Kuwait flag Kuwait: Economic and Political Overview

The economic context of Kuwait

Economic Indicators

Kuwait is a very rich country and has developed a welfare state for its nationals, who enjoy a very high per capita income. After growing 8.9% in 2022 amid high hydrocarbon prices, Kuwait experienced negative economic growth in 2023 (-0.6%) primarily attributed to reduced oil prices and OPEC+ production cuts, estimated at 4%. Oil, which constitutes nearly 50% of GDP, significantly impacted the economy. GDP growth is anticipated to rebound to 3.6% in 2024, driven by increased exports of crude oil and refined fuel, facilitated by the expanded refining capacity provided by the Al-Zour refinery (the total refining capacity is projected to rise to 1.4 million barrels per day in 2024, compared to an estimated 1.05 million in 2023, according to Coface). For 2025, the IMF forecasts growth at 4.1%.

Concerning public finances, the Ministry of Finance's draft budget anticipates a 13.5% reduction in Kuwait's budget deficit for the 2024-25 fiscal year. The expected deficit is set to reach KWD 5.89 billion (USD 19.15 billion), with total revenues estimated at KWD 18.6 billion, marking a 4.1% decrease from the previous fiscal year. Oil revenues are forecasted to amount to KWD 16.23 billion, down 5.4% from 2023-2024, based on an assumed oil price of USD 70 per barrel. Expenditure is projected to decrease by 6.6% to KWD 24.55 billion, with salaries and subsidies accounting for 79.4% of total expenses, while capital expenditure is expected to represent 9.3% of the total budget. Kuwait's fiscal and external balance sheets retain their position among the strongest globally. Fitch Ratings predicts that Kuwait's sovereign net foreign asset position will average 505% of GDP in 2023-24. The majority of these assets are held in the Future Generation Fund (FGF), overseen by the Kuwait Investment Authority (KIA), which also manages the assets of the General Reserve Fund (GRF), the government's treasury account. Gross government debt to GDP is currently low, standing at 8.7% of estimated GDP for the fiscal year ending March 2023. However, should a debt law be enacted in FY24 alongside limited fiscal reform and lower oil prices, Fitch Ratings predicts that government debt will more than double to 24% of GDP in FY25 and continue to rise in subsequent years due to projected fiscal deficits. According to the IMF, inflation was estimated at 3.4% in 2023 and should gradually decline to 3.1% this year and 2.8% in 2025, supporting private consumption.

The latest data from the Public Authority for Civil Information show that, as of June 2023, Kuwait faces unemployment challenges, with 31,831 individuals, both Kuwaiti and non-Kuwaiti, jobless. This represents an unemployment rate of approximately 1% among the total labor force of 2.96 million. Among Kuwaiti workers, there were 28,190 unemployed individuals, an increase of 2,100 from the end of 2022, resulting in a citizen unemployment rate of 5.75% among the total Kuwaiti labor force of 490 thousand. 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 Indicators 20222023 (E)2024 (E)2025 (E)2026 (E)
GDP (billions USD) 182.85161.78160.40163.38166.48
GDP (Constant Prices, Annual % Change) 6.1-2.2-1.43.82.5
GDP per Capita (USD) 37,62532,63831,72431,68031,648
General Government Gross Debt (in % of GDP) 2.93.27.112.217.1
Inflation Rate (%) 4.03.63.22.72.4
Current Account (billions USD) 63.1353.0448.3044.3339.87
Current Account (in % of GDP) 34.532.830.127.124.0

Source: IMF – World Economic Outlook Database, October 2021

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 2% 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 center. The primary crops cultivated in Kuwait include vegetables, potatoes, and grains, constituting the majority of the country's agricultural output.

The industrial sector contributes 45.4% of GDP and employs 25% 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 7% of GDP.

The services sector represented 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. Kuwait has 11 local commercial banks, which include five Islamic banks. Currently, 12 foreign banks have branches in Kuwait. 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.

 
Breakdown of Economic Activity By Sector Agriculture Industry Services
Employment By Sector (in % of Total Employment) 2.0 25.3 72.7
Value Added (in % of GDP) 0.5 45.4 69.1
Value Added (Annual % Change) -3.9 -12.2 -3.2

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:

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:

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

 

Country Risk

See the country risk analysis provided by Coface.
 

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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
 

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Latest Update: May 2024

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