{
  "title": "IMF Executive Board Concludes 2021 Article IV Consultation with Kuwait",
  "publication": "IMF News, March 28, 2022",
  "sourceUrl": "https://www.imf.org/en/news/articles/2022/03/28/pr2292-imf-executive-board-concludes-2021-article-iv-consultation-with-kuwait",
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  "summary": "Non-oil GDP growth is estimated at 3.4 percent in 2021 and is projected to rise slightly to 3.5 percent in 2022.",
  "publishDate": "2022-03-28",
  "sections": [
    {
      "heading": "Economic outlook and activity",
      "content": "- Non-oil GDP growth is estimated at 3.4 percent in 2021 and is projected to rise slightly to 3.5 percent in 2022.\n- Oil production is projected to rebound as OPEC+ quotas are relaxed.\n- Overall, GDP is projected to grow around 2.7 percent over the medium term.\n- Inflation is estimated at 3.4 percent in 2021 and is projected to rise to 4.4 percent in 2022 before declining to 2.4 percent over the medium term.\n- Recovery drivers: higher oil prices, relaxation of mobility restrictions, high vaccination rate achieved in 2021.\n- Table highlights (selected):\n  - Total oil and gas exports (billions of U.S. dollars): 59.1 (2021); 78.9 (2022); 74.6 (2023); 71.4 (2024); 70.5 (2025); 71.5 (2026); 71.9 (2027).\n  - Average crude oil export price (U.S. dollars/barrel): 82.4 (2021); 75.3 (2022); 70.9 (2023); 68.1 (2024); 66.3 (2025); 65.5 (2026).\n  - Crude oil production (millions of barrels/day): 2.43 (2021); 2.72 (2022); 2.77 (2023); 2.83 (2024); 2.88 (2025); 2.94 (2026); 3.00 (2027).\n  - Real GDP growth: 1.3 (2021); 8.2 (2022); 2.6 (2023); 2.7 (2024).\n  - Real oil GDP (including refineries): -0.3 (2021); 12.0 (2022); 2.0 (2023)."
    },
    {
      "heading": "Fiscal developments and public finances",
      "content": "- FY 2020/21 fiscal deficit increased to an estimated 16.6 percent of GDP.\n- Drivers of the wider deficit: fiscal stimulus for COVID-19, a 13.9 percent of GDP decline in oil revenues, and a slump in economic activity.\n- Financing constraints: absence of a public debt law permitting borrowing and no legal authority to draw from the Future Generations Fund (FGF) led to drawdown of liquid assets of the General Reserve Fund (GRF).\n- FY 2021/22 headline fiscal balance is expected to improve to a surplus of 3.7 percent of GDP, driven by rebound in oil revenues, announced spending cuts (August 2021), and significantly higher nominal GDP reflecting higher oil prices on the GDP deflator.\n- Supported by higher oil exports, the 2021 current account surplus is projected to increase to 16.1 percent of GDP.\n- Table highlights (percent of GDP at market prices):\n  - Revenue: 53.8 (2021); 56.9 (2022); 55.1 (2023); 53.7 (2024); 52.5 (2025); 50.4 (2026); 48.6 (2027).\n  - Oil revenue: 36.0 (2021); 40.0 (2022); 37.8 (2023); 34.7 (2024); 32.6 (2025); 30.9 (2026).\n  - Expenditures: 44.5 (2021); 46.6 (2022); 48.1 (2023); 48.7 (2024); 49.3 (2025); 49.8 (2026).\n  - Expense: 38.7 (2021); 40.5 (2022); 41.8 (2023); 42.5 (2024).\n  - Capital: 5.5 (2021); 6.1 (2022); 6.2 (2023).\n  - Balance: -16.6 (2021); 3.7 (2022); 5.6 (2023); 3.8 (2024).\n  - Balance (after transfer to FGF and excl. investment income): -31.1 (2020); -9.9 (2021); -4.4 (2022); -7.6 (2023); -9.5 (2024); -12.2 (2025); -14.4 (2026).\n  - Total gross debt (calendar year): 8.8 (2021); 17.9 (2022); 25.0 (2023); 33.7 (2024); 42.2 (2025).\n  - Estimated KIA assets (billions of U.S. dollars): 597.6 (2020); 544.8 (2021); 472.1 (2022); 497.4 (2023); 517.7 (2024); 530.0 (2025); 534.4 (2026); 535.7 (2027).\n  - Net government financial assets: 585.9 (2020); 535.9 (2021); 458.9 (2022); 483.8 (2023); 499.8 (2024); 505.0 (2025); 500.7 (2026); 493.5 (2027)."
    },
    {
      "heading": "Financial sector resilience",
      "content": "- Kuwait’s financial sector has weathered the crisis well: banks are well-capitalized and highly liquid.\n- As of 2021Q3, bank capital adequacy ratio stood at 18.6 percent, well above the required minimum level.\n- Nonperforming loans net of specific provisions remain low; loan-loss provisioning is high.\n- Directors commended the Central Bank of Kuwait for prudent regulation and supervision.\n- Recommendations to safeguard resilience:\n  - Continued forward-looking assessment of bank asset quality.\n  - Maintain strong capital and liquidity buffers.\n  - Relax interest ceilings on commercial loans.\n  - Enhance credit information infrastructure to improve access to finance, including for SMEs.\n  - Strengthen the AML/CFT framework."
    },
    {
      "heading": "Risks and uncertainties",
      "content": "- Substantial uncertainties surround the outlook, with the balance of risks tilted to the downside.\n- Downside risk factors:\n  - Rapid spread of the Omicron variant and renewed global pandemic control challenges.\n  - Delays in fiscal and structural reforms leading to procyclical fiscal policies, reduced investor confidence, hindered diversification and competitiveness, and increased social pressures.\n  - Volatility in oil prices significantly impacting the outlook and macroeconomic balances.\n- Upside risks:\n  - Stronger rebound in global activity boosting oil revenues.\n  - Resolution to political gridlock and strong fiscal consolidation improving investor sentiment."
    },
    {
      "heading": "Executive Board assessment and policy recommendations",
      "content": "- Directors agreed with staff appraisal and commended authorities for swift policy actions and strong vaccination efforts.\n- Key policy directions recommended by Directors:\n  - Comprehensive fiscal consolidation to reinforce fiscal sustainability and support intergenerational equity.\n  - Consider introducing a VAT and excise duties, expand corporate tax to domestic firms, and implement a property tax to boost revenues.\n  - Curtail the wage bill and consolidate subsidies and social benefits.\n  - Pass the new public debt law and establish a robust medium-term fiscal framework with a clear fiscal anchor to limit procyclicality, enhance fiscal credibility, reduce fiscal risks, and improve capacity to manage adverse shocks.\n  - Strengthen fiscal governance and transparency to improve public financial management.\n  - Continue supporting banking system resilience and supervision.\n  - Implement a comprehensive set of well-sequenced structural reforms to diversify away from hydrocarbon dependence and promote private sector-led growth, including reforms to the social safety net, labor market, regulatory framework, and business environment.\n  - Address climate challenges by supporting green infrastructure and strengthening energy efficiency standards.\n  - Forcefully implement the anti-corruption strategy and action plan to strengthen governance and improve the business environment."
    },
    {
      "heading": "Other procedural note",
      "content": "- It is expected that the next Article IV consultation with Kuwait will be held on the standard 12-month cycle.\n\nSource: IMF Press Release No. 22/92, \"IMF Executive Board Concludes 2021 Article IV Consultation with Kuwait\", March 28, 2022.\n\n---\n\n\n References\n\n- Kuwait and the IMF\n- IMF Policy Advice -- A Factsheet\n- Press Releases\n- PRESS CENTER\n- https://www.imf.org/en/home\n\nSource: https://www.imf.org/en/news/articles/2022/03/28/pr2292-imf-executive-board-concludes-2021-article-iv-consultation-with-kuwait"
    }
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    "Published: March 28, 2022",
    "Non-oil GDP growth is estimated at 3.4 percent in 2021 and is projected to rise slightly to 3.5 percent in 2022.",
    "Oil production is projected to rebound as OPEC+ quotas are relaxed.",
    "Overall, GDP is projected to grow around 2.7 percent over the medium term.",
    "Inflation is estimated at 3.4 percent in 2021 and is projected to rise to 4.4 percent in 2022 before declining to 2.4 percent over the medium term.",
    "Recovery drivers: higher oil prices, relaxation of mobility restrictions, high vaccination rate achieved in 2021.",
    "Table highlights (selected):",
    "FY 2020/21 fiscal deficit increased to an estimated 16.6 percent of GDP.",
    "Drivers of the wider deficit: fiscal stimulus for COVID-19, a 13.9 percent of GDP decline in oil revenues, and a slump in economic activity.",
    "Financing constraints: absence of a public debt law permitting borrowing and no legal authority to draw from the Future Generations Fund (FGF) led to drawdown of liquid assets of the General Reserve Fund (GRF).",
    "FY 2021/22 headline fiscal balance is expected to improve to a surplus of 3.7 percent of GDP, driven by rebound in oil revenues, announced spending cuts (August 2021), and significantly higher nominal GDP reflecting higher oil prices on the GDP deflator.",
    "Supported by higher oil exports, the 2021 current account surplus is projected to increase to 16.1 percent of GDP.",
    "Table highlights (percent of GDP at market prices):",
    "Kuwait’s financial sector has weathered the crisis well: banks are well-capitalized and highly liquid.",
    "As of 2021Q3, bank capital adequacy ratio stood at 18.6 percent, well above the required minimum level.",
    "Nonperforming loans net of specific provisions remain low; loan-loss provisioning is high.",
    "Directors commended the Central Bank of Kuwait for prudent regulation and supervision.",
    "Recommendations to safeguard resilience:",
    "Substantial uncertainties surround the outlook, with the balance of risks tilted to the downside.",
    "Downside risk factors:",
    "Upside risks:",
    "Directors agreed with staff appraisal and commended authorities for swift policy actions and strong vaccination efforts.",
    "Key policy directions recommended by Directors:",
    "It is expected that the next Article IV consultation with Kuwait will be held on the standard 12-month cycle.",
    "[Kuwait and the IMF](http://www.imf.org/external/country/KWT/index.htm)",
    "[IMF Policy Advice -- A Factsheet](https://www.imf.org/en/about/factsheets/imf-surveillance)",
    "[Press Releases](https://www.imf.org/en/news/searchnews)",
    "[PRESS CENTER](http://presscenter.imf.org/)",
    "[https://www.imf.org/en/home](https://www.imf.org/en/home)"
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