The widespread disruption to normal life and business activities due to the COVID-19 pandemic has led to warnings from IMF and other organizations of an upcoming global recession. The GCC countries that rely on oil revenues have been hit harder as oil prices reached record lows due to a combination of falling demand and increased supply as OPEC+ alliance partners failed to reach a consensus in March 2020 on production cuts. The OPEC+ agreed to a deal on 12 April, 2020 for a daily production cut ~10 million barrels but price outlook for oil price remains weak in light of weaker demand.

COVID-19

• 213 countries, areas or territories affected with nearly 1,914 thousand cases and 123 thousand deaths reported*.
• Governments around the world including Kuwait have taken drastic actions such as social distancing, lockdowns, travel restrictions and curfews to contain transmission.
• Economic activity affected through global and local supply-chain disruptions and demand-suppression.
• Governments’ efforts to mitigate the economic cost are evolving in response to the crisis. Kuwait Government has announced relief measures – more measures may be in the pipeline.

A decline in oil prices

• ~70% drop in oil prices since the beginning of the year 2020**.
• As at 14 April 2020, OPEC Basket crude oil price was reported at ~USD 19.70 per barrel.
• Constrained industrial demand, saturation of oil storage capacity (strategic reserves) and absence of production limits may lead to a continuation of the low oil price regime.
• Kuwait’s FY 2020 budget was forecast at USD 55 per barrel.
• A continued decline in oil prices could widen the fiscal deficit and challenge the government’s ability to spend on planned projects and also inhibit the ability to take aggressive measures to prop up the economy.

Source: *WHO, as at 14 Apr 2020, **OPEC.org