Non-oil Growth Sustains Kuwait's Economy

Kuwait's economy experienced a significant recovery in 2022, with real GDP growing 8.2% while nominal growth slowed to 0.1% in 2023, according to MEED. However, this decline on paper is the result of the country’s declining production of oil more than any major swing in its economic fate.

The report highlighted that it is natural that reducing the country's oil exports would have a significant impact on the main growth, as it announced in April a reduction of 128 thousand barrels per day, which is equivalent to about 10% of the total reductions of the OPEC group amounting to 1.15 million barrels per day and about 1%. 5 produced by Kuwait. In May and June, Kuwait pumped 2.55 million barrels per day of crude oil, down from 2.65 million barrels per day in April. For 2024, the country’s share is 2.676 million barrels per day, reports Al-Qabas daily.

Although Kuwait's main real GDP growth is affected by fluctuations in oil prices and production, the country continues to benefit from strong domestic demand and strong non-oil growth, with non-oil GDP increasing by 4% in 2022 and by 3.8% in 2023. Meanwhile, the World Bank expects Kuwait’s non-oil economy to grow by 4.4% in 2023.

The report indicated that Kuwait's oil-dependent economy remains vulnerable to fluctuations in oil prices in the future. Despite this, the 2023–2024 budget has been drawn up. Conservatively in terms of oil price assumptions, broadly in line with IMF assumptions of an average of $73.1 in 2023, $68.9 in 2024, and compared to the July 2023 spot price of around $80. The hope would be that the price will remain at a higher level and that the budgeted oil price will prove to be overly precautionary.

Both imports and exports fell in Kuwait's economy in July, which is a worrying sign for global trade and commodity prices.

MEED said: "Uncertainty surrounding such scenarios must accelerate the expected financial and structural reforms.". The hope is that a new parliament and government may mean that a solution to the political deadlock is on the horizon, paving the way for the fiscal and structural reforms the country needs.

The MEED states that enacting at least some of the reforms identified by the International Monetary Fund will be crucial for Kuwait's economic and financial survival in the medium to long term, since each delay makes it harder to deal with issues like public sector wages.

“Nonetheless, Kuwait will have to take a long and careful look at its future finances at some point,” the report concluded.

 

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