Kuwait Economy: Opportunity, Potential, Recovery (Expectation vs Reality)

Abstract

Kuwait is a fairly rich country in which citizens have a very high per capita income. After a modest recovery in 2018, Kuwait’s economic growth slowed to 0,4% in 2019 as oil production declined and global hydrocarbon prices fell as a result. In 2020, the country’s economic growth falls to the mark (–8,1%), while IMF analysts predict a recovery in growth to 0.7% in 2021 and to 3,2% in 2022.
Years of low oil prices have forced the government of Kuwait to almost use up its cash reserves, while the brewing political standoff has prevented it from borrowing on international markets. Kuwait provides a comfortable existence for 90% of local citizens who receive government wages, along with generous benefits and subsidies, from cheap electricity and gasoline to free health care and education. However, the COVID–19 pandemic, falling oil prices and a liquidity crisis forced the government to speak seriously about the crisis in the country for the first time. Thus, the Minister of Finance of Kuwait announced that soon the government would not be able to pay salaries, and the Central Bank of Kuwait in its reports indicated that the country’s budget deficit could reach 40% of GDP, which is the highest since financial losses as a result of Iraq’s invasion in 1990 and the subsequent Gulf War.