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RIYADH: Kuwait’s economy is on a steady recovery in 2025, driven by rising oil output and resilient non-oil growth after contracting 2.6 percent last year, the International Monetary Fund has said. 

Following its staff visit to the country, the IMF said higher oil production, after the recent unwinding of OPEC+ cuts, is expected to lift the oil sector by 2.4 percent, while non-oil growth is projected at 2.7 percent.

The forecast aligns closely with the World Bank’s April projection of 2.2 percent growth this year, with expansion accelerating to 2.7 percent in 2026 and 2027. 

IMF Mission Chief for Kuwait Francisco Parodi said: “The economy is recovering amid higher oil production and robust non-oil growth. An incipient recovery is underway, with real GDP expanding by 1 percent in the first quarter of 2025.” 

He added: “For 2025, real GDP is projected to expand by 2.6 percent.” 

In July, the National Bank of Kuwait reported that the economy returned to positive territory in the first quarter of 2025, recording a 1 percent year-on-year increase, following seven consecutive quarters of contraction. 

The bank noted that the non-oil economy continued to expand, supported by momentum in manufacturing, real estate, and transportation, while the impact of previous oil production cuts has begun to fade. 

Kuwait also increased its oil production in April by 135,000 barrels per day, which is expected to bolster overall economic activity. 

The IMF report added that inflation continues to moderate, though lower oil prices are weighing on fiscal and external balances. Headline consumer price index inflation is projected to ease to 2.2 percent in 2025, down from 2.9 percent in 2024. 

“The fiscal deficit of the budgetary central government is projected to rise to 7.8 percent of GDP in FY2025/26, up from 2.2 percent of GDP in FY2024/25, primarily reflecting lower oil revenue,” said Parodi. 

He added: “In parallel, the current account surplus is projected to moderate to 26.5 percent of GDP in 2025, down from 29.1 percent of GDP in 2024, mainly due to lower oil exports.” 

Affirming the growth of the non-oil sector, the report noted that credit to the non-financial private sector is projected to rise to 6.1 percent in 2025, up from 5.2 percent in 2024. 

The IMF also said that Kuwaiti banks have maintained strong capital and liquidity buffers, while non-performing loans remain low. 

“The risks to the economic outlook are broadly balanced. The economy is heavily exposed in the short run to upside and downside risks from shifts in oil prices and OPEC+ production quotas, which could arise from fluctuations in global growth, geopolitical tensions or non-OPEC+ supply,” said Parodi. 

He also lauded recent government initiatives, including the Public Debt Law enacted in March, which could further support the country’s economic recovery. 

The law, approved by Kuwait’s Ministry of Finance, aims to address fiscal pressures and finance infrastructure projects, marking the country’s return to international debt markets after an eight-year hiatus. 

At the time, the ministry said the law allows the government to issue up to 30 billion Kuwaiti dinars ($98 billion) in debt instruments, in either local or major foreign currencies, with maturities of up to 50 years. 

“A new Public Debt Law was enacted in March 2025, enabling the government to issue debt for the first time in almost a decade. Accelerating reform implementation is needed to promote economic diversification, enhance competitiveness, and boost non-oil growth,” said Parodi.