Kuwait Economic Forecast

The economy has likely gone from one of the Middle East’s strongest last year to one of the region’s weakest this year, due to a sharp pullback in oil production and a lack of progress on growth-enhancing structural reforms. In January–July, oil output was down around 2% in annual terms, contrasting double-digit growth in 2022. Moreover, the non-energy sector is being hampered by higher interest rates and the fading of the post-pandemic boost to activity: The expansion in credit to households and businesses has eased so far in 2023, while real estate sales fell year on year in H1 by roughly 27%. On the fiscal front, parliament belatedly approved the FY 2023 (April 2023–March 2024) budget in August. The budget forecasts record-high expenditure, which should support domestic demand in the coming months but will likely lead to the fiscal balance slipping back into deficit.

Inflation dipped to 3.7% in July from 3.8% in June. Rising tourist arrivals and the Central Bank of Kuwait’s milder tightening cycle relative to its Gulf peers have likely contributed to keeping inflation fairly elevated in recent months. That said, inflation is still forecast to average below its 2022 level this year due to lower international commodity prices.