Kuwait worried about economic imbalances; stocks drop

Opec member Kuwait needs to correct imbalances in its economy, the country's central bank governor said in comments which raised investor concerns, prompting a sharp drop in the Gulf state's stock market on Monday.
"Sheikh Salem Abdul-Aziz al-Sabah spoke about the economic situation in Kuwait and about the imbalances it witnesses which could lead to a lot of risks at various levels," state news agency KUNA quoted the central bank governor as saying late on Sunday. Sheikh Salem was speaking at a cabinet meeting, it said.
Sheikh Salem said that such concerns should be addressed by corrections to avoid any negative implications that they might have on the future of Kuwait, KUNA added.
The report did not give further details but the comments rattled Kuwait's benchmark, which closed down 1.6 percent on Monday, hitting a new seven-year low.
"There are many issues affecting the Kuwait market. One is the CMA laws that create conflict through their application, mainly on funds and the new regulations," said Safaa Zbib, head of research at Kuwait and Middle East Financial Investment Co.
Kuwait's Capital Markets Authority (CMA) has sought to better regulate the country's stock market and investment firms. "The government seems very pessimistic about the economy. And a lack of lending is crippling the banking sector. When companies are not in a good shape to borrow, economic activity stops," Zbib added.
Last month, Kuwait's parliament approved a 19.4 billion dinar ($71 billion) state budget for the 2011/12 fiscal year, the biggest since at least 2003.
The budget, based on a crude price of $60 a barrel, faced opposition by several lawmakers including members of the parliament's budget committee who dubbed the increased spending "crazy".
Oil revenues in Kuwait, the world's fourth-largest oil exporter, account for more than 90 percent of state revenues.
A fall in oil prices is one of the risks facing the country's economy in 2012, Kuwait's finance ministry has said in a report on its website. (www.mof.gov.kw)