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Kuwait’s non-oil economy all set to bounce back in 2025

The cancellation of 2025 oil production cuts, falling interest rates, increased development project awards, and the government’s push to accelerate its economic plan boost hopes for recovery.

Lower interest rates and the progress of Kuwait Vision 2035 are expected to drive investment, with non-oil GDP projected to grow 2.6% in 2025.

Kuwait’s crude oil production will gradually rise from April this year, adding 7,000 barrels per day each month until the full 135,000-barrel reduction is restored.

 

Preliminary estimates from the Central Bureau of Statistics indicate a 2.5% year-on-year decline in non-oil gross domestic product (GDP) for the third quarter of 2024, following strong growth in the first half of the year. The downturn is attributed to contractions in several sectors, including industrialization, public administration, and defense.

Meanwhile, oil GDP dropped by 5.3% due to the ongoing implementation of OPEC’s production quota reduction plan, which was extended into the second half of 2024, according to Al Qabas newspaper.

Based on changes in the outputs of the oil and non-oil sectors, GDP falls by 3.9% in the third quarter of 2024. However, the short-term outlook appears more optimistic,due to the cancellation of oil production quota reductions planned for 2025, the downward trend in interest rates, the recent increase in the frequency of development project awards, and the government’s expectations of accelerating the implementation of its economic development plan, which raises hopes for economic recovery.

According to a report by the National Bank of Kuwait, the decline in non-oil GDP in the third quarter of 2024 highlights significant weakness compared to the previous quarter.

The annual contraction rate was revised to 2.5% from the initially reported 4.2%. The year-on-year downturn in non-oil activities was widespread, with most sub-sectors experiencing declines. The manufacturing sector was hit hardest, recording a 10.8% year-on-year drop.

Kuwait’s non-oil economy set to recover in Q4

The report predicted that Kuwait’s non-oil economy would recover in the fourth quarter of 2025, driven by an influx of tourists linked to the country’s hosting of the Arab Gulf Football Cup.

Additionally, data from the Purchasing Managers’ Index (PMI) survey for the fourth quarter showed the highest growth rate for the production component in the index’s history, with a reading of 57.4 points.

For 2025, growth prospects remain broadly positive, with forecasts pointing to a gradual recovery. This is supported by expectations of improved consumer spending, albeit at a modest pace, a marked increase in credit growth, and a surge in development project awards, which reached their highest levels in about eight years during the fourth quarter of 2024.

The potential for lower interest rates could also boost investment, while the government continues to advance its Kuwait Vision 2035 economic agenda. Non-oil GDP is projected to grow by approximately 2.6% in 2025, up from 2.0% in 2024.

Improvement in oil production

The GDP of the oil sector contracted for the sixth consecutive quarter in the third quarter of 2024, though the decline was less severe than in the previous quarter, which saw a year-on-year decrease of 6.8%. However, the sector recorded a marginal quarterly improvement of 1.0%.

Since the start of 2024, Kuwait has maintained stable monthly crude oil production at 2.41 million barrels per day, adhering to OPEC’s quotas and voluntary production cut commitments, which included an additional reduction of 135,000 barrels per day early in the year.

Kuwait’s crude oil production is expected to gradually increase from April 2025 at a rate of 7,000 barrels per day per month until the full reduction of 135,000 barrels per day is restored.

Production is projected to reach 2.548 million barrels per day by September 2026. Based on this schedule—assuming no extension of production cuts—the oil sector’s GDP is expected to return to growth starting in the second quarter of 2025.

Kuwait’s economy weathered 2022-2023 recession with strong sector gains

The report indicated that revised data shows the economy weathered the recession of 2022-2023, supported by significant improvements in several sectors, including public administration, defense, electricity, gas, water, and construction.

Non-oil GDP growth for 2022 and 2023 was revised to 1.6% (up from the previous estimate of -0.1%) and 1% (up from the earlier forecast of a contraction of -2.9%), respectively.

In contrast, the growth rate for 2021 was revised down from 5.4% to 4.2%. Preliminary data for the third quarter may be subject to future revisions.



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