A Delicate Balancing Act Dr. Mohammad Y. Al-Hashel Chairman of the Higher Steering Committee for Economic Stimulus 4 June 2020 N.B.: This English translation is prepared by the Central Bank of Kuwait for information purposes only. In case of any variance between Arabic and English versions, Arabic text shall prevail.
Table of contents 1 Current situation 2 Overview of economic stimulus package 3 Financing support and guarantee program 4 Concluding thoughts and aspirations 2
Table of contents 1 Current situation 2 Overview of economic stimulus package 3 Financing support and guarantee program 4 Concluding thoughts and aspirations 3
The world is facing a sudden, unprecedented, generation-defining and unique crisis Worst recession Unprecedented Dual crisis for Significant uncertainty since the Great velocity and intensity Kuwait affecting consumer & Depression of unemployment business confidence 1.6 Bn workers 20+ year-low Uncertainty around crisis 3-5% GDP decline – both lockdown and impacted globally oil prices expected globally recovery timelines – 305 Mn job losses significant social and 8-12% GDP decline expected in Q2 2020 economic impact, and virus expected in Europe resurgence 4
We have been fighting this battle on two fronts - lives and livelihoods, with a need to continue balancing between both Suppress virus spread Lockdown measures were imposed to as soon as possible suppress virus spread and manage the capacity Build testing and of the healthcare system treatment capabilities for Health the virus capabilities and capacities Extended periods of lockdowns will suffocate Find treatment: medicines and vaccines livelihoods – difference in re-opening Protect approaches could cost global economy trillions lives Support individuals of dollars and businesses Protect impacted by the lockdown livelihoods New imperative is re-opening the economy and Have the adapting to operate alongside the virus under willingness to necessary health protocols and civic responsibility expand recovery to avert the expected until a breakthrough in vaccines, a cure or herd economic shock Prepare to resume immunity is reached work safely when virus spread decreases 5
On the lives front: health and government authorities took measures to slow the spread of the virus and save lives, which in turn impacted the economy 3 months %75 %45 of partial and full lockdown helped drop in visitors to grocery, of businesses suspended their mitigate exponential retail and recreation operations or had to shutdown, case count growth outlets in May 2020 and 26% witnessed a revenue drop of >80% 3 months %64 44% staged re-opening plan with necessary protocols being of individuals are concerned or of landlords reported having to developed to minimize uncertain about the post-crisis reduce rental payments for virus resurgence economic conditions tenants to be able to pay them 6
On the livelihoods front: failure to intervene quickly and effectively would result in bankruptcies leading to adverse economic and social effects 30-42% average revenue drop expected Increased risk of essential goods for impacted Corporates and SMEs and services shortages Businesses will face a liquidity Job loss in the shortfall of up to KD 3 Bn private sector 8-10x increase in Lower levels of spending and default rates investment Indirect economic and knock- Non-oil GDP on effects across sectors contraction 7
Globally, governments’ responses to the COVID-19 crisis have exceeded USD 11 trillion (15% of global GDP) 1 USD trillion Guarantees 12 5 ، 0 11 ، 1 11 ، 1 Cumulative number of COVID-19 cases reported in 10 ، 7 10 ، 7 10 ، 7 10 ، 6 10 ، 4 1% 5% 11 Liquidity injection from the 4 ، 5 Cumulative size of stimulus packages Central bank 10 8% the countries under study 3 (million) 8 ، 9 4 ، 0 8 ، 5 Direct financial support 9 12% 3 ، 5 8 Not determined 2 3 ، 0 19% 7 6 2 ، 5 5 ، 2 Concessionary loans 5 20% 2 ، 0 Postponements of dues 4 1 ، 5 3 2 ، 1 Equity investments 1 ، 0 2 32% 0 ، 5 1 0 ، 5 Regulatory changes 0 0 14 9-15 16-22 23-29 30 March - 6-12 13-19 20-26 27 April - 4-10 11-17 18-24 COVID-19 cases 3 February - March March March 5 April April April April 3 May May May May 8 March 1. Total reported, collected and analyzed number to date (across 54 countries where information on package size has been studied) 2. The difference between the announced package size and the total actions that have a size or can be estimated 3. Cumulative cases as of the last day of the period 8
The Higher Steering Committee for Economic Stimulus proactively focused on stabilization and preparing the economy for recovery to enable future reform Economic stabilization and Economic reform and re- recovery preparation imagination Higher Steering Committee for A national project owned by all Economic Stimulus mandate institutions and parties in and framework in response to the Kuwait crisis 9
To fulfil its mandate, the Higher Steering Committee for Economic Stimulus adopted a set of guiding principles Introduce immediate remedies and urgent practical solutions Design and propose effective programs Practice burden-sharing with all that can be implemented by stakeholders stakeholders 1 2 8 Incentive packages based on current Withhold compensation for missed 7 3 data and conditions profit opportunities and losses 6 4 5 Protect all economic sectors to Support competent businesses to get prevent cross-sectoral damage in through this phase light of sector interdependence Enable businesses to restore activity once normality is restored 10
Table of contents 1 Current situation 2 Overview of economic stimulus package 3 Financing support and guarantee program 4 Concluding thoughts and aspirations 11
Clear objectives were defined across all segments of the economy and measures tailored accordingly 4 key segments Households Businesses Banking Government sector 22 measures taken to stimulate the economy 11 11 Measures included in the Council of Additional Ministers Resolution No. (455) measures (A1 – A11) (M1 – M11) 12
Households – key objectives and measures taken Protect nationals working in impacted M1 sectors from the repercussions of the crisis Maintain the availability and price stability Secure basic M2 needs of food and medical supplies Provide Ensure minimum income to cover the cost M3 financial of living for impacted workers support Support the salaries of workers registered M4 under Chapter 5 of the PIFSS Preserve job Disburse the retirement pension in select security M9 cases for a period of 6 months Double the support provided to workers A1 Households registered under Chapter 3 of PIFSS Implement a moratorium on personal loans A2 Waive fees on POS, ATMs, and online A3 M Council of Ministers channels for 3 months measures Additional A measures 13
The Economic Committee introduced additional measures to M4 A1 support households and employees ~15k Kuwaitis under Chapter 5 Beneficiaries ~57k Kuwaitis under Chapter 3 Support Doubling national labor support Duration 6 months 14
Business sector – key objectives and measures Postpone loan payments due to the National Fund and M5 the Industrial Bank Provide concessionary loans to SMEs M6 Provide concessionary loans to impacted Corporates and M7 individuals Postpone monthly contributions to PIFSS for 6 months M8 Provide government fee waivers to impacted institutions M10 Expedite payments due from government agencies to the M11 private sector Businesses Implement a moratorium on loans for impacted A4 companies Promote A5 Amend some labor law articles flexibility A6 Propose postponement of eviction of commercial Alleviate tenants Support financial A7 Government financing support and guarantee scheme cashflow and burdens Council of Ministers M A8 liquidity measures Propose establishment of specialized courts for positions economic, financial and commercial cases Additional measures A 15
Banking sector – key objectives and measures Activate macroprudential tools to A9 expand banks' lending capacity Provide attractive rates to borrowers Boost banks’ A10 willingness to and lenders through monetary policy lend measures Banking Prohibit the liquidation of collateral Reinforce A11 sector sector posted by bank customers flexibility Build lending capacity Additional measures A 16
CBK has proactively introduced swift and firm macro-prudential and monetary measures KD 1.7 Bn 1.5% CBK Discount Rate at historic low additional regulatory capital released to banks by relaxing capital buffers 16 March 2020 2 April 2020 3 x KD 8-9 Bn lower capital requirements for SME lending capacity made available to banks loans through reducing liquidity requirements 2 April 2020 2 April 2020 17
Government – key objectives Maximize support impact Minimize Maximize support impact costs Minimize costs Government 18
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