Kuwait is making a mistake in its decision to slash public spending as this will further depress its economy that has already been jolted by the global financial turmoil, an investment bank in the country said yesterday.
After recording strong growth in 2008 due to a surge in oil prices and the country's crude output, Kuwait's economy has started to slow down and growth is expected to plunge through 2009, Global Investment House (GIH) said in a strategic report on Kuwait.
"There is an urgent need on the part of the Kuwait government to adopt an expansionary fiscal policy at this critical juncture to minimise the impact of the economic crisis. However, as per the preliminary reports, the government has expressed its intention for a contractionary budget for 2009-2010," the report said. "Almost everybody was expecting the new budget to be much of a capital expenditure budget that might see actual deficit due to increased spending on mega projects. In fact most of the GCC countries as well as other economies around the world are announcing expansionary budgets. We believe in the current circumstances it is much better to record a budget deficit while increasing capital expenditure rather than reporting ongoing increasing surplus while keeping capital expenditures at a lower level."
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