The International Monetary Fund (IMF) has predicted that Kuwait’s economy will remain in a recession due to the ongoing OPEC+ oil production cuts.
“The economy is projected to remain in recession under the baseline in 2024, then to recover over the medium term,” the IMF said a week after OPEC+ announced it was extending voluntary cuts of 2.2 million barrels per day until April 2025.
Kuwait’s GDP contracted by 3.6% last year, thanks in large part to a 4.3% contraction in its oil sector due to the production cuts. The economy shrank again by 1.5% on an annual basis in the second quarter after the oil sector declined 6.8%.
Earlier in the year, a Reuters poll of economists predicted that the Gulf Cooperation Council (GCC) economies will grow at a considerably slower clip in the current year due to the ongoing oil production cuts. However, Kuwait is expected to fare the worst, with the same poll saying the country will have the highest inflation in the region while its economy will remain in a recession. That’s a sharp contrast from just two years ago when high oil prices powered 85% growth in Kuwait’s oil revenue, translating into 8.5% GDP growth and a 70% decrease in the fiscal deficit–the first drop since Covid hit. In the same year, NBK-Kuwait, the country’s largest bank, saw its net profits increase 40.5% Y/Y to reach $1.7 billion.
Kuwait is a wealthy petroleum-based economy and the fifth richest country in the world by gross national income per capita. It’s OPEC’s 5th largest producer, and is home to 101 billion barrels in proven oil reserves, the 7th largest in the world. Indeed, Kuwait’s oil reserves are considerably bigger than the U.S.’ ~70 billion barrels. Unfortunately, the country’s economy is too reliant on oil. According to Kuwait’s Ministry of Finance data, oil accounts for 91% of both exports and revenue, making the tiny Gulf nation extremely rich but also very vulnerable to oil price swings. In contrast, last year, Saudi Arabia’s non-oil revenue hit 50% of GDP for the first time in history thanks to the country’s 2030 Economic Diversification Plan.
Source: By Alex Kimani from Oilprice.com