A recent report issued by MEED said that Kuwait witnessed a significant recovery in its economy in 2022, with real GDP growth rising to 8.2%, at a time when nominal growth slowed to 0.1% in 2023. However, this decline on paper is the result of the country’s declining production of oil more than any major swing in its economic fate.
The report pointed out that it is natural that reducing the country’s oil exports would have a significant impact on the main growth, as it announced in April a reduction of 128 thousand barrels per day, which is equivalent to about 10% of the total reductions of the OPEC group amounting to 1.15 million barrels per day and about 1%. 5 produced by Kuwait. In May and June, Kuwait pumped 2.55 million barrels per day of crude oil, down from 2.65 million barrels per day in April. For 2024, the country’s share is 2.676 million barrels per day, reports Al-Qabas daily.
The report showed that behind fluctuations in Kuwait’s main real GDP growth are due to oil production and prices, the country continues to enjoy domestic demand and strong non-oil growth, with non-oil GDP growing by 4% in 2022 and projected to grow by 3.8% in 2023. Meanwhile, the World Bank expects Kuwait’s non-oil economy to grow by 4.4% in 2023.
Looking to the future, the report indicated that fluctuations in oil prices remain the main threat to the oil-dependent Kuwaiti economy. Despite this, the 2023–2024 budget has been drawn up. Conservatively in terms of oil price assumptions, broadly in line with IMF assumptions of an average of $73.1 in 2023, $68.9 in 2024, and compared to the July 2023 spot price of around $80. The hope would be that the price will remain at a higher level and that the budgeted oil price will prove to be overly precautionary.
However, Kuwait’s economy showed signs of slipping again in July, with both imports and exports falling – a worrying sign for global trade and commodity prices.
MEED added: “The uncertainty surrounding such scenarios must accelerate the expected financial and structural reforms. The hope is that a new parliament and government may mean that a solution to the political deadlock is on the horizon, paving the way for the fiscal and structural reforms the country needs.
MEED stated that enacting at least some of the reforms identified by the International Monetary Fund will be crucial to Kuwait’s financial and economic continuity in the medium to long term, as each delay makes it more difficult to address items such as the public sector wage bill.
“However, at some point, Kuwait will still need to take a long and careful look at its future finances,” the report concluded.
