Washington, DC: The Executive Board of the International Monetary Fund (IMF) concluded the Article IV consultation with Kuwait.
The economy remains in recession due to OPEC+ production cuts, but a recovery has begun in the non-oil sector, and inflation is moderating. Real GDP contracted by 3.6 percent in 2023, led by a 4.3 percent contraction of the oil sector given an OPEC+ production cut, and reinforced by a 1.0 percent contraction of the non-oil sector primarily reflecting lower manufacturing activity. More recently, real GDP contracted by 1.5 percent (y-o-y) in 2024Q2, driven by a further 6.8 percent contraction of the oil sector that was partially offset by a 4.2 percent rebound of the non-oil sector. Headline CPI inflation declined to 3.6 percent in 2023, reflecting lower core and food inflation. More recently, headline CPI inflation moderated further to 2.6 percent (y-o-y) in September 2024.
Lower oil prices and production have weakened the external and fiscal balances, while financial stability has been maintained. The external position remains strong, with the current account surplus moderating to 31.4 percent of GDP in 2023, and official reserve assets amounting to US$47.6 billion at end-2023, equivalent to 9.2 months of projected imports.
"The fiscal balance of the budgetary central government has weakened," said IMF officials.
The economy is projected to remain in recession under the baseline in 2024, then recover over the medium term with real GDP contracting by a further 2.8 percent due to additional OPEC+ production cuts before expanding by 2.6 percent in 2025 as these cuts are unwound.
"Executive Directors agreed with the thrust of staff appraisal," noted IMF's Executive Board Assessment.
Directors welcomed recovery signs within Kuwait's non-oil sectors alongside moderating inflation rates but stressed ongoing risks tied heavily to global oil market dependencies which necessitate economic diversification for sustainable growth moving forward.