Kuwait city: The Central Bank of Kuwait (CBK) has announced the conclusion of the International Monetary Fund's (IMF) regular staff visit to Kuwait, during which the IMF experts projected a 2.6 percent growth in Kuwait's real GDP by 2025.
According to Kuwait News Agency, the IMF's concluding statement also forecasted that Kuwait's GDP would reach 3.8 percent in 2026, driven by the unwinding of OPEC+ production cuts and robust non-oil growth. It is expected to stabilize just above 2.0 percent over the medium term. The non-oil GDP is anticipated to expand by 2.7 percent in 2025 and 3.0 percent in 2026, fueled by a surge in investment, before growing at its potential rate of 2.7 percent over the medium term.
The CBK highlighted an incipient recovery underway, with real GDP expanding by 1.7 percent year-on-year in the second quarter of 2025, driven by robust non-oil growth of 3.1 percent year-on-year. It was also noted that headline consumer price index (CPI) inflation has moderated to 2.4 percent year-on-year in August.
The IMF statement indicated that headline CPI inflation will moderate to 2.3 percent in 2025 and 2.1 percent in 2026, before stabilizing just below 2.0 percent over the medium term. The current account surplus declined to 29.1 percent of GDP in 2024 due to lower oil exports, although higher non-oil exports and investment income helped mitigate the impact. Official reserve assets were recorded at 8.3 months of projected imports at the end of 2024.
The IMF mission noted that Kuwait's external position was weaker than what medium-term fundamentals and desirable policies would imply, reflecting an excessive reliance on oil exports and inadequate public saving of oil revenue. However, external buffers remain ample.
Improvements were noted in Kuwait's public budget, despite a decline in oil revenues. The fiscal deficit of the budgetary central government narrowed to 2.2 percent of GDP in FY2024/25, owing to rationalization of the public sector wage bill, moderation of energy subsidies, and mobilization of non-oil revenue through increased government service fees. At the general government level, the fiscal surplus widened to 27.7 percent of GDP in FY2024/25 due to higher sovereign wealth fund investment income.
Kuwait resumed sovereign debt issuance after nearly a decade, issuing domestic and external bonds. However, the fiscal deficit is expected to increase in the coming years, driven by higher spending and lower oil revenue, potentially widening to 11.5 percent of GDP by FY2031/32.
The mission emphasized that the stance of monetary policy remains appropriate, with the CBK having cut its policy rate by 75 basis points since September 2024. Credit growth to the non-financial private sector supports non-oil growth, while nonperforming loans remain low and well-provisioned.
The mission also highlighted Kuwait's exposure to global risks due to its oil dependence and emphasized the need for structural reforms to diversify the economy under Vision 2035. Fiscal reforms should enhance long-term fiscal sustainability and incentivize private sector employment. Structural reforms should aim to unify the labor market and improve the business environment, including the gradual elimination of energy subsidies and the introduction of taxes such as the 15 percent CIT, GCC-wide excise tax, and 5 percent VAT.