IMF Executive Board Concludes 2024 Article IV Consultation with Kuwait
IMF News, December 9, 2024
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- Published: December 9, 2024
Recent economic developments
- Real GDP contracted by 3.6 percent in 2023.
- Oil sector real GDP contracted by 4.3 percent in 2023, driven by an OPEC+ production cut.
- Non-oil sector real GDP contracted by 1.0 percent in 2023, primarily reflecting lower manufacturing activity.
- Real GDP contracted by 1.5 percent (y-o-y) in 2024Q2.
- Oil sector contracted by 6.8 percent in 2024Q2.
- Non-oil sector rebounded by 4.2 percent in 2024Q2.
- Headline CPI inflation:
- Declined to 3.6 percent in 2023 (reflecting lower core and food inflation).
- Moderated to 2.6 percent (y-o-y) in September 2024.
External position and financial sector
- Current account surplus moderated to 31.4 percent of GDP in 2023.
- Official reserve assets: US$47.6 billion at end-2023, equivalent to 9.2 months of projected imports.
- Fiscal balance of the budgetary central government swung to a deficit of 3.1 percent of GDP in FY2023/24.
- Fiscal balance of the general government—including estimated SWF investment income and SOE profit transfers—was 26.1 percent of GDP in FY2023/24.
- Credit growth slowed in 2023 given higher interest rates.
- Banks maintained strong capital and liquidity buffers; NPLs remained low and well provisioned.
Baseline projections (headline)
- Real GDP: contract by a further 2.8 percent in 2024, then expand by 2.6 percent in 2025.
- Non-oil GDP: expand by 2.0 percent in 2024 despite fiscal consolidation (text); Table shows Non-oil 1/ at 2.1 for 2024 and 2.3 for 2025.
- Headline CPI inflation to moderate to 3.0 percent in 2024.
- Current account surplus to moderate to 27.2 percent of GDP in 2024.
- Fiscal deficit of the budgetary central government to increase to 6.6 percent of GDP in FY2024/25.
Risks to the outlook
- Risks skewed to the downside.
- External risks: commodity price volatility, a global growth slowdown or acceleration, and the intensification of regional conflicts.
- Domestic risks: implementation delays or accelerations of fiscal and structural reforms.
- Policy implication: reforms are needed to diversify the economy away from oil to enhance resilience and promote private investment.
Executive Board assessment and policy recommendations
- Directors welcomed:
- Emergence of recovery in the non-oil sector.
- Moderating inflation.
- Significant financial buffers.
- Directors emphasized:
- Need for sustained diversification efforts given heavy reliance on oil.
- Importance of a comprehensive and well-sequenced package of fiscal and structural reforms.
- Fiscal policy guidance:
- Undertake fiscal consolidation over the medium-term to enhance fiscal sustainability and intergenerational equity.
- Balanced approach underpinned by current expenditure rationalization and non-oil revenue mobilization, while increasing infrastructure investment.
- Extend the CIT to all large domestic companies.
- Adopt the GCC-wide VAT and excise taxes.
- Contain the wage bill and phase out energy and water subsidies, while protecting vulnerable groups.
- Implement a Medium-Term Fiscal Framework to strengthen budget planning and execution.
- Enact the Financing and Liquidity Law to facilitate orderly fiscal financing.
- Monetary and financial sector guidance:
- Exchange rate peg remains an effective nominal anchor.
- Maintain restrictive monetary policy stance as appropriate.
- Strengthen monetary transmission by deepening the interbank and domestic sovereign debt markets.
- Replace the unlimited guarantee on bank deposits with a limited deposit insurance framework to mitigate moral hazard.
- Phase out bank lending rate caps to support efficient risk pricing.
- Structural and governance guidance:
- Prioritize comprehensive, well-sequenced reforms to improve competitiveness and diversify the economy.
- Improve the business environment, enhance transparency, and further open the economy.
- Implement gradual labor market reforms to incentivize private sector-led growth.
- Address measures to improve the AML/CFT framework identified by the 2024 FATF Mutual Evaluation.
- Advance climate change adaptation and mitigation efforts.
- Address shortcomings in data provision, supported by Fund capacity development.
Key quantitative indicators (selected table highlights)
- Output and prices (Percent change)
- Real GDP: 5.9 (2022); -3.6 (2023); -2.8 (2024); 2.6 (2025); 2.2 (2026)
- Oil 1/: 12.1 (2022); -4.3 (2023); -6.9 (2024); 3.0 (2025); 2.0 (2026)
- Non-oil 1/: -0.3 (2022); -1.0 (2023); 2.1 (2024); 2.3 (2025)
- CPI inflation (average): 4.0 (2022); 3.6 (2023); 2.4 (2024)
- Core 2/: 3.3 (2022); 3.1 (2023); 2.5 (2024)
- External sector (Percent of GDP, unless noted otherwise)
- Current account balance: 34.3 (2022); 31.4 (2023); 27.2 (2024); 22.5 (2025); 19.8 (2026)
- Official reserve assets (months of imports): 9.1 (2022); 9.2 (2023); 9.3 (2024); 9.4 (2025); 9.5 (2026)
- Gross external debt: 35.0 (2022); 39.4 (2023); 39.5 (2024); 41.7 (2025); 42.3 (2026)
- Government finance (Percent of GDP)
- Revenue 4/: 69.8 (2022); 78.6 (2023); 75.4 (2024); 74.0 (2025); 73.2 (2026)
- Oil: 65.5 (2022); 73.7 (2023); 70.2 (2024); 68.5 (2025); 67.3 (2026)
- Other 4/: 4.3 (2022); 4.9 (2023); 5.2 (2024); 5.5 (2025)
- Expenditure: 48.7 (2022); 50.7 (2023); 50.2 (2024); 49.7 (2025)
- Net lending (+) / borrowing (-) 4/: 30.4 (2022); 29.9 (2023); 24.7 (2024); 23.8 (2025); 23.4 (2026)
- Budgetary central government: 7.2 (2022); 0.9 (2023); -5.8 (2024); -7.9 (2025); -8.8 (2026)
- Gross government debt 5/: 2.9 (2022); 3.2 (2023); 7.3 (2024); 12.9 (2025); 16.3 (2026)
- Money and credit
- Credit to nonfinancial private sector: 8.6 (2022); 1.8 (2023); 3.9 (2024); 4.7 (2025); 5.1 (2026)
- Broad money: M2: 6.5 (2022); 1.0 (2023); 2.7 (2024); 4.6 (2025)
- Memorandum items
- Nominal GDP (US$ billions): 184.0 (2022); 163.7 (2023); 159.1 (2024); 158.6 (2025); 162.2 (2026)
- Population (millions): 4.8 (2022); 5.0 (2023)
- GDP per capita (US$): 38,380 (2022); 33,321 (2023); 31,753 (2024); 31,029 (2025); 31,104 (2026)
Source: Press Release No. 24/452 — IMF Executive Board Concludes 2024 Article IV Consultation with Kuwait (December 9, 2024).