Various developments point to healthy economic performance in the near term for Kuwait. Chief among them are the upgrade of the country’s stock exchange, which has been approved for addition to the MSCI Emerging Markets Index; the continuing rollout of a large infrastructure programme; and the transition into higher value-added downstream production within the country’s leading hydrocarbons industry. Meanwhile, prudent macroeconomic policies – including building one of the world’s largest sovereign wealth funds (SWFs) – have helped Kuwait weather the recent downturn in oil and gas prices.

Positive Proceedings

The country returned to growth in 2018, and its current account has moved back into surplus territory and credit growth is resuming on the back of ample liquidity. Public debt remains well covered, inflation close to zero and the banking sector robust. The state is also carrying on its programme of economic diversification, supporting a major shift from a public sector, resource-dominated economy to a private sector, knowledge-based one. The move has particular consequences for employment, too, as efforts are being made to encourage Kuwaiti nationals to establish their own businesses and create job opportunities for fellow citizens.

Foreign investment has been welcomed with these changes, as Kuwait capitalises on its strong regional and international connections to mobilise global interest. Positive sentiment for the country’s overall economic health is reflected in a Reuters poll of Middle Eastern fund managers in June 2019. The poll concluded that Kuwait is the nation that most would consider for regional investment over the following three months, with six of the 11 managers saying they plan to increase investment in Kuwait.

Running the Show

The government is headed by Prime Minister Sheikh Jaber Al Mubarak Al Hamad Al Sabah, who was appointed by Emir Sheikh Sabah Al Ahmad Al Jaber Al Sabah in December 2011. The prime minister oversees the Council of Ministers, or Cabinet, which includes the first deputy prime minister along with the ministers of commerce and industry, finance, oil, public works, economic affairs, housing affairs, and social affairs and labour.

Key ministers from the Cabinet also sit on the Supreme Council for Planning and Development (SCPD), which includes the governor of the Central Bank of Kuwait (CBK). The SCPD has a general secretariat, currently headed by secretary-general Khaled Mahdi, while its meetings are chaired by Sheikh Nasser Sabah Al Ahmad Al Sabah, the first deputy prime minister and minister of defence. The minister of finance also chairs the board of the Kuwait Investment Authority (KIA), the country’s SWF. The KIA is the world’s oldest SWF, tracing its origins to 1953; it is also one of the richest. Although there are no officially published figures, the SWF Institute estimates the KIA’s assets under management at $592bn. The KIA manages two funds: the General Reserve Fund (GRF) and the Future Generations Fund (FGF). The former is used as a treasury and stabilisation account, while the latter receives 10% of all state revenue and 10% of the GRF’s income each year. The FGF is managed by the KIA as an intergenerational savings scheme that is separate from federal budgets.

Other key government bodies include the Kuwait Direct Investment Promotion Agency (KDIPA) and the Kuwait Authority for Partnership Projects (KAPP), which is managing the country’s public-private partnership strategy. In addition, the Supreme Council for Privatisation (SCP) is in charge of rolling out the country’s privatisation programme, with this being spearheaded by the sell off of a share of the country’s stock exchange, Boursa Kuwait, in early 2019. Another important body is the National Fund for Small and Medium Enterprise Development, which is an independent public corporation able to finance up to 80% of the capital costs of small business projects.

Recent times have also seen an enlarged role for the Kuwait National Competitiveness Committee and the Permanent Committee for Streamlining Business Environment and Enhancing Competitiveness in the State of Kuwait, headed by the KDIPA. In cooperation with a range of other state and non-state actors, including the World Bank, these committees have been working to implement the national agenda for streamlining business environment in Kuwait, known as the Tahseen Programme.

Kuwait was ranked 97th out of 190 economies in the World Bank’s “Doing Business 2019” report, one place lower compared to the previous year’s index. However, the move was largely due to improvements in the regulatory environment of other countries, as Kuwait showed notable improvements in the categories of starting a business, getting electricity and protecting minority investors. There are already signs of progress moving into 2020; in a preliminary announcement for its “Doing Business 2020” report, the World Bank placed Kuwait among the top-20 economies that improved the most on the ease of doing business index score.

Economic Activity

Kuwait’s massive oil and gas industry is state owned, with the Supreme Petroleum Council the primary government body overseeing the sector. This is headed by the prime minister and includes six cabinet ministers, six representatives of the private sector, the head of the CBK and the head of the national oil company, Kuwait Petroleum Corporation (KPC). The KPC is an umbrella organisation for a range of upstream, midstream and downstream companies, which are also all state owned (see Energy Chapter). This high-level, all-encompassing state presence underscores the fundamental role the energy sector plays in the economy. The most recent statistics from the CBK show that GDP in 2017 was KD47.4bn ($156.1bn) at current prices before bank and insurance service charges were deducted and taxes net of subsidies on products were added, bringing GDP at market value to KD42.7bn ($140.6bn). Of the former figure, oil and gas accounted for KD20.6bn ($67.8bn), or 43.5%. In 2018 Kuwait exported KD20.4bn ($67.2bn) worth of goods and services, of which 91% was oil.

Besides energy being the largest sector, state revenue is highly dependent on oil and gas because there are no personal taxes in Kuwait to help pad government coffers. Indeed, in May 2018 the government postponed plans to implement value-added tax until 2021, delaying a move that was originally planned as part of a GCC-wide introduction of the measure.

Other sectors of the economy tracked by the CBK include community, social and personal services, responsible for KD9.1bn ($30bn; 19.2%) of GDP in 2018; financial intermediaries and insurance, accounting for KD3.7bn ($12.2bn; 7.8%); real estate at KD3.66bn ($12bn; 7.7%); manufacturing, accounting for KD3.4bn ($11.2bn; 7.2%); transport, storage and communications, bringing in KD3bn ($9.9bn; 6.3%); wholesale and retail at KD1.7bn ($5.6bn; 3.6%); and electricity, gas and water, responsible for KD1.1bn ($3.6bn; 2.3%). Construction, hotels and restaurants, and agriculture and fishing accounted for less than KD1bn ($3.3bn) each. The government, in part through the KIA, has also played an important role in other industries, either as a shareholder or full owner. This has led the public sector to be a key employer in the country, with more than 90% of the national labour force in state jobs.

New Kuwait

A thorough study of the current makeup of economic activity and where the government would like to steer it resulted in the long-term development plan New Kuwait 2035. Rebranded in January 2017, this plan aims to further transform the country into a cultural, financial, trading and institutional centre for the region.

With this roadmap Kuwait plans to shift from a resource-based economy to an innovation-led, knowledge economy – the path towards Smart Kuwait. Some 28 programmes and 279 projects are involved in this, with 42% in oil and gas, 22% in logistics, 11% in energy, 9% each in health and education, and 7% in small business development. By late 2018 approximately $60bn in ICT, energy, construction and housing had been invested in the plan, according to Nayef Al Hajraf, the minister of finance, while $100bn was still to come. These investments include the new Terminal 2 at Kuwait International Airport, which was under construction as of October 2019; a national railroad; additional power and water plants, as well as renewable energy plants; the Al Zour refinery and petrochemicals complex; more hospitals, health centres, colleges and university buildings; the Mubarak Al Kabeer Port; and the Silk City project.

The latter will see a city for some 700,000 people built across an area that encompasses Failaka, Boubyan Island and Subiyah, the district on the opposite side of the bay from Kuwait City. May 2019 saw a major step towards the city being realised with the opening of the Sheikh Jaber Al Ahmad Al Sabah Causeway (see Construction chapter).

While state financing is behind much of these undertakings, the KAPP and the SCP are driving a much larger role for the private sector. The KDIPA is aiming to encourage foreign businesses, in particular, to take part. Mubarak Al Kabeer Port has already attracted interest from China as part of that country’s Belt and Road Initiative (see Transport chapter).


With the economy closely linked to oil prices, their protracted downturn beginning in mid-2014 impacted performance. GDP contracted by 2.7% year-on-year (y-o-y) in the fourth quarter of 2014, then posted y-o-y growth of 1.7% and 4% in the final quarters of 2015 and 2016, respectively. The following year recorded a y-o-y contraction of 4.3% in the last quarter, with GDP returning to growth of 0.6% in the second quarter of 2018. Growth picked up as 2018 continued, with the third quarter seeing a 2.9% y-o-y expansion. This was led by the oil sector, which grew by 3.3%, while non-oil – which includes the refining industry – increased by 2.3%. The fourth quarter of the year showed 2% growth y-o-y, while the first quarter of 2019 saw a 2.6% y-o-y expansion on the back of strong growth in the non-oil sectors. In its April 2019 Article IV report, the World Bank predicted GDP expansion of 2.5% for the year.

With oil prices being such a large determinant of GDP performance, measures are often taken to keep them in balance. As a member of the Organisation of the Petroleum Exporting Countries (OPEC), Kuwait has followed the OPEC+ agreement to cut output in order to support prices. Along with other member countries, Kuwait has overcomplied with its production cut quota, hitting 111% as of May 2019. The agreement, which helped push Kuwaiti export crude over the $70-per-barrel mark in early April 2019, was extended in July 2019 for another nine months. Abundant US shale supply and concerns over sluggish global growth have continued to suppress prices.

Nevertheless, the major investments being made in Kuwait’s oil sector – particularly in the downstream segment – are expected to have an impact beginning in 2020. The Clean Fuels Project is set for completion by early that year, an initiative to increase the combined capacity of the Mina Al Ahmadi and Mina Abdullah refineries to 800,000 barrels per day. The new Al Zour refinery will then open in 2021 (see Energy chapter). These moves are set to boost added value, increasing the sector’s contribution to GDP.

Fiscal Balances

Public finances, also heavily shaped by oil prices, have improved recently. The National Bank of Kuwait (NBK) predicts a budget surplus of KD800m ($2.6bn) in FY 2018/19, based on provisional data for the first 11 months, from April 2018 through March 2019. Revenues swelled from KD1.4bn ($4.6bn) to KD18.4bn ($60.6bn) over this period as Kuwait’s export crude rose in value. While this was in part due to rising oil prices in 2018, a slowdown in spending factored in as well. In the first 11 months of FY 2018/19 spending was down by 5% y-o-y, despite a planned 8% increase for the fiscal year as a whole. Final full-year figures had not been released as of October 2019.

As in other GCC economies, the long period of low oil prices saw government debt rise considerably when Kuwait continued to fund programmes and subsidies despite a drop in revenue. Indeed, total gross debt rose from 3.4% of GDP in 2014 to 20.7% in 2017. However, this position has improved since, with the IMF estimating debt at 14.8% of GDP in 2018. Debt financing has been undertaken via transfers from the KIA’s GRF since the Parliament blocked a new debt law in 2017. The law had proposed increasing the debt ceiling from $32bn to $82bn, and the tenor from 10 years to 30 years. While the GRF’s resources are substantial, transfers are hampered by the state of liquidity of the fund’s assets, with credit rating agency Moody’s estimating that only around 65% are liquid – enough to finance three years of deficits. The return to budget surplus is thus welcome, while efforts to pass a new debt law continue.

Across Borders

Oil price increases lifted the current account balance back into a surplus after a deficit in 2016 – the first in two decades. The current account surplus stood at 5.9% of GDP in 2017 and 12.7% in 2018. Exports rose from KD16.7bn ($55bn) in 2017 to KD21.8bn ($71.8bn) in 2018, according to the CBK, of which non-oil exports accounted for KD1.7bn ($5.6bn) during the former year and KD2.1bn ($6.9bn) during the latter. Non-oil exports primarily comprise chemicals and machinery. Imports also rose between 2017 and 2018, although to a lesser degree: KD9bn ($29.6bn) to KD9.5bn ($31.3bn).

Furthermore, a record increase in foreign investment income was logged in 2018, reaching KD6.4bn ($21.1bn), largely due to higher returns from KIA investments. At the same time, remittances sent home by expatriates working in Kuwait fell as the number of foreigners living in the country declined. This also had a positive effect on the current account balance, with the NBK estimating remittances dropping from KD15.8bn ($52bn) in 2016 to KD12.3bn ($40.5bn) in 2017 and KD10.9bn ($35.9bn) in 2018.

Net foreign inflows to the Boursa Kuwait, for their part, have been growing, with the market the best performing in the GCC as of March 2019. Inflows are widely expected to surge in 2020, when the exchange is added to the MSCI Emerging Markets Index.

Money & Credit

With 2018 seeing the US Federal Reserve rate hikes impact many emerging markets negatively, the CBK was obliged to intervene during the year, raising its repo rate several times. However, the policy lending rate has been kept at 3% since March 2018, with bank lending rates consequently rising less than deposit rates. Buoyed by returning confidence and strong bank liquidity, this CBK interest rate policy helped credit growth pick up in 2018, with figures from the NBK showing credit growth of 2.3% for the whole of 2018 and 5.3% y-o-y in February 2019. Business loans were up by 6.2% y-o-y in February 2019 after a 6% rise in January. Household credit also increased, with consumer loans showing their highest growth in four years in February 2019, at 3.9%, while housing lending was up by 5.9% y-o-y.

The money supply, meanwhile, has also crept up in recent years, by 3.6% in 2016, 3.8% in 2017 and an estimated 4% in 2018, according to the NBK. This increase has had little impact on prices, however. Consumers and businesses benefit from low inflation, with the headline consumer price index (CPI) showing price climbs of less than 1% between early 2018 and early 2019. In February 2019 the CPI stood at 0.6% y-o-y, up from 0.4% in January, mainly due to a small rise in food prices. This category moved from 0% in January to 0.4% in February. Housing, for its part, is helping keep overall inflation down, with rents softening in 2018. At the same time, the Kuwaiti dinar remains stable, pegged to a basket of currencies. The average rate of KD1:$3.31 remained largely constant in 2016, 2017 and 2018.


The total population of Kuwait stood at an estimated 4.42m at the start of 2019, according to the Central Statistical Bureau, with around 70% being expatriates. The latter group has been in decline in recent times, however, due to the policy of Kuwaitisation – the issuing of caps on non-Kuwaiti workers in different industries. Kuwaitisation has helped lead a decline in the unemployment rate of Kuwaiti nationals, from 5% in 2014 to 3.3% in 2016, where it remained the following year.

The push for Kuwaitisation has seen nationals replacing expatriates in the private sector accelerate in 2019. Indeed, in the first four days of May 2019 alone it was reported in local media that some 30,000 foreigners left the country. This shift has, however, been a major factor in the softening of the real estate market and slow growth in areas such as retail. Still, the years ahead will see Kuwaitisation extend further as a means to ultimately balance the population between nationals and foreigners to 50:50.


As the nation looks set to emerge from a trying couple of years, the need for the New Kuwait 2035 vision to be implemented is clearer than ever. Indeed, the country’s plans to shift to a private sector-led, knowledge-based economy would act as a long-term buffer against the fiscal challenges it faced at the hands of a volatile hydrocarbons industry.

Such a transformation will come with challenges, however, as issues such as the role of expatriates and state privatisation plans prove contentious. Yet Kuwait has many of the tools necessary to achieve its 2035 goals, given its ample financial reserves, entrepreneurial tradition and strategic location. Moreover, the rollout of projects such as the Silk City development, major upgrades in the oil and gas downstream segment, and transport and logistics links are set to boost added value in the years ahead.