Kuwait Economic Outlook
The economy should have expanded at one of the fastest paces in the region last year. Oil output rose by around 12% in annual terms on looser OPEC+ production quotas. In addition, the non-oil economy benefited from strong consumer and business credit growth, generous fiscal support and higher employment among Kuwaiti nationals. Turning to 2023, the economy is likely losing steam as the post-pandemic boost to activity fades, and momentum in the oil sector eases; oil production rose by just 5% year on year in January. On the fiscal front, the FY 2023 (April 2023 to March 2024) draft budget was recently published. The budget is expansionary, with a projected double-digit increase in spending despite forecasts for lower revenue, and will support the economic outlook once passed. However, approval could be delayed by the current political impasse following the Cabinet’s resignation in January.
Inflation rose to 3.3% in January from 3.2% in December. Relatively low price pressures persisted thanks to the FX peg and subsidies. Meanwhile, the Central Bank hiked the discount rate to 4.00% in late January to support the currency peg. Inflation should recede later in 2023 due to tighter monetary policy at home and abroad.