Consumer Confidence Reaches Record Level in Decades

ARA Research & Consultancy released its Consumer Confidence Index for Kuwait for January 2025, sponsored by Lexus.

The ARA General Index for Consumer Confidence continued its upward trend, boosting its monthly balance by 3 points and recording 120 points. This is the highest level since nearly 12 years, when it had reached 122 points in May 2013.

January witnessed an increase across all sub-indexes except for the Current Economic Situation Index. Historically, January tends to see a decline in this index as it corrects the increase of December, due to the waves of optimism influenced by the end of a year and the beginning of a new one.

It is essential to closely examine the remarkable rise in consumer confidence in Kuwait, at a period of extreme complexity and geopolitical risk at both regional and international levels. In fact, only few countries have managed to maintain and stabilize their consumer confidence, mainly due to the following factors:

1. The collapse of the foundations, principles, policies, and objectives of globalization, which has become a casualty of current global dynamics.
2. The original globalization project, aimed at opening global markets by eliminating or reducing customs tariffs, has fallen apart due to escalating trade wars affecting various countries and continents.
3. Policies of sanctions and counter-sanctions have played a critical role in disrupting global trade exchange.
4. The raising of customs tariffs by the United States by rates ranging between 10% and 25%, are expected to receive counter reactions that lead to:

A- Higher prices for goods, foodstuff, and other imported products.

B- A resurgence of monetary inflation and a decline in purchasing power.

C- Painful decline in global economic growth.

D- Increased unemployment rates.

E- Instability in global fuel prices and markets.

The ongoing wars in the Middle East, Ukraine, and other countries, alongside the various trade wars, threaten the world with further shocks and crises, negatively impacting consumers’ psychology and convictions worldwide.

However, despite these global challenges and their repercussions, Kuwait has managed to create a different environment that has strengthened and sustained consumer confidence, driving the ARA Consumer Confidence Index to its highest levels in over a decade. Some of the key factors boosting this confidence include:

1. Consecutive gains achieved by the stock market.
2. Strong financial solvency at both the public and private levels, with banks holding substantial deposits that stimulate economic activity.
3. The Kuwaiti government's continued investments in strategic sectors, including oil, infrastructure, and others.

Slight Decline in the Current Economic Situation Index

The Current Economic Situation Index was the only sub-index, among the six composing the General Index, to experience a minor decline. It dropped by 1 point from the closing of the previous year to reach 110 points. Accordingly, it maintained the high levels achieved over the past year.

Oil prices’ instability has become a negative factor. In the ninth month of the 2024/2025 fiscal year (December), the average price of Kuwaiti oil reached USD 73.7 per barrel, compared to USD 84.4 in the 2023/2024 fiscal year, i.e. a decline of USD 10.7. Nonetheless, the current price remains above the hypothetical price of USD 70 per barrel in the budget.

Based on this, and assuming current price stability, oil sector revenues are expected to reach 18.388 billion dinars, with additional non-oil revenues amounting to 2.154 billion dinars.

The projected budget deficit for the current fiscal year is expected to exceed 3 billion dinars.

Nevertheless, economic forecasts for 2025 remain optimistic, supported by several factors, including:

1. Increased momentum in project allocations in Kuwait.
2. Declining interest rates both domestically and internationally.
3. The government's decision to accelerate projects implementation as part of its economic development plan.

Additionally, investment funds in Kuwait achieved remarkable success in 2024, with a growth rate of 14.9%.

Similarly, the Expected Economic Situation Index recorded 125 points, adding 2 points to its monthly balance and maintaining its strong levels.

Personal Income Indexes Continue to Rise

The Current Personal Income Index increased by 4 points, reaching 111 points at the end of January. Naturally, rising wages result from economic activity’s expansion and diversification across various sectors, positively impacting incomes.

Similarly, the Expected Personal Income Index increased by 2 points in January, reaching 112 points. This indicates that the gap in confidence between current and future income is narrowing, noting that over the past decade, the Current Personal Income Index had generally trailed behind the Expected Personal Income Index, except in certain exceptional circumstances.

ARA analysts view the convergence of these two indexes as a positive indicator, confirming that future expectations are backed by present economic realities.

It is worth noting that the Minister of Finance and the Minister of State for Economic Affairs and Investment has downplayed the likelihood of introducing income tax in the near future.

Significant Increase in the Confidence Index in Employment Opportunities

The Current Employment Opportunities Index soared to 176 points, adding 15 points compared to December, the highest level since October 2021.

Confidence increased across the various demographic groups and professions, reflecting the expansion and diversification of available employment opportunities. Likewise, the index increased by 5 points among citizens and by 28 points among Arab residents.

A rare trend was observed, with five out of Kuwait’s six governorates raising the employment opportunities index between 11 and 26 points. The only exception was Al-Farwaniya Governorate, which recorded a decline of 3 points.

These research findings confirm key facts, including:

1. The significant increase in job opportunities.
2. The diversification of sectors in Kuwait’s economy has created demand for both mid and lower-level workers as well as highly skilled professionals.

The rising demand for labor to support various economic sectors, particularly the growing activity in the real estate sector, which directly impacts multiple industries, has contributed to this positive employment trend. This, in addition to the government projects currently under implementation.

Loans and Bank Facilities Support Consumer Spending

The Purchase of Durable Goods Index regained some of the ground lost in December, rising by 3 points to 117 points at the end of January.

Despite an annual increase of approximately 5% in food, beverage, and clothing prices, as reported by the Central Statistical Bureau, and an acceptable inflation rate of around 2.5%, the purchasing index has maintained an upward trajectory for a year.

Abdulkhaleq Al-Ali, Managing Partner at ARA, explained:
 "Undoubtedly, banking loans, which reached 3.62 billion dinars by the end of 2024, continue to support consumer spending on durable goods, noting that the cumulative volume of credit facilities and loans reached 57.17 billion dinars by the end of December."

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