BMI View: As a highly oil-dependent country, Kuwait has been and will be facing an economic slowdown. The decrease of commodity prices has come before the economy diversified significantly and households in the country have few reasons to expect sizeable income gains. N on-essentials retailers will be hit the hardest as Kuwait's consumer will shift a large part of their budgets to the housing sub-sector.
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 2.6% and 2.4% 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 which was underlined by the slowdown in the last two years. 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 2.4% 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.
Uncharacteristically for developed countries, Kuwait's retail sector will face a sharp increase in essentials spending over the next four years. While food & non-alcoholic drinks and transport sub-sectors will stay relatively flat, housing & utilities spending will surge by an average annual growth rate of 10.8% until 2019. We expect that Kuwaiti households will become more active in the housing market starting to spend more on new houses and apartments. The financial buffer accumulated during long years of stable economic expansion will help to fully or partially finance big ticket purchases as young families and expats begin spending more on housing. We are projecting that the sub-sector's share of the total will continue rising to hit a 35% mark and completely reshape household spending patterns over the course of the forecast period.
Non-essentials sub-sectors will post much slower growth rates. Kuwait's retail sector is highly diverse and caters well to the country's small population. As a result, clothing & footwear, furnishing & home and other retail sub-sectors can only grow in response to expanding consumer base or rising household affluence. While we do project the country's population to grow by 2.2% annually on average for the next four years, net household income will expand at a much slower pace. Increased uncertainty in the oil markets will take its toll for Kuwait, which is one of the less diversified economies of the GCC with a high exposure to oil price fluctuations. Delayed diversification will have to pick up steam in the medium term in order to create a positive long-term impact on the overall economy and household incomes. As the country drifts away from relying mostly on oil revenues, we anticipate the return of non-essentials spending towards the end of the forecast period and in the long run.
Tamdeen Group, the operator of 360 Mall, is developing Al Kout project, an upgrade and expansion of a current mall, which will, when finished, have more than 83,000 sq m of retail opportunities at the waterfront south of Kuwait City.
Bloomingdale's, an American chain of luxury department stores, is reportedly in talks to open its first store in Kuwait's 360 Mall, which would be the retailer's third outlet in the GCC.
Hyatt Hotels Corporation announced that it would be developing its first Grand Hyatt hotel in the 360 Mall, which will have 261 rooms when finished and will be the chain's fifth in the GCC.
360 Mall, Kuwait's premier shopping centre, is undergoing a major expansion plan which will feature a large tennis complex and a Grand Hyatt hotel, both of which are expected to open before 2019 and increase the mall's footfall by 30%.
Key BMI Forecasts
We expect total household spending to stand at USD28bn in 2015, up 1.8% from the last year.
Housing & utilities, which again became the biggest spending category in 2014, will continue surging growing from 27.7% to 35.3% before 2019 due to rising rental prices and spending on new houses and apartments.
Net household income will record weak 0.4% average annual growth due to disappointing oil prices which are expected to slow down Kuwait's exports-dependent economy.
The Kuwait Retail Report has been researched at source and features BMI Research's independent assessment and forecasts for the retail sector. The report examines key drivers of retail sales growth and future prospects, including consumer spending and private sector investment.
BMI's Kuwait Retail Report also examines the level of development and potential for growth of the retail sector, the commercial initiatives of major players, changing consumer demographics that influence demand and the regulatory environment. Key sub-sectors include mass grocery retail, autos, over-the-counter pharmaceuticals, computers and consumer electronics.
- Benchmark BMI's independent retail industry forecasts for Kuwait to test other views - a key input for successful budgeting and strategic business planning in the Kuwaiti retail market.
- Target business opportunities and risks in Kuwait through our reviews of latest industry trends, regulatory changes and major deals, projects and investments.
BMI Industry View
Summary of BMI’s key forecasts and industry analysis, plus a discussion of major industry developments and a snapshot of key short-term demand-driving macroeconomic movements.
Industry SWOT Analysis
Analysis of the major Strengths, Weaknesses, Opportunities and Threats within the retail sector and within the broader political, economic and business environment.
BMI Industry Forecasts
There are four separate 5-year forecast modules in the retail reports. These are:
- Headline Retail Forecast: Total household spending (local currency and USDbn, % growth, % GDP, per capita, per household), spending by retail sector (food & non-alcoholic drink, alcoholic drink, clothing & footwear, housing & utilities, furnishings & home, health, transport, recreation, education, restaurants & hotels, personal care & insurance (local currency and USDbn, % growth, % GDP, % of total spending)
- Retail Sector Forecast: Breakdown of Food, Non Alcoholic Drink, Alcohol, Tobacco, Clothing, Footwear, Household Goods, Furnishings, Appliances, Glass and Tablewear, Household Textiles, Consumer Electronics, Garden Toys and Pets, Home and Garden tools, Personal Care, Personal Effects Spending (USDbn, % Growth)
- Household Income and Numbers Forecast: Number of Households (‘000, % growth); gross income per household and per capita; net income per household and per capita; tax and social contributions per capita; breakdown of household incomes – USD5000+, USD10,000+ USD50000+ (‘000, % of total); labour force, employment and unemployment (‘000, % change)
- Demographic Forecast: Total population; Babies 0-12 months; Young Children 0-4yrs; Children 5-9yrs; Young Teens and Older Children 10-14yrs; Older Teens 15-19yrs; Adults 21yrs +; Young Adults 21-29yrs; Middle Aged 40-64yrs (‘000, % growth, male, female); Urban Population (‘000, % population); Rural Population (‘000, % population).
BMI’s Retail Risk Reward Index
BMI’s Risk Reward Indices provide investors looking for opportunities in the region with a clear country comparative assessment of a market’s risks and potential rewards. Each of the country markets are scored using a sophisticated model that includes more than 40 industry, economic and demographic data points to provide indices of highest to lowest appeal to investors, with each position explained.
Provides a detailed country-specific analysis of the key trends and developments in the retail sector as a whole, as well as an assessment of the main drivers affecting the major retail segments including mass grocery retail, fashion, pharmacies, consumer electronics, home improvement and personal care. The market overview also considers the most effective store formats in a given country and the impact of these factors on the main international and domestic players’ development strategies.
This provides a brief overview of the key players in each subsection of the retail sector including MGR, Fashion, Home Improvement, Consumer Electronics, Pharmacies, and Department Store chains.
The Retail Reports draw on an extensive network of primary sources, such as multilateral organisations, government departments, industry associations, chambers and company reports.