Kuwait: 2023 Article IV Consultation-Press Release; and Staff Report

IMF Staff Country Reports, September 18, 2023

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Canonical URL: Kuwait: 2023 Article IV Consultation-Press Release; and Staff Report

Benefiting from high oil prices, Kuwait’s economic recovery continues and inflation is contained.
A structural reform package is needed to boost labor productivity and non-oil private sector-led growth.
Strong non-oil private sector-led growth is needed to absorb new labor market entrants; this requires a comprehensive set of reforms that tackle deep-rooted structural challenges.
To incentivize Kuwaitis to seek careers in the private sector, labor market reforms to promote a market aligned wage structure are needed.

Non-oil gross domestic product (GDP) growth rose to an estimated 3.4 percent in 2021, benefiting from a recovery in domestic and external demand.
Non-oil GDP growth strengthened to 4.0 percent in 2022.
Pickup in oil production, together with stronger non-oil activity, resulted in a rebound in overall real GDP growth to 8.2 percent in 2022.
Oil GDP growth is expected to decline in 2023 due to oil production cuts.
Non-oil GDP growth is expected to stay robust in 2023, driven by domestic demand, and is foreseen to remain steady over the medium term.

The recovery has been supported by high oil prices and a pickup in oil production, but medium-term resilience depends on diversification of growth away from oil.
Persistent structural challenges in the labor market and public-private wage differentials hinder private sector absorption of new labor market entrants.
Fiscal and policy settings should consider both the implications of volatile oil revenues and the need to finance reforms that foster private sector-led growth.

Implement a comprehensive structural reform package to:
- Boost labor productivity.
- Promote non-oil private sector-led growth.
- Address deep-rooted structural challenges across labor market and business environment policies.
Undertake labor market reforms to:
- Promote a market aligned wage structure to incentivize Kuwaitis to seek careers in the private sector.
- Facilitate absorption of new labor market entrants through private sector job creation.

Source: Kuwait: 2023 Article IV Consultation-Press Release; and Staff Report (IMF Staff Country Reports 2023, No. 331).