Kuwait does not expect its economy to be affected by contagion from the European Union’s debt crisis and there is no concern over the risk of a weak dollar, Governor Sheikh Salem Abdul Aziz Al-Sabah said in an interview with Bloomberg.

"Kuwait's central bank governor expects the economy to be shielded from EU debt crisis", Al-Sabah said in the interview, adding he is “very confident” about Kuwaiti banks, which he said had the highest earnings among lenders of the Persian Gulf countries through the third quarter of this year.

“Kuwaiti banks have put together a very good and sufficient level of provisions not only for bad loans but also as precautionary measures,” Sheikh Salem said, adding that he expected the ratio of provisions to decline. 

Kuwait’s macroeconomic indicators are “excellent,” with a budget surplus and a current account surplus exceeding 30 percent of GDP, he said.

The central bank has about 5.7 billion dinars (USD20.2 billion) in foreign currency reserves, excluding gold, as of November 24th. The Governor declined to provide a value for the country’s holdings of gold. Kuwait’s central bank (CBK) expects inflation to slow in 2011 and foresees the economy returning to growth.

“For 2011 we expect between 3 - 4% and for this year I can say almost zero” growth, Al-Sabah said. "Inflation will be 4% by the end of this year and “slightly lower” in 2011, he said.  Comment: Kuwait's full economic forecasts will be provided by Beltone Financial in its intiation of coverage on Kuwait's economy this week