Economic Outline

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.

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