Special Report:Global Financial Crisis
KUWAIT CITY, Feb. 1 (Chinese media) -- "There is a 30 percent drop sales of
automobiles and electronic appliances due to economic crisis," said Ahamed
Salikh, manager of a prominent business group in Kuwait.
He added "Retail businesses of white and brown goods have taken a toll.
Corporate tenders have fallen and public projects of roads and harbors have also
shown significant decline."
However, he noted that the sale of luxury cars costing more than 30,000
Kuwait dinars (about 108,000 U.S. dollars) is unaffected, "because that sector
caters to very high-net worth individuals, whom the slowdown has not really
affected still."
A gold merchant in the country's capital Gold Street said retail sales in
gold has gone down a bit now for two reasons, firstly because of the economic
crisis and secondly because of hike in gold prices.
"We are looking forward to making the most of the shopping festival in
February to gain back our losses. Many shops have closed already due to poor
business," Salikh said.
Shops are increasingly offering discounts and conducting sale to push their
stocks.
Kuwait has been beset with economic woes following the global economic
crisis that has also gravely impacted its banking sector and equities market.
According to a recent report, the stock exchange has shed over 30 percent
in the last one year.
Global Investment House, the country's biggest investment bank, shocked
investors by announcing that it has defaulted on most of its 3 billion U.S.
dollars loan, while Islamic lender The Investment Dar said it needs 1 billion
Kuwait dinars to repay debts.
Kuwait's third largest lender Gulf Bank had to double its capital after
losing 137 million Kuwait dinars last year in derivatives and other instruments.
Tumbling oil prices have been a concern of Kuwait as oil is still the
state's key source of foreign revenue.
Amir Tameemi, a local prominent economist and columnist, said the
government always plans budget based on an assumed oil prices of 50 dollars per
barrel, and when the price hovers below this level for a long time, the country
will suffer a deficit.
The oil prices have fallen to around 42 dollars after hitting arecord high
of 147 dollars per barrel last July.
The surpluses from the past upswings in oil prices cannot sustain for long
as they will be liquidated due to the crisis, Tameemi added.
A head of an investment firm, who declined to give his name said Kuwait is
seeing maximum layoffs in the investment sector.
He put the percentage of job losses between 30 and 45 percent.
The industry is facing serious finance crisis, he said, adding that the
economic stimulus plan put forward by Central Bank of Kuwait (CBK) recently to
the cabinet is not very attractive.
The plan offers only 25 percent guarantee to investment firms from foreign
loans, for which the firms will have to mortgage their assets.
This means the investment firms will be unable to move their assets for up
to five years or more, while the loans they get will be hardly enough to pay off
the debts.
National Bank of Kuwait, Kuwait's largest commercial bank, warned in a
research report released recently that the country's economic growth would
decline 4 percent on the back of realty sector and falling crude oil prices.
But Kuwait's Finance Minister Mostafa al-Shamali told Al-Watan daily that
the government's stimulus package will plant confidence in the country's
financial and banking sectors.
The cabinet is expected to approve the plan on Monday which will allow
banks to save troubled companies and will guarantee bank facilities to
companies. (1 Kuwait dinars = 3.6 U.S. dollars)
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