CBK: IMF mission forecasts Kuwait GDP would surge by 2.6 pct in '25

KUWAIT, Dec 18 (KUNA) -- The Central Bank of Kuwait (CBK) announced on Thursday the conclusion of the International Monetary Fund (IMF) regular staff visit to Kuwait, saying the IMF experts expected that Kuwait's real GDP would expand by 2.6 percent in 2025.
In a press release, the CBK said the IMF, in its concluding statement, also predicted that the GDP will "hit 3.8 percent in 2026, driven by the unwinding of OPEC+ production cuts and robust non-oil growth, then will stabilize just above 2.0 percent over the medium term." Non-oil GDP will expand by 2.7 percent in 2025 and 3.0 percent in 2026 on the back of a surge in investment, then will grow at its potential rate of 2.7 percent over the medium term, the CBK said quoting the IMF statement.
It stated that an incipient recovery is underway, with real GDP expanding by 1.7 percent (y-o-y) in 2025Q2, driven by robust non-oil growth of 3.1 percent (y-o-y).
It went to say that so far this year, headline consumer price index (CPI) inflation has continued to moderate, reaching 2.4 percent (y-o-y) in August.
The statement indicated that "headline CPI inflation will moderate to 2.3 percent in 2025 and 2.1 percent in 2026, then will stabilize just below 2.0 percent over the medium term." The mission referred that the current account surplus declined to 29.1 percent of GDP in 2024, due to lower oil exports.
However, higher non-oil exports and investment income helped cushion the impact. Official reserve assets stood at 8.3 months of projected imports at end-2024.
The external position was substantially weaker than the level implied by medium-term fundamentals and desirable policies in 2025, reflecting an excessive reliance on oil exports and inadequate public saving of oil revenue. External buffers are ample, the central bank pointed out.
The mission affirmed the improvement of Kuwait's public budget despite the decline in oil revenues.
"The fiscal deficit of the budgetary central government narrowed to 2.2 percent of GDP in FY2024/25," it showed.
"This reflected rationalization of the public sector wage bill from retirements, moderation of energy subsidies alongside international fuel prices, and mobilization of non-oil revenue by raising government service fees. At the general government level, the fiscal surplus widened to 27.7 percent of GDP in FY2024/25, also reflecting higher estimated sovereign wealth fund (SWF) investment income." The government resumed sovereign debt issuance after an almost decade long hiatus, issuing 4.6 percent of GDP in domestic bonds and 7.1 percent of GDP in external bonds as of end-October, it stated.
The fiscal deficit of the budgetary central government will increase to 8.7 percent of GDP about KD 4.2 billion (USD 13.7 billion) in FY2025/26 and 9.4 percent of GDP, estimated at KD 4.6 billion (about USD 15 billion) in FY2026/27, given higher spending and lower oil revenue, then will widen to 11.5 percent of GDP, KD 7.0 billion (about USD 22.8 billion), by FY2031/32, according to the statement.
Experts of the mission stressed that the stance of monetary policy remains appropriate, noting that "since September 2024, the CBK has cut its policy rate by 75 basis points." The policy rate remains above neutral, and is in line with achieving inflation control and non-oil output stabilization objectives, it elaborated. Under the baseline, monetary normalization should continue as inflation further moderates and the non-oil output gap closes.
The mission's final communique also pointed to credit growth to the non-financial private sector, supporting non-oil growth. Nonperforming loans remain low and well provisioned for.
Furthermore, the mission said the economy is highly exposed to a variety of global risks through its oil dependence, in particular to commodity price volatility, a global growth slowdown or acceleration, and shifts in global financial conditions.
The materialization of these risks would be transmitted to Kuwait mainly via their impacts on oil prices and OPEC+ production. The main domestic risk is changes in the speed of structural reforms and associated infrastructure project implementation to diversify the economy, it mentioned.
On economic reforms, the communique said Kuwait seeks to move from economy depends on oil to a dynamic and varied economy under their Vision 2035.
As the momentum of these reforms rose, starting with the enactment of the financing and liquidity law, they emphasized the need for a comprehensive package of fiscal and structural reforms.
"Fiscal reforms should reinforce long-term fiscal sustainability while incentivizing Kuwaitis to pursue jobs in the private sector. In parallel, structural reforms should unify the labor market and improve the business environment," it said.
The experts pointed to the need to gradually eliminate the large energy subsidies by repricing electricity, water, and fuel bills for consumers so that they reach the average price levels in the Gulf Cooperation Council (GCC) countries.
Regarding increasing non-oil revenue, they underlined the necessity that "the 15 percent CIT (Corporate Income Tax) should be extended to all domestic companies, while the GCC-wide excise tax and 5 percent VAT (Value Added Tax) should be introduced." Finally, they underlined that a "structural reform package should be implemented to unify the labor market and improve the business environment." (end) fnk.amh.hm