Kuwait saw its economy recover in 2022, posting an 8.2 percent increase in its real gross domestic product (GDP) growth. This comes amid a nominal growth slowdown to 0.1 percent in 2023.
According to a MEED report, this lethargic performance is more of a consequence of the country’s reduced oil production than a swing in the economy.
Kuwait, OPEC’s fifth-largest crude oil producer and the world’s 10th-largest, previously announced that it will reduce oil exports by 128,000 barrels per day. The decision to cut oil production is in an effort to stabilize oil prices.
In May and June, the country had a 2.55 mn-barrel-per-day output. This is lower than April’s 2.65 mn barrels daily.
Despite Kuwait’s oil-related fluctuations, the country is seeing strong performance from its non-oil sectors.
In 2022, it recorded a four percent growth in its non-oil GDP. For this year, MEED forecasts that this number will grow by 3.8 percent this year. On the other hand, the World Bank estimates that the non-oil economy will rise by 4.4 percent.
Nonetheless, Kuwait devised its 2023-24 budget conservatively, taking into account average oil prices of $73.1 in 2023 and $68.9 in 2024. These estimates align with the assumptions of the International Monetary Fund (IMF) and consider the July 2023 spot price of around $80.
The hope is for prices to remain at a higher level, potentially surpassing budgeted levels. But with Kuwait’s imports and exports falling, concerns were raised about the state of global trade and commodity prices.
“The uncertainty surrounding such scenarios must accelerate the expected financial and structural reforms. The hope is that a new parliament and government may mean that a solution to the political deadlock is on the horizon, paving the way for the fiscal and structural reforms the country needs,” stated MEED in its report.
Last week, the IMF warned about “substantial” risks to the country’s economy, citing how gridlock between the government and parliament is hindering vital fiscal reforms.
Boost in tourism as Kuwait’s economy recovers
Tourism is seen as one potential alternative revenue stream for Kuwait, which has been reducing dependency on oil. From 1995 until 2020, the country’s tourism revenues averaged $562.19 mn.
A report from the World Travel and Tourism Council also shows that the travel and tourism sector contributed 4.3 percent to the country’s total economy in 2021. Additionally, it produced 121,700 jobs, which is equivalent to 5.7 percent of the total jobs generated in Kuwait during the same year.
For this summer, Abdullah Fadous Al-Rajhi, the directorate-general of Civil Aviation and the Director of Kuwait International Airport (KIA)’s Air Transport Department, revealed that the KIA is expecting a 13 percent rise in passenger traffic. Another 15 percent increase is predicted in aircraft movements.
Summer in 2023 has already witnessed the transit of 5.75 mn passengers, exceeding last year’s 5.07 mn. Flight operations also rose, with 45,000 flights recorded this season, up from 39,000 in the prior period.
For 2023, the full-year passenger estimate is around 15.5 mn. This is a significant increase from the 12.46 mn arrivals and departures recorded in 2022.
For more economic news, click here.