - compared to up to 8.5% in recent years. By
2013, sales on the Kuwaiti market should have
exceeded 2008 levels,
reaching 127,235 units.
The contraction in consumer spending comes from a
very high base, and could be even more drastic but
for the entrenched
culture of government bail-outs and fiscal stimuli in Kuwait. The government
has also
been spending generously to support the banking sector,
guaranteeing local bank deposits. However,
these measures may not
necessarily boost private spending, even if they prevent an outright collapse.
A
sustained rise in oil revenue through a rise in oil prices could bolster
liquidity and encourage greater bank
lending, providing a stimulus to
automotive sales.
Kuwait scores 54.1 points (out of a theoretical maximum
of 100) in the BMI Automotive Business
Environment rating this quarter.
This puts it in fifth place, 0.2 points behind Saudi Arabia and 2.6 points
ahead of Bahrain. A lack of an automotive production base, low rates of sales
growth and lack of market
openness have dragged down the country' s score,
despite possessing a highly developed national
infrastructure and strongly
positive long-term economic risk factors.
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