Kuwait enters the near future with economic indicators signaling wider growth opportunities
. . . retains one of the strongest sovereign financial positions in the region. International assessments continue to highlight the country’s substantial foreign reserves, its relatively low public debt, and its significant external investment assets.
Kuwait is approaching the coming period supported by economic indicators that suggest a broader and more sustained growth trajectory than in recent years.
This outlook is strengthened by the modernization of the country’s public finance legislative framework and the steady progress of major government projects that are either under planning or already in implementation, reports Al-Rai daily.
Although Fitch Ratings has maintained a “neutral” outlook for the Middle East banking sector in 2026, its assessment of Kuwait points to several factors that could enable the country to exceed baseline expectations for credit growth, currently estimated at between 7 and 8 percent.
These prospects are not driven by global conditions alone; they are largely influenced by the transformation taking place in Kuwait’s financial landscape following the approval of the Finance and Liquidity Law, as well as renewed momentum in the housing sector and in major development initiatives.
Both areas are closely tied to banks’ ability to expand lending. Forecasts also indicate that real GDP growth could reach about 2.7 percent in 2026, though this will depend on how swiftly accompanying stimulus measures are implemented.
Kuwait retains one of the strongest sovereign financial positions in the region. International assessments continue to highlight the country’s substantial foreign reserves, its relatively low public debt, and its significant external investment assets.
These elements provide Kuwait with a strong buffer against fluctuations in oil markets and global financial volatility, while also enhancing confidence in its banking system and strengthening long-term financial stability.
However, stability alone is not enough to launch a new phase of credit expansion.
What it does provide is the foundation for banks to respond effectively to rising demand for financing, whether from government entities or private-sector players. In this context, the recently enacted Public Debt Law marks an important institutional turning point.
Beyond meeting short-term financing needs, the law establishes a clearer and more structured framework for government borrowing and project financing.
This reduces volatility in capital spending and allows banks to plan their lending strategies with greater predictability. As a result, the law serves as a structural reform that helps redefine how banks assess long-term risk and allocate credit, particularly in the context of infrastructure and development projects.
Looking ahead, Fitch notes that credit growth could exceed current projections if two key drivers materialize.
The first is the Mortgage Law, which is expected to alter the dynamics of the housing market significantly. Heavy reliance on state-provided housing finance has long limited the role of the banking sector.
Once the law is finalized and implemented, demand for long-term mortgage financing is expected to increase, enabling part of the housing finance burden to shift from the state to the banking sector under regulated conditions.
This shift is likely to improve the quality of banks’ loan portfolios, as residential mortgages are typically secured by tangible assets and are considered less volatile than corporate loans.
It would also stimulate activity in sectors linked to housing construction, engineering, and contracting, with positive spillovers on commercial lending.
The full effect of the law, however, depends on the regulatory details that accompany its implementation, including guarantees, subsidy levels, interest-rate caps, and the balance of responsibilities between government institutions and banks.
The second driver is the portfolio of major development projects under Kuwait Vision 2035. These projects, which span infrastructure, energy, logistics and digital transformation, often rely on complex financing structures such as long-term project finance and syndicated loans.
Large projects directly increase demand for bank credit, while indirectly generating financing needs across supply chains, including contractors, suppliers and service providers. If global interest rates continue to gradually decline, the financing environment will become even more attractive, further supporting credit expansion.
Despite these opportunities, the Kuwaiti banking sector continues to face the challenge of credit-risk concentration, particularly in real estate and construction. This issue has become more pronounced as banks have expanded their loan books over the years.
Sustainable growth requires not only an increase in lending volume but also a broader distribution of risks across a more diverse set of borrowers and sectors.
Mortgage lending can play an important role in this shift by expanding the base of individual borrowers and reducing reliance on a small number of large corporate clients.
Major development projects can also open the door to new sectors such as logistics, renewable energy and technology, helping reduce concentration and support healthier, more balanced growth.
Overall, Kuwait’s economic outlook remains decidedly positive. The country benefits from a strong sovereign wealth position, a highly liquid and profitable banking system, and recent legislative reforms that strengthen fiscal planning and financial governance.
The expected acceleration of government projects, together with the anticipated implementation of the Mortgage Law, has the potential to reshape the lending environment and provide new momentum for credit growth.
The foundations for a more active phase of economic expansion are already in place.
What remains is for the relevant reforms and projects to be executed efficiently and in a timely manner. If this occurs, Kuwait could move beyond current projections and enter one of its most dynamic periods of growth in recent years.
