Impact of Covid-19 on Kuwait’s Economy

Posted: January 4th, 2023

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Impact of Covid-19 on Kuwait’s Economy

Introduction

The coronavirus outbreak alluded to as Covid-19 brought about by the SARS-CoV-2 infection, has significantly affected the worldwide organization. The first instances of the pandemic were affirmed in December 2019 in Wuhan city, Hubei territory of China. The ailment has quickly spread over the world, with many cases of death announced in China, Italy, Iran, Spain, Germany, and the U.S. among other nations. While a few countries have effectively treated reported cases, it is eccentric to figure out where and when various instances of the infection may emerge ((Ozili and Thankom 2). Covid-19 has been announced a pandemic by the World Health Organization as it presents a general health crisis of global concern. While the outbreak of Covid-19 is more of a health issue, it has had severe impacts on the economy of Kuwait.

Kuwait’s Economy in the Times of Covid-19

The economy of Kuwait greatly depends on oil. The nation has vast oil reserves that contribute most to its economic growth through exportation of oil products to other nations. Subdued oil prices and lower oil production in 2019 slowed the overall economic growth of the country. However, the robust spending in the nation and credit growth is expected to underpin the importance of non-oil activities in the growth of the economy (World Bank). The fall in the prices of oil in Kuwait is linked with the widespread of Covid-19 in the country that led the government to implement appropriate policies to contain the pandemic. Covid-19 underscores the need for the state to adopt new reforms that fundamentally project at obtaining a sustainable growth model.

            The coronavirus outbreak has negatively impacted Kuwait’s economy. Conflicts about oil pricing in the GCC region significantly emerged early in 2020. Covid-19 worsened the war between Russia and the GCC countries on the prices of oil in the region through reduced demand for oil. Imposed travel restriction in the country and other regions in the world has led to reduced movement of people and goods, and consequently the decline in demand for aviation fuel, coal and other energy products (Ozili and Thankom 8). Despite its impact on a broader range of energy markets, the effects on oil markets are severe due to reduced consumption of oil products.

            Besides, the country experienced a loss of oil revenue during the times of the pandemic. The decline in oil demand and reduced prices of oil products in the international market has resulted in a significant fall in oil revenue in Kuwait. Declined income has led to the rise in current account deficits and worsened the balance of payment in the nation. This way, the country cannot adequately stabilize the economy due to deficiencies in the collected revenue (Ozili and Thankom 8). The country has to find alternative approaches, such as seeking for external assistance to sustain its economy as well as control the spread of the disease.

            The falling oil prices worsened by Covid-19 in Kuwait meant that the country had to restructure its national budget. The national budget in Kuwait had to be revised since it had earlier been priced in higher oil prices and demand in 2019 and did not reflect the current economic reality. Massive deficits in the country’s national budget also led the country to seek foreign loans from the International Monetary Fund and the World Bank to fund its activities (world Bank). Covid-19 influenced Kuwait’s economy by altering the county’s primary source of revenue.

            The implementation of health policies in Kuwait such as social distancing, stay home, and curfews as measures to prevent the disease from spreading were beneficial in the health sector but had significant impacts on the country’s economic development. The policies restricted the interactions between citizens, and therefore, the productivity of established enterprises, both public and private declined. As a consequence, the revenue collection is such economic activities in the state declined as citizens did not report to work, and no taxes were paid (Baldwin and Weder 12). Reduced incomes provision from internal operations in the nation led to the seeking of external assistance to keep the country on track during the period of the pandemic.

            Covid-19 has led to the closure of many businesses in the country. Implemented health policies led to reduced productivity and demand for non-essential products in human existence. As a result, many citizens in the country became jobless. The major groups of affected people include those in the tourism and hospitality sectors, sports and entertainment, the travel industry, and the education sector (Baldwin and Weder 10). Movement restrictions have led to the reduced work in these areas, and the businesses are closed indefinitely leaving employees with no option but to remain home. Lack off jobs in the country due to Covid-19 reduced the counties income as there is a reduced number of citizens subjected to taxation.

The pandemic resulted in confusions in operations and functioning of the government as it focused more on the health aspects of the citizens and has neglected their need for economies and finances.  The sudden suspension of ministries and government agencies in the country had severe impacts on workers in the institutions. Approximately 14000 citizens in the country working for the government have not received their salaries due to confusions in the government’s execution of activities (Baldwin and Weder 12). Some were paid half of their wages while others were not paid at all. The situation led to harsh living conditions for the citizens since they struggled to obtain a living in the hard times caused by the pandemic.

The general perception of the impact of Covid-19 on the economy of Kuwait was that the pandemic has adverse effects. However, some aspects of its contribution to the independence of the state were witnessed. The government could leverage the use of internal resources to ensure the thriving of the country’s economy during the outbreak. This was a positive impact because the pandemic has proved that the nation can maintain its economy without depending much on external assistance (Ozili and Thankom 13). Appropriate planning in the government’s approach to containing the spread of Covid-19 in Kuwait ensured that the country’s economy was not be affected much and relevant policies are implemented to balance the impact of health policy measures on the economy.

Besides, despite the closure of many companies and government ministries that rendered many citizens jobless, Covid-19 created numerous job opportunities for health workers in Kuwait. The department of health in the country resolved to enhance cooperation between private and public hospitals as a way to improve the preparedness of the health sector to deal with the virus (Ozili and Thankom 12). Through this approach, many nurses and doctors were employed to deal with the ever-rising cases of Covid-19 in the nation. Other than job creation, employment of many health practitioners increased the amount of revenue collected from the health sector.

Also, policies to contain the pandemic resulted in movement restrictions and closure of many academic facilities and institutions. Revenue collected by the government in the sector reduced as workers were stopped from going to work. The sector, however, turned to leverage the use of technology to continue with education. Online classes are organized, and students and tutors can communicate through the use of the internet and video conferencing (Ozili and Thankom 13). On these grounds, Covid-19 resulted in the use of alternative approaches in the continuation of educational services. As such, the small amount of revenue collected by the government from e-learning is substantial in maintaining the country’s economy.

Conclusion

Covid-19 has had substantial impacts on global health and economy. The outbreak of the epidemic and its contagious nature has made it difficult for the development of its vaccine. Its rapid spread in Kuwait has resulted in the implementation of different health policies such as social distancing, stay home initiation of curfews and lockdown, which have affected the nation’s economy. The consequences of the health policies are severe to the country’s economy because of the restrictions in the movement of people within the country and on the international level.

The pandemic has led to a decline in the countries income due to reduced prices and demand for oil and associated products. Besides, many citizens have lost their jobs due to the pandemic, and the government has limited sources of obtaining its revenue. The national budget restructuring has been vital for the country to maintain its economy. However, Covid-19 has been beneficial to health workers because increased demand for their services, leading to the creation of many jobs in the health sector. E-learning in Kuwait has also emerged as a consequence of the pandemic.

Works Cited

Baldwin, Richard, and Beatrice Weder. Economics in the Time of Covid-19. Centre for Economic Policy Research Press London, 2020.

Ozili, Peterson K, and Thankom Arun. “Spillover of Covid-19: Impact on the Global Economy.” SSRN Electronic Journal, 2020, pp. 1–26., doi:10.2139/ssrn.3562570.

World Bank, “Kuwait’s Economic Update – April 2020” www.worldbank.org/en/country/gcc/publication/kuwait-economic-update-april-2020.