Kuwait delivers on reforms, leads Gulf Markets in 2025: EFG Hermes

EFG Hermes said Kuwait has fulfilled the promises it made after being described last year as the “dark horse” of the region, emerging as the best-performing stock market among Gulf countries for the second consecutive year.

In a recent report, the group said the Kuwaiti market continued to benefit from positive sentiment driven by economic reforms, most notably the enactment of the Finance and Liquidity Law and the Mortgage Law.

These measures helped accelerate credit growth amid improving business confidence, while project awards maintained strong momentum, with Kuwait being the only country in the region to record an increase in project award values during 2025, reports Al-Rai daily.

The report noted that leading stocks provided additional momentum to the market, supported by exceptional one-off events.

Jazeera Airways ranked as the second-best-performing stock in 2025, backed by a voluntary takeover offer from its largest shareholder, Boodai Real Estate. Warba Bank followed as the third-best performer, driven by its planned acquisition of Gulf Bank, while shares of Boursa Kuwait and Mezzan Holding also posted strong gains on the back of improved profitability.

EFG Hermes said Kuwait’s banking sector recorded solid credit growth, reaching about 8 percent year-on-year through September 2025, led mainly by corporate lending.

Retail loan growth remained moderate at around 4 percent, reflecting high interest rates, expectations surrounding the implementation of the mortgage law, and cautious consumer spending.

Card spending declined by around 5 percent in the first nine months of the year, indicating a slowdown in private consumption.

The report confirmed that there are no liquidity pressures in the banking system, despite loan growth outpacing deposit growth.

Regulatory liquidity indicators remain within comfortable levels, supported by banks’ diversified funding sources and active participation in debt markets.

Looking ahead, EFG Hermes expects corporate lending to receive a further boost in 2026 from capital spending on major infrastructure projects, in addition to mortgage lending once regulatory frameworks are completed.

Loan growth is forecast to slightly exceed 10 percent next year, while net interest income is expected to grow at low-to-mid single-digit rates.

Despite maintaining a positive long-term view of Kuwait’s economic prospects, Hermes said the market may be due for a pause following two years of exceptional performance.

Accordingly, the group has tactically shifted its outlook to “neutral,” pending greater clarity on key growth drivers, particularly the pace of real estate reform implementation.