A recent report by Fitch Ratings indicated that Kuwait’s non-oil economy is on track for a sustainable medium-term recovery, highlighting the country’s resilience in absorbing regional shocks and maintaining positive growth despite ongoing geopolitical tensions.
According to the report, Kuwait’s non-oil sector experienced a slowdown in 2022 and 2023, recording growth rates of 1.5 percent and 0.8 percent respectively. However, economic momentum rebounded strongly in 2024, with growth exceeding 3 percent.
Although Fitch forecasts that non-oil growth may slow to around 1 percent in 2026, the agency noted that the Kuwaiti economy continues to demonstrate relative resilience and cohesion, successfully avoiding the sharp contraction expected to affect some Gulf economies during the same period.
Fitch expects Kuwait’s non-oil sector to regain stronger momentum in the coming years, with growth projected to return to approximately 3 percent in 2027 before stabilizing near 2.5 percent by 2028, reflecting balanced and stable long-term prospects.
On the banking sector, the agency said Gulf banking systems have shown strong resilience against the repercussions of regional conflict and are expected to maintain stability during the second half of 2026, unless military tensions escalate significantly or lead to prolonged disruptions in the Strait of Hormuz or damage to critical energy infrastructure.
Fitch highlighted that liquidity and financing remain key strengths for Gulf banks, which rely heavily on customer deposits and benefit from stable government and government-related deposits that account for between 20 and 30 percent of total sector deposits.
The report also noted that Gulf banks maintain strong reserve buffers and that regulatory easing measures introduced by authorities are precautionary steps aimed at reinforcing confidence and limiting temporary market disruptions rather than responding to severe banking stress.
Fitch added that the continued ceasefire and de-escalation efforts between the United States and Iran remain important factors supporting the stability of Gulf banking systems and reducing the likelihood of severe credit risks in the region.
The agency cautioned, however, that slower non-oil economic growth could lead to weaker loan growth, moderate deterioration in asset quality, and pressure on bank profitability in the near term, although Gulf banking systems still possess strong financial buffers to withstand potential risks.
