Kuwait’s economy is characterized by its substantial wealth derived from vast oil reserves, making it one of the richest countries in the world. The nation’s wealth ranks 32 of 144 countries in the World Economics Global Wealth rankings and 12 in the Asia-Pacific region.
Kuwait has developed a robust petroleum-based economy, with oil accounting for nearly 50 percent of its GDP and approximately 90 percent of total exports. This heavy reliance on hydrocarbons has shaped Kuwait’s economic landscape, influencing everything from public finances to employment patterns. Despite its wealth, Kuwait faces significant challenges, including fluctuations in global oil prices and the need for economic diversification to reduce dependence on oil revenues.
In recent years, Kuwait has made strides toward diversifying its economy, investing in sectors such as finance, logistics, and tourism. The government aims to enhance its economic resilience and create sustainable growth opportunities for its citizens. As part of its Vision 2035 initiative, Kuwait is also focusing on attracting foreign investment and fostering a business-friendly environment. With a GDP projected to reach approximately $167.76 billion by the end of 2024, the outlook for Kuwait’s economy remains cautiously optimistic, contingent on successful diversification efforts and global economic conditions.
As Kuwait navigates these complexities, understanding its economic indicators, such as GDP growth rates and per capita income, becomes crucial for assessing its future trajectory. This article explores the current trends and future projections of Kuwait’s economy, highlighting the key factors that will shape its growth in the coming years.
Non-oil sector resilience
In 2023, the economy of Kuwait experienced a downturn primarily due to additional oil production cuts by OPEC+, resulting in a projected GDP decrease of 0.7 percent. Meanwhile, the non-oil sector expanded by 3 percent, fueled by robust consumption from both private and government sources. Consumer card spending increased by 8.7 percent, although there was a slowdown in real estate and household credit growth. Inflation remained elevated at 3.7 percent. Looking ahead to 2024, Kuwait’s economy is anticipated to remain subdued, although rising oil prices are expected to ease some fiscal pressures. The growth of non-oil GDP surged to 2.8 percent in Q3 2023; however, it seems to have weakened over the year.
The oil sector’s GDP contracted by 9 percent year-on-year in Q3 2023 due to OPEC+ production cuts, leading to an overall GDP decline of 3.7 percent year-on-year during the same period. The fiscal balance indicated a deficit of 1.1 billion Kuwaiti dinars in the first ten months of FY23/24, primarily driven by current expenditures.
Kuwait’s economic outlook for 2024 is mixed. While higher oil prices are expected to provide some relief from fiscal pressures, there are considerable challenges ahead, particularly regarding economic diversification and the need for structural reforms. The stable outlook for credit ratings reflects robust financial buffers; however, ongoing political and economic reforms are essential for sustained long-term growth and stability. Without these reforms, fiscal imbalances may widen, potentially undermining the nation’s economic standing, despite its strong position as a net external creditor.
Economic indicators
Despite anticipated challenges, Kuwait’s real GDP is forecasted to grow by an average of 2.4 percent from 2025 to 2027, following a contraction of 2.3 percent in 2024. The credit ratings for Kuwait continue to be strong, with S&P Global Ratings affirming the country’s ‘A+/A-1’ ratings and a stable outlook. Inflation decreased to 3.4 percent year-on-year in February 2024 and is trending downward. It is noteworthy that inflation rates in the GCC have remained below the global average, despite recent increases in food prices. The average inflation rate is expected to be 2.3 percent from 2024 to 2027, according to S&P Global Ratings.
Fiscal and external positions
Kuwait is projected to continue facing fiscal deficits from 2024 to 2027, as predicted by the IMF, despite having substantial fiscal net assets. These fiscal imbalances could significantly increase if fiscal reforms are not implemented or if oil prices decline. Nevertheless, Kuwait’s status as a net external creditor remains one of the strongest among rated sovereigns. The banking sector exhibits resilience, with strong financial soundness indicators. Additionally, the country’s public and external balance sheets are robust, with considerable government financial assets mitigating the risks associated with the economic concentration in the oil sector and oil price fluctuations.
Sector performance and activity
In Q1 2024, oil prices rose sharply, with Kuwait Export Crude (KEC) increasing by 8.5 percent quarter-on-quarter to reach $86.3 per barrel by the end of March. This increase was driven by OPEC+ supply cuts and stronger-than-expected global oil demand. During the same quarter, Kuwait’s crude production met its OPEC quota of 2.41 million barrels per day. In the non-oil sector, data from the Central Statistical Bureau (CSB) indicates that non-oil GDP grew by 2.8 percent year-on-year in Q3 2023, supported by growth in financial services (+2.7 percent y/y), public administration (+1.0 percent), and transportation & storage (+28 percent).
Market trends
Real estate sales declined in Q1 2024, amounting to KD697 million (-9.5 percent q/q; -2.3 percent y/y). This decrease was primarily observed in the commercial property sector, while the residential and investment sectors experienced slight increases. Seasonal factors, such as the month of Ramadan, may have contributed to the reduced transaction volumes. Project awards in Q1 2024 plummeted to KD98 million (-78 percent q/q; -80 percent y/y), marking the lowest level in two decades. Nonetheless, significant projects like the Al-Zour IWPP phases 2 and 3 are anticipated to advance later in the year. In the post-pandemic context, consumer spending has been a crucial driver of non-oil activity, although growth has considerably slowed.
Central bank data reveals that total card spending increased by 5.4 percent year-on-year in Q4 2023, down from 8.7 percent in Q3 2023 (according to CSB data). Limited growth is forecasted for 2024 amid challenging macroeconomic conditions, although sustained high oil prices could enhance consumer confidence.
Outlook and challenges
The economic outlook for Kuwait remains stable, supported by robust public and external balance sheets, with significant government financial assets mitigating the risks associated with economic reliance on the oil sector and fluctuations in oil prices. Nonetheless, the country confronts several challenges, including sluggish global growth, elevated interest rates, and a slow pace of reforms. Structural and fiscal reforms have lagged behind those of regional peers, and Kuwait’s heavy dependence on hydrocarbon resources leaves it vulnerable to oil market volatility. Observers anticipate positive changes in some of these areas, driven by proposed reforms from the executive branch in alignment with Kuwait Vision 2035. The benefits of these reforms are expected to become apparent in the coming years.
Digital transformation
Digital transformation stands as a cornerstone of Kuwait Vision 2035. The nation is prioritizing the adoption of smart and digital technologies to innovate services, stimulate economic growth, and enhance quality of life. The ICT market in Kuwait is projected to reach $10 billion by the end of 2024, with the digital information strategy fostering increased investment in this sector while improving operational efficiency across key industries. The objectives for ICT also include transitioning Kuwait into a digital society and economy, enhancing government performance through digital means, and establishing a robust cybersecurity infrastructure to defend against attacks and safeguard digital resources.
Renewable energy
Renewable energy is another critical component of Kuwait Vision 2035, with ambitions to double renewable energy production from 15 percent to 30 percent by 2030, and further to 50 percent by 2050. These targets are part of a strategy announced by the Ministry of Electricity, Water, and Renewable Energy in March 2024. Kuwait is actively pursuing various green initiatives, such as the Shagaya Renewable Energy Park and the Al-Dibdibah photovoltaic solar project, among others. At present, the country relies heavily on fossil fuels for energy generation and water desalination, with energy demand expected to triple by 2030.
Enhancing fiscal revenue
In accordance with Kuwait Vision 2035, authorities are also working to enhance fiscal revenue collection and improve expenditure efficiency. However, a debt law is still required to enable Kuwait to access international capital markets in the event of a budget deficit.
The recurring institutional bottlenecks and delays between the executive and legislative branches in recent years have resulted in multiple government reshuffles and parliamentary dissolutions, which have impeded investments, projects, and fiscal reforms. The new institutional framework established after the Amir’s suspension of Parliament in May 2024 is anticipated to foster more effective governance across all sectors, particularly in implementing essential structural reforms. Overall, the predominant challenge remains the excessive reliance on oil, which constitutes nearly the sole source of income.
Despite these challenges, Kuwait presents numerous opportunities for Swiss companies. Ironically, the delays in reforms and development projects have created significant untapped potential, particularly now with the new institutional framework signaling a forthcoming “New Era” for Kuwait.
Priority sectors and opportunities for Swiss companies
Kuwait’s economy is significantly reliant on oil, which constitutes nearly 95 percent of exports and 90 percent of government revenues. As the fifth-largest crude oil producer in OPEC and the tenth largest globally, Kuwait boasts more than 102 billion barrels in proven oil reserves, accounting for approximately 6 percent of the world’s total reserves. Ongoing discoveries of oil and gas each year ensure that its oil reserves will remain sustainable for at least the next century. The historical accumulation of oil profits has been managed by the Kuwait Investment Authority (KIA), which oversees the assets of Kuwait’s Sovereign Wealth Fund, including the Future Generation Fund (FGF) and the General Reserve Fund (GRF). Founded in 1953, this is the oldest sovereign wealth fund in the world and ranks as the third-largest globally, with assets currently estimated at $1 trillion.
In alignment with Kuwait Vision 2035, the country aims to advance its renewable energy sector. Specifically, the Shaqaya Phase III project will feature a solar photovoltaic (PV) plant, a concentrated solar power (CSP) plant, and a wind power plant, collectively expected to generate no less than 2,000 megawatts of renewable energy. Nonetheless, the oil and petrochemical sectors will continue to serve as the backbone of Kuwait’s wealth for the foreseeable future.
It is widely recognized that the heavy reliance on oil necessitates structural reforms, which have been politically unpopular and thus delayed by many elected representatives. The absence of these reforms complicates conducting business in the country, especially when compared to the impressive advancements seen in other regional nations. However, Kuwait still offers a multitude of opportunities for Swiss enterprises.
Favorable factors
Among the favorable factors are the highly supportive political and economic environment for Switzerland, the strong purchasing power of the Kuwaiti dinar, and the deep-rooted people-to-people connections dating back to the 1930s, with many Kuwaitis visiting Switzerland for decades and owning properties there. More specifically, the potential opportunities for Swiss businesses include:
Export of Swiss luxury goods
Kuwaiti society has a strong preference for luxury items and high-quality brands, such as watches. The substantial purchasing power of the Kuwaiti dinar makes high-end products accessible to a broad audience
FinTech
As part of its diversification efforts, the financial services sector and digitalization have emerged as top priorities.
Agriculture
Kuwait currently imports about 95 percent of its food and is actively working to enhance its agricultural sector. Food security is a critical political priority, presenting numerous opportunities, particularly sustainable and innovative solutions to minimize water and energy consumption.
Health
The demand in this extensive sector is significant, with the country aiming for the highest standards. The construction of new specialized hospitals is generating opportunities, and the government is working on expanding three major hospitals to increase bed capacity nationwide. Kuwait’s pharmaceutical sector is also witnessing a rise in partnerships with multinational drug manufacturers.
Sustainable/renewable energy
Enhancing the ecological footprint of the oil and gas sector and developing alternative energy sources remain top political priorities. Kuwait continues to depend heavily on oil exports, and industrial projects focusing on the hydrocarbon sector will remain central to government infrastructure investments. Sustainable and green energy solutions are critical in this context.
Water
Improving the ecological impact of the desalination industry, which provides nearly all water for the local population, is crucial.
Infrastructures
Due to regional pressures, the GCC railway project has potential for implementation in Kuwait, despite previous delays. The establishment of “Nuwaiseeb,” a new free trade zone on its border with Saudi Arabia, is considered a vital project likely to attract foreign investment, especially since the railway will be constructed nearby. The 2,177 km-long Gulf Railway system is expected to connect all six GCC countries in Eastern Arabia.
Platform for the Iraqi market
Kuwait’s geographical position is advantageous; sharing a border with Iraq positions it as a gateway to the extensive Iraqi market. Kuwait has maintained open diplomatic channels and supported Iraq’s stability, offering substantial commercial potential.
Free-trade zone projects
Initiatives such as “Nuwaiseeb” on the Saudi border, the “Northern Gulf Gateway project” (Silk City) near Iraq, as well as the Abdali, Al Na’Ayem, and Al Wafra Economic Zones.
Kuwaiti tourists in Switzerland
Switzerland is traditionally a favored destination for Kuwaiti tourists. It is estimated that Kuwaiti tourists spent over $10 billion abroad during the first nine months of 2022. Studies from UNWTO indicate that Kuwaiti tourists tend to spend significantly more at their destinations compared to the average tourist. This trend represents a vital opportunity for various sectors related to tourism in Switzerland, including hotels, restaurants, leisure activities, shopping, and sports. Additionally, winter and summer camps for young people should not be overlooked.
Key international treaties
Kuwait, as a member of the Gulf Cooperation Council (GCC), has entered into several International Treaties with Investment Provisions (TIPS). These include agreements with various countries and regions aimed at enhancing trade and investment opportunities. Notable treaties include:
- GCC-Peru FTA
- GCC-U.S. Trade and Investment Framework Agreement
- GCC-EFTA FTA
- GCC-Singapore FTA
- GCC-India Framework Agreement
- GCC-Lebanon FTA
- EC-GCC Cooperation Agreement
- GCC Economic Agreement
- OIC Investment Agreement
- Arab Investment Agreement
- Arab League Investment Agreement
In addition to these regional agreements, Kuwait has signed at least 93 Bilateral Investment Treaties (BITs) with various countries, including Austria, Belarus, Belgium, China, France, Germany, India, Italy, Japan, the Netherlands, Russia, and Switzerland, among others. A significant agreement with the U.S. was established in 2004 through the Trade and Investment Framework Agreement.
Foreign trade overview
Developments and general outlook
Kuwait’s economy is heavily reliant on oil, with proven reserves exceeding 102 million barrels, ensuring production sustainability for the next century. The country is adopting new extraction techniques to enhance oil production, contributing to long-term sustainability.
Trade in goods
- Exports: In 2023, Kuwait’s exports were estimated at KWD25.797 billion (approximately $84.854 billion), marking a 15 percent decline. Oil constituted about 90 percent of total exports, with major partners including the UAE, Saudi Arabia, India, and China.
- Imports: Due to limited agricultural and manufacturing sectors, Kuwait relies on imports, which were estimated at KWD11.515 billion (around $37.07 billion) in 2023, reflecting a 4.64 percent increase from the previous year. The primary sources of imports are Asia (notably China), Europe, and the Americas.
Read more: Central Bank of Kuwait allocates $792 million bonds, securitization
Bilateral trade with Switzerland
Kuwait’s trade balance with Switzerland is favorable to the latter, as Kuwait primarily re-exports Swiss goods, particularly watches and jewelry. In 2023, Swiss exports to Kuwait reached approximately $762 million, a 22 percent increase from 2022, while imports from Kuwait amounted to about $22.6 million, a 50.2 percent rise. The Swiss market is particularly attractive for pharmaceuticals, watches, and luxury goods.
Direct investments
Developments and general outlook
Kuwait aims to significantly increase Foreign Direct Investment (FDI) by 2035, facilitated by the Kuwait Direct Investment Promotion Authority (KDIPA). This body oversees investment applications and promotes Kuwait internationally. Recent data indicates a rise in FDI, with expectations of modest annual averages of about $600 million from 2022 to 2026.
Bilateral investment
- Swiss investment in Kuwait: Swiss investments in Kuwait are limited, primarily involving non-manufacturing branches and local agents. Notable companies like Roche Diagnostics and Sika have established operations in Kuwait.
- Kuwait investment in Switzerland: The Kuwaiti Investment Authority (KIA) has substantial investments in Switzerland, estimated to exceed $15 billion, focusing on various sectors including real estate and financial services.
Economic and tourism promotion
Switzerland Global Enterprise (S-GE) promotes Swiss exports and investments, facilitating connections between Swiss companies and the Kuwaiti market. The Swiss Tourism sector actively engages with GCC travelers, who significantly contribute to tourism spending.
FDI growth overview
Kuwait Foreign Direct Investment (FDI) increased by $372.4 million in September 2022, compared with an increase of $7.5 million in the previous quarter (CEIC Data, 2023). The Kuwait Direct Invest- ment Promotion Authority intelligence unit pointed out that incoming flows have tended to decline since 2016. However, it expects these inflows to rise to a still modest annual average of about $600 million in 2022-2026, as the gradual privatization of state assets provides opportunities for foreign investors, and projects are being launched. Public-private partnerships go beyond the utilities sector and infrastructure projects as part of the New Kuwait Vision 2035 development plan (Kuwait Direct Investment Promotion Authority, 2022).
Overall, while Kuwait faces significant economic challenges, particularly in the short term, the forecasts for GDP growth and stable credit ratings provide a foundation for optimism. The government’s efforts to manage inflation and diversify the economy will be crucial in shaping the future economic landscape.
FAQs about Kuwait’s GDP
What is Kuwait’s current GDP value?
The GDP in Kuwait was worth $161.77 billion in 2023, according to official data from the World Bank. The GDP value of Kuwait represents 0.15 percent of the world economy, according to the World Bank.
What are the primary contributors to Kuwait’s GDP?
Hydrocarbons account for over 85 percent of fiscal revenue and 50 percent of GDP, a key issue in the New Kuwait 2035 Development Plan.
What is the role of oil in Kuwait’s economy?
Kuwait’s economy is predominantly driven by its oil and natural gas sector, which constitutes approximately 60 percent of the country’s gross domestic product (GDP). This heavy reliance on hydrocarbons makes Kuwait’s economic model particularly vulnerable to fluctuations in global oil prices. As a result, any significant changes in oil prices can have a substantial impact on the country’s overall economic stability and growth prospects.
How is Kuwait diversifying its economy beyond oil?
In recent years, Kuwait has made strides in diversifying its oil sector, expanding its range of downstream activities both domestically and internationally. Significant infrastructure projects have been completed, which have facilitated these diversification efforts and broadened the scope of downstream energy operations. However, despite these advancements,
What is Kuwait’s GDP per capita ranking globally?
Kuwait ranks among the top countries globally in terms of GDP per capita. As of 2022, Kuwait’s GDP per capita was approximately $58,056, placing it 23rd in the world when measured by purchasing power parity (PPP). This high ranking reflects Kuwait’s wealth, primarily driven by its substantial oil reserves and production capabilities.
