Kuwait’s gross domestic product (GDP) fell 4.4 percent annually in the last quarter of 2023, easing slightly from Q3’s decline of 5.8 percent. The latest preliminary estimates from the National Bank of Kuwait‘s (NBK) economic insight report reveal that the country’s oil sector remained under pressure by OPEC’s oil production cuts, while the non-oil sector recorded a steeper decline than in Q3 of 2023.
Oil sector remains constrained
The NBK report reveals that Kuwait’s oil GDP declined 6.4 percent year-on-year in Q4 of 2023, marking a slight improvement from Q3. Kuwait maintained crude oil production at 2.55 million barrels per day in line with its OPEC+ production cut obligations.
In 2023, the country’s oil GDP contracted by 4.3 percent, a turnaround from the robust expansion Kuwait witnessed in 2022, when a tighter oil market prompted OPEC to raise production.
However, the oil sector’s positive performance in 2022 largely came against global trends. Hence, for seven of the last 10 years, Kuwait’s oil GDP growth was negative, fluctuating in line with OPEC supply policy. Kuwait’s crude oil production in 2023 at 2.59 million barrels per day is about 10 percent lower than it was in 2014 at 2.87 million barrels per day.
Looking ahead, Kuwait’s oil GDP growth will likely begin rising starting Q4 2024 after OPEC+ announced in June that it will start easing production cuts in October.
NBK expects Kuwait’s oil GDP to grow by 0.9 percent quarter-on-quarter in Q4 of 2024. Moreover, it expects it to rise 4 percent annually in 2025 if production eases back to normal levels. However, OPEC has left open the possibility that it could pause and even reverse these supply gains if market conditions dictate.
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Non-oil sector contracts for 5th consecutive quarter
Kuwait’s non-oil GDP remained in contraction at -2.3 percent year-on-year in Q4 of 2023, extending the decline for the fifth consecutive quarter.
In 2023, non-oil activity declined by 2.9 percent, the second consecutive annual decline following 2022’s fall of 0.1 percent. Despite the decline, the transportation and storage sector grew 20 percent, while the hotels and restaurants sector rose by 17.4 percent. Meanwhile, household employment grew by 13.1 percent.
That said, the performance of the larger non-oil sectors like manufacturing, which declined 17 percent annually, impacted Kuwait’s non-oil GDP. Trade declined 2.8 percent while other services and real estate declined 2 percent.
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