Abstract
A dynamic multisector CGE model is constructed to analyze the medium-term path of the Kuwaiti economy. The model is in the applied general equilibrium tradition emphasizing the role of structural factors in the macro-economy and is based on a static within-period and dynamic inter-period components. The first component can be described as a twelve-sector, demand-driven model with a supply-determined oil sector and imports that are treated as a part of composite commodity. The second component expands the short-run adjustment to a medium-term run by capturing the dynamic changes in population structure, capital stock and government assets held abroad. The reference path generated by the model showed a modest growth of GDP components, a slight improvement in Kuwaiti population ratio, and a dramatic drop in per Kuwaiti general fund. Increasing investment expenditure in non-oil sectors improved the per capita Kuwaiti household income but deteriorated the per capita general fund and population balance. The increase in investment income from abroad produced similar effects on per capita income and population balance but improved the performance of the per capita general fund. The increase in participation of Kuwaitis is mainly felt in the population balance. Its effect on GDP growth and per capita indicators is very limited.
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