Kuwait’s draft budget for 2025-26 projects a deficit of KWD6.3 billion ($20.4 billion), as stated by the finance minister. Total revenue is anticipated to reach KD18.2 billion ($58.9 billion), while expenditures are set at KWD24.5 billion ($79.3 billion), according to the state-run Kuna news agency, citing Finance Minister Noura Al-Fassam. Non-oil revenues are expected to increase by 9 percent to KWD2.9 billion ($9.4 billion), she noted. However, oil revenues are forecasted to decrease by 5.7 percent from 2024-25 to KWD15.3 billion ($49.55 billion), based on an oil price of $68 a barrel. The breakeven price needed to cover the deficit is estimated at $90.5 per barrel, as per the ministry’s report.
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Economic outlook and projections
In December 2024, the International Monetary Fund (IMF) indicated that the Kuwaiti economy is likely to remain in recession through 2024, but recovery is projected over the medium term. Economic activity is expected to rebound in 2025, with a forecasted growth of 2.6 percent, as oil production curbs begin to ease. Project activity last year reached its highest value since 2017 at KD2.7 billion, according to the National Bank of Kuwait (NBK).
Credit rating and fiscal challenges
In September 2024, Fitch Ratings confirmed Kuwait’s long-term foreign currency issuer default rating at AA- with a stable outlook. The rating agency remarked that Kuwait’s rating is driven by its robust fiscal and external balance sheets. Nevertheless, these advantages are counterbalanced by weaker governance compared to its peers, significant dependence on oil, a generous welfare system, and a large public sector, which could be challenging to sustain in the long run, as noted by Fitch. Kuwait’s rating could see an upgrade if its institutions and political system can address long-term fiscal challenges through the implementation of a clear deficit reduction plan that remains resilient to lower oil prices.
