ECR analysts recorded an increase in political risk in Kuwait in Q3 2012 as the country showed signs of increased instability, which finally erupted in the wave of political protests that have swept the country in recent weeks.
Widespread demonstrations turned violent this week, sending shockwaves through the country’s financial markets. The Kuwait stock exchange fell to its lowest level since August 2004 on Thursday after police used tear gas to disperse protesters marching to a prison where an opposition leader is being held after being charged with insulting the emir.
Despite the country’s overall ECR score rebounding during Q3, Kuwait’s political assessment score fell by 1.1 points between June and October 2012. Of most concern to ECR were the country’s government stability, institutional risk and information access/transparency indicators, which all deteriorated during the quarter.
A member of ECR’s expert panel for Kuwait says: “The country is going through a historic period of civil unrest. Unless Kuwait’s already-dysfunctional government can orchestrate some kind of rapid resolution to the crisis, the situation will only deteriorate further.”
Nassib Ghobril, chief economist at Byblos Bank, says: “Kuwait’s world-leading fiscal metrics continue to insulate the economy from shocks. However, recent political developments have delayed the implementation of the government investment programmes intended to spur economic growth."