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Vital Role of the Private Sector in Building a Robust Economy

Economy projected to slow down globally: according to international financial institutions, the present turmoil in global markets has led to a pessimistic near-term forecast for the worldwide economy. In April, the International Monetary Fund (IMF) reduced its global economic growth projections...

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Global markets grappling with uncertainty have spurred financial institutions to predict a modest...
Global markets grappling with uncertainty have spurred financial institutions to predict a modest economic growth trajectory for the coming years. In April, the International Monetary Fund (IMF) revised its global economic growth predictions for 2025 and 2026, attributing the decline to heightened risks to the economy arising from tariff-related uncertainties.

Vital Role of the Private Sector in Building a Robust Economy

Real Talk about Global Economy and the Middle East

The current global economy is a tricky landscape, with major financial institutions like the International Monetary Fund (IMF) predicting a slowdown. In April, the IMF revised its global growth forecasts for 2025 and 2026, citing increased risks due to trade tariffs and policy shifts. Here's a breakdown of what's happening:

  1. Slowing Growth: The IMF predicts global growth in 2025 to slide by 0.5 percentage points to 2.8 percent, from the earlier prediction of 3.3 percent. In 2026, it expects a similar trend, with growth expected to be down 0.3 percentage points to 3 percent.
  2. Hydrocarbon-dependent Economies: Countries like Kuwait, that are heavily reliant on hydrocarbons, may feel the pinch due to a persistent drop in global oil prices. This could strain resilience and fiscal revenues.
  3. US-China Tariff Tussle: Although Kuwait is relatively less impacted by direct US trade tariffs, the ongoing tariff escalations between the US and China are still unfavorable. These tariff battles have led to a sharp drop in global oil prices, which is harmful to Kuwait's economy.
  4. Reduced Imports: Reduced imports by major global partners such as the European Union (EU) and China, due to ongoing economic uncertainty, may add pressure to Kuwait's fiscal balances.
  5. Exposure to Chinese and EU Markets: It's worth noting that Kuwait has significant exposure to Chinese and EU markets. In 2024, Chinese imports from Kuwait totaled $11.5 billion, while EU imports stood at over $7.6 billion.

As for the Middle East and North Africa (MENA) region, the World Bank shares the IMF's more downbeat prospects. The Bank estimates growth to reach a modest 1.9 percent in 2024, with forecasts that it would rise moderately to 2.6 percent in 2025. To boost productivity, the World Bank recommends:

  1. Promoting Competition: Governments should foster competitive markets to encourage business growth and innovation.
  2. Empowering Women Entrepreneurs: Closing the gender employment gap could boost income per capita. Encouraging women's participation in the labor market is essential.
  3. Better Management Practices: Encourage private sector firms to adopt better management practices that enhance productivity and efficiency.
  4. Regulatory Environment: Reconsidering the role of state-owned enterprises and reducing governance-deficits can foster innovation and improve the business environment.

By implementing these recommendations, the MENA region can unlock the full potential of its private sector, leading to sustainable economic growth and increased productivity. As governments in regions like Kuwait strive to implement reforms for economic growth, it's important to consider these suggestions for a sustainable future.

  1. The Kuwaiti government, in an effort to integrate with global financial trends and lessen the impact of the IMF's forecasted slowdown, might find it valuable to consider adopting better management practices and fostering competitive markets in their business sector.
  2. The ongoing tariff tussle between the US and China, despite minimally affecting Kuwait directly, has still led to a drop in global oil prices, prompting the potential need for Kuwait to diversify its finance and trade strategies to reduce its exposure to such volatile markets.
  3. To seamlessly integrate into the global economic landscape and bolster its finance sector, Kuwait could prioritize empowering women entrepreneurs and improving its regulatory environment, as suggested by the World Bank, which could potentially boost productivity and help sustain economic growth.

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