IMF Staff Concludes Staff Visit to Kuwait

IMF News, December 22, 2022

Source details

Press Release No. 22/454
Mission led by Mr. Yasser Abdih
Discussions held in Kuwait City during December 11-18, 2022
Statement issued at mission conclusion on December 22, 2022
Views are those of IMF staff and do not necessarily represent the views of the IMF’s Executive Board; this mission will not result in a Board discussion

Overall real GDP growth:
- Rebounded from -8.9 percent in 2020 to 1.3 percent in 2021
- Projected to increase to above 8 percent in 2022, supported by increased oil production, high oil prices, and sustained improvement in domestic demand
- In 2023, growth is likely to moderate, reflecting slowing external demand and oil production cuts under the OPEC+ agreement
Fiscal and external balances:
- Supported by high oil output and prices, Kuwait’s economic recovery is carrying on and fiscal and external balances are improving
- With higher oil prices and output, the overall fiscal and current account surpluses increased significantly from last year
Inflation and monetary conditions:
- Inflation has been contained so far, supported by monetary policy tightening and energy and food subsidies
- Limited passthrough from higher global food and energy prices due to administered prices and subsidies

Banking system:
- Banks remain well-capitalized and liquid
- Strong bank buffers and prudent oversight and proactive monitoring of financial risks by Central Bank of Kuwait have helped the system weather recent shocks
- Financial soundness indicators are healthy, and private sector credit growth remains strong

Fiscal measures:
- Authorities continue to implement measures to improve fiscal revenue collection and spending efficiency
Structural and strategic initiatives:
- Ongoing efforts to promote digital transformation, advance financial technology, and invest in green energy

External environment risks:
- Potential repercussions from the global economic slowdown and externally-induced volatility in oil prices and output
- Possible impacts of monetary policy tightening in major advanced economies and further slowdown in global economic activity
Geopolitical and commodity risks:
- Volatility in oil prices and production, stemming from external factors including the geopolitical environment, could weigh on activity and macroeconomic balances
- Direct adverse spillovers from the Russia’s war in Ukraine have been contained so far given the limited trade and financial linkages with both countries
Domestic reform risks:
- Delays in key fiscal and structural reforms could amplify the risk of procyclical fiscal policies, and hinder progress toward more economic diversification and higher competitiveness

The IMF mission team expressed appreciation to the authorities for their hospitality and the candid and productive discussions and looks forward to continuing dialogue and close collaboration

IMF staff statement, December 22, 2022.