Kuwaiti businesses struggling to meet demand as orders surge

Alamy via Reuters

• Staff needed to clear backlogs
• Fastest growth rate in five years
• ‘Capacity will need to be ramped up’

Businesses in Kuwait have accumulated huge backlogs of work and will need to increase capacity and staff levels to meet customer demand, according to ratings agency S&P Global.

The monthly purchasing managers’ index (PMI) report for Kuwait revealed companies strengthened employment levels in a bid to satisfy “sharp and accelerated increases in new business” throughout May.

The rate of growth was the quickest since the survey began in September 2018, excluding the rebound in June and July 2020 as Covid-19 pandemic restrictions were loosened. New export orders also increased at a faster pace.

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“The challenge for firms at present is keeping up with demand,” said Andrew Harker, economics director at S&P Global Market Intelligence. 

“While employment returned to growth in May, the rate of job creation was only marginal and insufficient to prevent the strongest build-up of outstanding business in the survey’s history. 

“Capacity will need to be ramped up in future if companies are to be able to satisfy customer requirements in a timely manner.”

The report revealed that purchase costs continued to rise sharply in May. But price increases passed on were only “modest”, while some companies chose to offer discounts to clients, further squeezing profit margins.

Kuwait’s largest online classifieds platform, 4Sale, has around 1 million active users a month and echoed this increase in business. It reported this month that revenue in 2023 was up 11 percent year on year and online accounted for around 90 percent of sales, compared with 65 percent in 2019.

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The headline PMI posted 52.4 in May, up from 51.5 in April and signalled an improvement in business conditions in the non-oil private sector for the 16th consecutive month – the 50.0 mark divides economic growth from contraction.

Despite this, Kuwait’s government spending remains overwhelmingly dependent on oil and gas revenues.

The country produces almost 2.5 million barrels of oil per day, and has plans to increase production capacity to 4 million bpd by 2035.

“The government has made almost no progress, over many decades, in diversifying the economy away from oil, or in reducing the huge burden of government salaries and welfare payments,” said Andrew Cunningham, a consultant on risk and governance in the Middle East and sharia-compliant banking systems.

State foreign reserves are around $930 billion, according to National Bank of Kuwait, the country’s largest bank. With a population of a little over 4 million, its GDP per capita is one of the highest in the world.

In March this year, rating agency Fitch described Kuwait’s fiscal and external balance sheets as among the strongest of any of the governments it rates. 

Kuwait’s Emir Sheikh Meshal al-Ahmad al-Sabah, who began his reign in December 2023, issued a decree on June 1 nominating Sheikh Sabah al-Khalid al-Sabah as crown prince.