BMI View: Kuwait is a small market for retailers due to its small population size. However, high levels of urbanisation, disposable income and household spending mean there are opportunities, particularly in the higher-end segment. Modern retail formats are increasingly popular, as the comfort of malls offers protection from extreme weather conditions. Foreign brands are also on the rise, driven by the high number of foreign workers in the country.
After a tough year due to the turbulence in the petroleum markets which led to lower oil prices - with oil the overwhelmingly dominant industry of the Kuwaiti economy - we expect the country to post 2.5% and 1.9% real GDP growth in 2015 and 2016, respectively. Kuwait's dependence on oil and oil-related activities as a driver for economic growth does make it vulnerable and the slowdown of the last two years is evidence of that. Despite these frailties and the volatility in the oil industry, the Kuwaiti economy is expected to continue posting healthy, though not spectacular, growth figures during our forecast period - averaging 2.2% over the next five years. Overall the country has a solid financial foundation, after accumulating many budget surpluses over the years, meaning government debt is low, while they continue to invest abroad with their sizeable sovereign wealth fund.
The country has a very small population with only 3.4mn people inhabiting Kuwait. We note, however, high average income and spending levels: at USD30,455 per household and USD50,404 per household, respectively. The discrepancy is due to the high number of foreign workers and tourists in the country. The high average spending is a positive characteristic for retailers as that means very few households are limited to just purchasing the most basic goods, giving retailers opportunities to diversify further. Another key characteristic is the number of households in the highest income bracket of USD50,000+ which is expected to reach 15.8% of the total households by 2019, meaning there are many opportunities for retailers to market luxurious products at a high price. Preferences are changing, and though food and drink still make up most of the spending in the country, there is an increasing preference for international brands and premium products. Elsewhere, the clothing and footwear fashion sector is diversifying as the population becomes more in tune with global trends, while electronic communication devices are also set to increase in demand further.
Retail formats in Kuwait are increasingly modern, with the decline in the traditional mom-and-pop stores. This is a result of the extremely high levels of urbanisation, at over 98% of the population, as well as the preferences of Kuwaiti shoppers. The mall complex format is extremely popular in Kuwait due to the comfort and convenience they provide, as well as the range of services and entertainment proving extremely preferential for the modern urbanised Kuwaiti who enjoys international luxurious brands. Other modern formats also prosper, despite government restrictions, such as the mass grocery retail and department store sectors catering to the affluent population.
Key BMI Forecasts
We expect total household spending to be USD28bn in 2015, up 1.8%.
Household numbers will reach 564,961 in 2015, up 3.8% from the year before.