IMF Staff Concludes Staff Visit to Kuwait

IMF News, May 9, 2024

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Real economic activity is estimated to have fallen by 2.2 percent in 2023.
The oil sector contracted by 4.3 percent in 2023 due to an OPEC+ production quota cut in May.
The non-oil sector expanded by 0.8 percent in 2023 amid subdued domestic demand growth.
The economy is projected to contract by a further 1.4 percent in 2024.
Oil production is projected to fall by another 4.3 percent in 2024 due to the OPEC+ quota cut in January.
The non-oil sector is expected to expand by 2.0 percent in 2024 as domestic demand growth picks up.
GCC comparison: non-oil sector growth average is 3.6 percent.

CPI inflation registered 3.6 percent in 2023.
CPI inflation is projected to reach 3.2 percent in 2024.
Fiscal balance of the budgetary central government:
- Realized surplus of 11.8 percent of GDP in FY2022/23.
- Swung to a deficit—estimated at 4.3 percent of GDP in FY2023/24—as oil revenues fell and government expenditures rose across all spending categories.
- In the absence of fiscal consolidation measures, this deficit is projected to widen further over the medium-term.
Current account balance:
- Peaked at 34.5 percent of GDP in 2022 on the back of high oil exports.
- Moderated to 32.9 percent of GDP in 2023, as a lower trade surplus more than offset higher international investment income.

Growth in credit to the nonfinancial private sector fell to 1.8 percent in 2023.
Bank lending rates rose in response to gradual policy rate hikes by the Central Bank of Kuwait (CBK) broadly in line with global monetary policy tightening.
Prudent financial regulation and supervision by the CBK has helped maintain financial stability.
Banks have maintained strong capital and liquidity buffers.
Bank profitability has rebounded from pandemic lows.
Non-performing loans remain low and well provisioned for.
Recommendation: It is crucial to preserve the CBK’s independence in implementing its mandate.

Progress with fiscal and structural reforms has been held back by political gridlock between the government and Parliament.
Continued delays in fiscal and structural reforms could:
- Give rise to procyclical fiscal policy.
- Undermine investor confidence.
- Hinder progress towards diversifying the economy and enhancing its competitiveness.
Recommendation: The new Public Debt Law should be passed expeditiously to ensure orderly fiscal financing while promoting local debt market development.

Elevated external risks surround the economic outlook, mainly associated with:
- Volatility in oil prices and production arising from global factors, posing two-sided risks to growth and inflation, as well as to the fiscal and external balances.
- Spillovers from regional conflicts.
While conflicts in the Middle East and shipping disruptions in the Red Sea have had limited impacts on the economy so far, any major shock to the global oil market would have significant effects.

Mission dates: April 30 – May 7, 2024.
Mission leader: Mr. Francisco Parodi.
Press Release No. 24/147.
IMF Communications Department — MEDIA RELATIONS
- PRESS OFFICER: Angham Al Shami
- Phone: +1 202 623-7100
- Email: MEDIA@IMF.org

IMF Staff Concludes Staff Visit to Kuwait — May 9, 2024