Stability of Consumer Confidence Amid International Uncertainties

 ARA Research & Consultancy has released its Consumer Confidence Index in Kuwait for June 2023, in collaboration with Arab Times Newspaper and under the sponsorship of Lexus.

The research data showed the ability of consumer confidence in Kuwait to face tough uncertainties at the international level and their resulting repercussions, including the instability of oil markets due to unstable demand levels, as well as the negative international expectations regarding future global economic growth.

 The General Index recorded a ratio of 107 points, stabilizing at its previous monthly balance and decreasing by 2 points on a yearly basis.

 It is noteworthy that the General Index figures recorded by various components of the research were almost similar, except for one component with monthly salaries ranging between 1850 and 2249 dinars, whereby they were content with 97 points, declining 28 points within a month.

Furthermore, the citizens’ index also decreased by 6 points while the index level increased by 5 points among Arab residents As for the regional level, the General Index ratios increased in three governorates by 5, 4 and 2 points, while the other 3 governorates took a different position and their balances decreased by 1, 5 and 7 points.

It is natural that the stability of Consumer Confidence in Kuwait is affected by the integration of general external factors with internal elements, as there are a series of internal decisions and achievements that contributed to the stability of consumer satisfaction, including:

• The official bodies expect the financial budget of 2023/2024 to achieve a surplus of 22%.
• The International Monetary Fund experts believe that maintaining the Kuwaiti dinar exchange rate fixing system has proven its worth and ability to protect the purchasing power of the dinar. Moreover, this fact particularly contributes to preserving consumer confidence in Kuwait, as the stability of the exchange rate and purchasing power guarantees food security and relative stability of prices.
• The recent decisions of OPEC, which left for the member states the choice of the possibility to reduce oil exports by proportions ranging between one million barrels per day by Saudi Arabia and 500 thousand barrels per day by the Russian Federation, all the way to reductions appropriate to the situation and the specificity of each member country.

This measure is aimed at stabilizing market prices in a way that guarantees the rights of producers and consumers. Noting that there are convictions by some specialized institutions that Kuwait will face a slow decline in the level of the gross national income growth for 2023 to about 3 - 3.5% with an estimated decline of 8% from 2022.

This calls for more work to increase the level of production growth in the private sector, which reached around 4.4% this year. 

Decline in the Economic Index Among Citizens

 The Current Economic Situation Index of June 2023 registered 97 points, decreasing by 3 points within a month and 2 points on an annual basis. 

Moreover, the Expected Economic Situation Index also recorded 117 points, with a decrease of 1 point compared to its previous balance, noting that the internal economic factors still remain positive. The reason for the decline in confidence in the economic conditions may be due to the instability of the markets and oil prices, with reference to the experts' expectations that confirm the increase in prices and improvement of the supply and demand balance during the second half of this year. 

There is no doubt that there are several positive internal factors that have contributed and continue to contribute in strengthening consumer confidence, including currently, the recovery of the real estate sector at high rates and the expansion of the construction industry, knowing that these two sectors are reviving other industrial and service sectors. 

The IMF delegation proposed to implement the decisions taken by the official government departments in Kuwait regarding the VAT law. This would contribute to strengthening the state treasury by 15% of revenues.

 Despite the decline in oil prices, Kuwait has maintained its ability to contain monetary inflation.

On the other hand, Moody's, the global rating agency, expressed its opinion that raising the level of Kuwait's rating is related to the extent of encouraging Kuwait's non-oil economies. 

Noting that the Kuwait Stock Exchange was able to achieve gains amounting to 1.5 billion dinars within three weeks during June.

 Noting that most of the global financial markets suffer from the repercussions of the problematic relationship between increasing the level of central banks’ interest rates and its negative impact on trading volume, stock prices and the level of growth.

 Within this climate, the Expected Economic Situation Index of the Capital decreased by 10 points within a month, the ratio of Mubarak Al-Kabeer Governorate also decreased by 27 points, and the ratios of the Current and Expected Economic Situation Indexes among citizens decreased by 12 and 10 points, respectively.

It seems that workers with a primary school education level decreased their ratio of economic conditions by 11 points, as well as the confidence levels of secondary school diploma holders decreased by 12 points.  It is noted that majority of the research components chose to negatively express their current convictions about economic conditions during June.

18 of the 26 respondents expressed a negative view of the Current Economic Situation. This proportion was limited to 15 components regarding the extent of mistrust in the Expected Economic Situation.

Respondents Prefer Expected Income to Current Income

The research figures and data confirmed that around 65% of the research components showed a low level of satisfaction with the monthly personal income levels. This assessment affected the Current and Expected Personal Income Indexes. it is prominent in this context the decline in consumer confidence in Current Personal Income by 6 points, while the decline in the Expected Personal Income Index ratio was limited to 1 point within a month. The first index recorded 91 points only, a14 points decline on an annual basis, while the Expected Personal Income Index decreased by 2 points only in a year.

There is no doubt that the assessment of Personal Income, its size and purchasing power are organically related to many factors and characteristics that distinguish each country from another, including:

• The extended healthcare and educational allowances.
• Subsidies that help citizens and residents, which are provided indirectly such as subsidies for commodities, foodstuffs and necessary products. For example, the Kuwaiti government offered subsidies to citizens worth 91 million dinars within three months. The subsidy system is an indirect part of income, but it increases the purchasing power of consumers.

The spread of difficulties and hotbeds of conflict in some parts of the world, and the repercussions that affected import chains as well as prices stability down to food insecurity in many developing countries. 

These facts and other forms of monetary inflation for most countries and the high damage they inflicted on the security, economic and social conditions in many countries, had their negative effects in one way or another and in varying proportions on most countries of the world.

Therefore, it is necessary to follow up on the general data in the markets and conduct a careful assessment of the opinions and convictions of the respondents to follow up on their future tendencies and opinions about the current and expected monthly Personal Income Indexes, noting that the level of confidence in the current indicators in the study remains declining compared to the future Index ratios. 

The Labor Market Activity with Positive Connotations 

The labor market activity was and continues to be one of the main important references in determining the economic reality and its future directions. It has acquired exceptional significance in the current circumstances, which are characterized by the most complex and dangerous since the Second World War.

Based on these facts, we return to the assessment of the Current Employment Opportunities Index in Kuwait to extract the market's indications and trends on the ground.

 This indicator recorded a ratio of 138 points in June 2023, increasing its monthly balance by 11 points. 

With reference to the decline of this ratio by 12 points on an annual basis. Taking into consideration that the year 2022 is at the stage of overcoming the pandemic and the gradual resurgence of the economy's various sectors, consequently the high level of demand for the workforce during 2022 is considered necessary and exceptional.  Accordingly, the decline in June 2023 ratios should not be measured by the results of 2022.  Therefore, the current ratio could be regarded as a ratio indicative of economic recovery in Kuwait, albeit in varying proportions, among different fields. 

The growth of the real estate sector and the increase of its return rate to 6.75 - 7.75% may have been a lever for higher workforce demand at this stage.

On the other hand, and in view of the scientific and technical development in production, and the need for researchers, engineers and competent labour to meet the needs of the labour market, it is necessary to accelerate the implementation of programs to reorganize expatriate workers in a way that ensures, on the one hand, the continuity of the employment localization policy, and on the other hand, guarantees the necessary professional and educational conditions for expatriates.

 Scientific and technical development in the public and private sectors has become a necessity that cannot be postponed at both the domestic and international levels.

Taking into consideration the need to secure employment opportunities for male and female citizens, whose numbers exceed 20,000 annually, and to give the subject of qualification and professional preparation an urgent priority to engage in the production process.

Rise in the Level of Consumption

ARA’s index for the Purchase of Durable Goods for June recorded a ratio of 105 points, adding 11 points to its balance within a month. Nevertheless, it is still down by two points on an annual basis.

Noting that 17 of the 27 research components confirmed increasing the level of their expenditures during June. Also noting that a number of respondents increased their ratios for this indicator in high proportions, including: Al-Jahra Governorate 41 points, the Capital 40 points and Al-Farwaniya Governorate 12 points.

While the ratios of the remaining 3 governorates decreased by 6, 5 and 2 points.

It seems that workers with a secondary school education level are facing some difficulties, as they lost from their previous balance of consumption level 39 points, while the ratios of university graduates increased by 24 points, and the ratio of those with a diploma education level decreased by 17 points.

 It is natural for spending level to increase in the beginning of summer, as supported by the increase of the volume of consumer credit loans to 109 million dinars within a month, including housing loans.

On the other hand, monitoring and controlling the prices of commodities and essential foodstuffs in Kuwait contributed to containing prices and facilitated the increase of consumption level.  Whereby, the Ministry of Commerce strictly monitors price movements, especially commodity prices, and takes necessary actions in cooperation with the cooperative sector and central markets.

Due to the importance of the consumption cycle at the economic and social levels, we will follow up the trends and characteristics of Kuwait's market activities in the coming months. 

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