The latest Economic Insight report for the Middle East, commissioned by ICAEW and compiled by Oxford Economics, reveals a positive economic outlook for Kuwait boosted by rising oil prices and increasing oil. This has led to a much higher GDP growth forecast of 7% for 2022, compared with 2.5% in 2021. For the Middle East, the report reveals a positive regional outlook despite a darkening global landscape as market pressures mount and uncertainty heightens. Middle East GDP growth in 2022 is now projected at 5.2%, an increase of 1 percentage point on Oxford Economics’ forecast three months ago.  

According to the report, the scrapping of all Covid-restrictions has supported a strong bounce back in economic activity following a modest retraction in Q1. This has seen the non-oil sector expand 4.7% this year, following growth of 3.1% in 2021, as consumer spending increases and the real estate market remains robust.

The oil sector, which accounts for over half of Kuwait’s GDP, is the main driver of its economic growth, with the sector expected to see year-on-year growth of 11.8%. This is a significant recovery following a 10% decline in 2020 and subdued growth of 0.1% in 2021. Kuwaiti oil output has risen to above 2.6 million barrels per day, as OPEC+ continues to gradually increase production quotas. With Brent Oil forecast to remain over $112 per barrel in 2022 – significantly above Kuwait’s estimated break-even price of $65 – the government is expected to post its first budget surplus since 2014, at 6.2% of GDP.

Oil income has buoyed fiscal performance, allowing the nation to recover from its record budget deficit of KWD10.7 billion posted in 2020. The spike in oil prices has boosted liquidity and allayed pressures to reduce current spending on wages and subsidies, which currently accounts for 90% of total expenditures. Future surpluses will be used to replenish the General Reserve Fund, which has been critical in funding shortfalls in recent years.