The economic context of Kuwait

Economic Indicators

Kuwait is a wealthy country with a well-developed welfare state, providing its nationals with a very high per capita income. However, the country's long-term economic outlook remains heavily dependent on hydrocarbon revenues. While the Kuwait Investment Authority’s (KIA) significant foreign assets help maintain macroeconomic stability, they are not enough to fully offset the impact of global oil market volatility and the anticipated decline in long-term oil demand. In 2023, Kuwait's real GDP contracted by 3.6%, driven by a 4.3% decline in the oil sector due to OPEC+ production cuts, compounded by a 1.0% contraction in the non-oil sector, primarily due to reduced manufacturing activity. In 2024, real GDP contracted by an additional 2.8% as OPEC+ production cuts continued, but the economy is projected to grow by 2.6% in 2025 as these cuts are gradually reversed, with growth aligning closely with potential thereafter. The non-oil sector is beginning to recover, and in 2024, it expanded by an estimated 2.0%, supported by rising real credit growth despite fiscal consolidation. Over time, non-oil GDP growth should gradually converge to its potential of 2.5% (IMF).

Concerning public finances, the fiscal deficit of the budgetary central government is expected to rise to 6.6% of GDP in FY2024/25, as lower oil revenue outweighs expenditure rationalization. The deficit is then projected to increase by around 1% of GDP per year over the medium term, as the decline in oil revenue continues to outpace expenditure adjustments under current policies. The low government debt is anticipated to gradually reach 25% of GDP over the medium term, assuming the enactment of the Financing and Liquidity Law in FY2024/25, driven by the goal of developing the sovereign debt market (IMF). The country’s external balance sheets remain among the strongest globally. According to Fitch Ratings, Kuwait's sovereign net foreign assets increased to 538% of GDP in 2024 and are expected to average 553% in 2025-2026. Headline CPI inflation moderated to 3.0% in 2024, down from 3.6% the previous year, as excess demand pressure eased and imported food prices fell. Inflation is expected to gradually converge to 2.0% as the non-oil output gap closes (IMF).

Employment in Kuwait rose by 7.5% in 2023, reaching 2.1 million, driven by a 9.0% increase in expatriate workers to 1.7 million. However, employment growth slowed to 2.5% (y-o-y) in 2024Q2, down from 4.7% (y-o-y) in 2023Q4, reflecting a deceleration in expatriate employment growth (IMF). According to the latest data from the Public Authority for Civil Information, Kuwait’s private sector workforce decreased by 1,475 employees, from 72,231 in December 2023 to 70,756 in December 2024. Meanwhile, government employment increased by 3,125, reaching 400,815 employees. Unemployment among Kuwaiti citizens stood at 33,307 by the end of 2024. It's important to note that comparing unemployment rates in Kuwait with those in developed countries requires consideration of Kuwait's unique context, where unemployment often correlates with awaiting nominations from the Civil Service Commission, especially for Kuwaiti graduates seeking public sector positions.

Main Sectors of Industry

Agriculture is very limited in the country due to the lack of water and fertile land. The primary sector is constituted mainly by fishing activities and contributed only 0.5% to the GDP, employing 1.9% of the workforce (World Bank, latest data available). Kuwait's agricultural regions are situated in Wafra to the south, Al-Abdali to the north, and Al-Sulaibiya in the centre. The primary crops cultivated in Kuwait include vegetables, potatoes, and grains, constituting the majority of the country's agricultural output. Despite geographic and political challenges limiting Kuwait's agricultural sector to a minor role in the economy, both private companies and the public sector are investing in new technologies to enhance production.

The industrial sector contributes 45.4% of GDP and employs 24.9% of the total workforce (World Bank). With 104 billion barrels of oil in reserve (i.e. 6% of the world's total and representing 100 years of production), the country's industry is based on oil exploitation. This sector accounts for nearly half of Kuwait’s GDP, around 95% of exports, and approximately 91% of government revenue (OPEC, 2023). By 2030, Kuwait is planning to invest more than USD 87 billion in the oil sector, especially in creating new oil refineries. The manufacturing sector is still underdeveloped, accounting for only 8% of GDP. Kuwait's oil product output and exports reached record highs in 2024, driven by the full ramp-up of the 615,000 b/d Al-Zour refinery. According to figures from the Joint Organisations Data Initiative (JODI), Kuwait's refinery production—excluding LPG—averaged 1.21 mn b/d last year, marking a 22% increase from 2023. Fuel oil production saw a significant rise of 51% year-on-year. The record output also led to all-time high refined product exports, which grew by 28% to an average of 968,000 b/d. Fuel oil exports surged by 44%, while gasoil exports increased by 40%.

The services sector represents more than half of the GDP and employs 73% of the active population (World Bank). The most important sub-sectors are real estate and financial services. 10 banks are active in the country, with adequate capital, good funding and liquidity, and strong risk-management practices (Fitch Ratings). According to GlobalData's projections, Kuwait's telecom service revenue is anticipated to increase from USD 2.1 billion in 2022 to 2.5 billion by 2027. This growth is expected to be mainly driven by revenue generated from the mobile data and fixed broadband segments. Tourism in Kuwait is expanding, with official data from the Central Bank of Kuwait showing that visitors spent approximately KD 505.7 million in the first nine months of 2024. This represents a 28.2% annual increase, equating to an additional KD 111.3 million compared to the KD 394.4 million spent during the same period in 2023.

 

Breakdown of Economic Activity By Sector	Agriculture	Industry	Services
Employment By Sector (in % of Total Employment)	1.9	24.9	73.1
Value Added (in % of GDP)	0.5	60.7	51.3
Value Added (Annual % Change)	5.0	-5.4	1.2

Source: World Bank, Latest Available Data. Because of rounding, the sum of the percentages may be smaller/greater than 100%.

 

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Indicator of Economic Freedom

Definition

Definition:

The Economic freedom index measure ten components of economic freedom, grouped into four broad categories or pillars of economic freedom: Rule of Law (property rights, freedom from corruption); Limited Government (fiscal freedom, government spending); Regulatory Efficiency (business freedom, labour freedom, monetary freedom); and Open Markets (trade freedom, investment freedom, financial freedom). Each of the freedoms within these four broad categories is individually scored on a scale of 0 to 100. A country’s overall economic freedom score is a simple average of its scores on the 10 individual freedoms.}}

Score:

64,1/100

World Rank:

74

Regional Rank:

8

Economic freedom in the world (interactive map)
Source: Index of Economic Freedom, Heritage Foundation

 

Business environment ranking

Definition

Definition:

The business rankings model measures the quality or attractiveness of the business environment in the 82 countries covered by The Economist Intelligence Unit’s Country Forecast reports. It examines ten separate criteria or categories, covering the political environment, the macroeconomic environment, market opportunities, policy towards free enterprise and competition, policy towards foreign investment, foreign trade and exchange controls, taxes, financing, the labour market and infrastructure.

Score:

6.38/10

World Rank:

47/82

Source: The Economist Intelligence Unit - Business Environment Rankings 2021-2025

 

Sources of General Economic Information

Ministries

Ministry of Finance (in Arabic)

Statistical Office

Kuwait Central Statistics Bureau

Central Bank

Central Bank of Kuwait

Stock Exchange

Boursa Kuwait

Economic Portals

Economic Arab portal