14 June 2021
1 mins clock icon

Kuwait: Economy contracted by at least 8.9 percent in 2020

We expect the nonoil sectors to recover this year but the hydrocarbons sector will likely remain a headwind to headline GDP growth

By Khatija Haque


Kuwait’s economy shrank -8.9% in real terms last year according to preliminary data, although the central bank report estimated a -8.9% to -9.9% contraction. Both the oil and non-oil sectors declined at a similar rate in 2020, with construction and manufacturing particularly hard hit at -43.2% y/y and -32.6% y/y respectively.  The services sectors were also affected by the pandemic, with restaurants & hotels GDP declining -24.2% y/y  and wholesale & retail trade down -12.1% y/y.  While we expect the non-oil sector to recovery in 2021 with 3% growth, OPEC+ has been conservative in unwinding last year’s production cuts.  As a result, we expect the oil & gas sector to remain a headwind to growth this year as well.

Kuwait: GDP growth and budget balance

Source: Haver Analytics, Emirates NBD Research

Kuwait’s budget deficit was -25% smaller in the fiscal year through February 2021.  However, there is usually a significant rise in expenditure in March before the end of the fiscal year.  We retain our forecast of a -KWD 9.7bn budget shortfall (-29.8% of GDP) in the fiscal year ended March 2021, but we expect this to narrow to -14.8% of GDP in the fiscal year ending March 2022. While parliament has proposed amendments to the debt law, these have not been passed as MPs and the government remain at odds. However, Reuters reported in April that the government had reached an agreement with the Kuwait Petroleum Corporation to receive around USD 20bn in accrued dividends, which would help finance the budget shortfall.  

The number of new coronavirus cases have increased sharply over the last month, with the 7-day moving average topping 1500/ day by 12 June.  Travel restriction on non-Kuwaitis remain in place as do restrictions on large gatherings, and mandatory wearing of face masks and social distancing measures.

Kuwait: Daily new coronavirus cases (7dma)

Source: Our World In Data


Written By

Khatija Haque Head of Research & Chief Economist

There was an error during your feedback!

Your feedback is valuable to us and will help us improve.

Khatija Haque

Related Articles

Subscribe to our newsletter and stay updated on the markets

There was an error during your newsletter subscription!

Please try again to stay updated with all the latest financial news and valuable insights.

Thank you for newsletter subscription!

To stay updated with all the latest financial news and valuable insights.