Boston, MA -- (ReleaseWire) -- 04/30/2014 -- Final-year sales data for 2013 were unavailable as this report was being compiled. Consequently, BMI retains its current forecasts this quarter, although we have now extended our forecast period to 2018. Overall, BMI remains upbeat on the medium-term outlook for the Kuwaiti new vehicle sales market, with the country offering strong growth potential in both the volume and high-end segments.
For 2014, BMI retains its GDP growth forecast of 2.9% this quarter. We expect the Kuwaiti economy to perform relatively well over the year, with non-oil growth expected to accelerate on the back of strong domestic demand and a modest pick-up in government capital spending. While we remain fundamentally cautious about the country's medium-term investment outlook, we note that higher growth in bank lending over the last few months of 2013 and signs of progress on some of Kuwait's development projects have improved the growth prospects for gross fixed capital formation.
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Moreover, the outlook for private consumption - a key indicator of likely demand for new passenger vehicles - continues to be broadly positive, with BMI forecasting growth of 3.0% in 2014. Fiscal policy will remain expansionary, although we expect a deceleration in current expenditure growth following the 25% hike in public sector salaries in March 2012. The interest rate environment also remains broadly favourable for those Kuwaitis needing to finance new car purchases via loans. The Central Bank of Kuwait has kept the key discount rate at 2.0% since October 2012, with inflation set to remain relatively subdued, at an annual average rate of 3.5% in 2014, according to BMI forecasts. Consumer credit is still the main driver of the overall expansion in lending, with personal credit (excluding purchases of securities) growing at an annual rate of 17.7% in October 2013. The recent strengthening state of the real estate market should also provide another boost to private consumption. The value of real estate sales rose by an average of 26.6% y-o-y over 8M13, according to data from the National Bank of Kuwait (NBK).
Turning to infrastructure spending, following a period where there has been slower-than-expected progress on infrastructure projects, there are some indications that investments may now be speeding up, in a move which should boost demand for commercial vehicles across Kuwait.
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