Kuwait, 11 December, 2024 : The International Monetary Fund (IMF) has completed its Article IV consultation with Kuwait, highlighting that the country’s economy is in recession due to OPEC+ production cuts, though the non-oil sector is recovering. Real GDP contracted by 3.6% in 2023, driven by a 4.3% decline in the oil sector and a 1% contraction in the non-oil sector. In Q2 2024, GDP contracted by 1.5%, with the oil sector declining by 6.8%, partially offset by a 4.2% rebound in the non-oil sector.
Headline inflation decreased from 3.6% in 2023 to 2.6% by September 2024. Despite weaker oil prices, Kuwait’s external position remains strong, with official reserves at US$47.6 billion, covering 9.2 months of imports. However, the central government’s fiscal balance shifted to a 3.1% GDP deficit in the 2023/2024 fiscal year.
The IMF forecasts Kuwait’s economy to contract by 2.8% in 2024 due to continued production cuts, but projects a 2.6% recovery in 2025 as these cuts are unwound. The non-oil sector is expected to continue its recovery, with GDP growing by 2.0%. Inflation is expected to moderate to 3.0% in 2024 as food prices decline and demand pressures ease.
The IMF warned of downside risks, including oil price volatility and regional conflicts, and urged Kuwait to continue diversifying its economy. It recommended fiscal and structural reforms to enhance resilience and promote private investment, including a balanced approach to fiscal consolidation, non-oil revenue mobilization, and infrastructure investment.
Directors also emphasized the need to extend corporate income tax, adopt GCC-wide VAT, and manage public sector wages. They suggested replacing the unlimited deposit guarantee with a limited insurance framework to reduce moral hazard and phasing out lending rate caps.
Source : www.zawya.com
