World Bank, IMF align on Kuwait’s economic growth

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KUWAIT CITY, April 17: The World Bank has upgraded its growth projections for Kuwait’s economy in 2024 to 2.8%, surpassing its earlier forecast of 2.6% made in January, reports Al-Seyassah daily. Similarly, for 2025, the Bank now anticipates a growth rate of 3.1%, up from the previous estimate of 2.7%. These revisions are outlined in the report titled “Conflicts and Debts in the Middle East and North Africa.” The expected growth follows a contraction of Kuwait’s GDP by 0.1% in 2023, which contrasts with the significant 7.9% growth experienced in 2022. In terms of per capita GDP, Kuwait is projected to see an acceleration, with a growth of 1.9% in 2024, compared to a slight contraction of 0.1% in the previous year.

This growth trend is expected to continue, reaching approximately 2.2% in 2025. Regarding the current account balance, it is forecasted to decrease, representing 22.7% of GDP in 2024, down from 29.3% in the previous year, and further declining to 21.9% in 2025. It’s worth noting that Kuwait’s public debt law expired in September 2017, with no new state debt law approved since then, despite the introduction of a draft law allowing the issuance of sukuk. The World Bank anticipates faster growth for the economies of Gulf oil-exporting countries in 2024, around 2.8%, and a further increase to 4.7% in 2025. The report emphasizes the necessity of diversifying economic and financial revenues due to shifts in global oil markets and the growing demand for renewable energy sources.

For the Middle East and North Africa region, the World Bank expects GDP to rise to 2.7% in 2024, a slight improvement from 1.9% in 2023. Similarly, both oil-importing and oil-exporting countries are expected to experience more balanced growth rates compared to 2022, when higher oil prices favored growth in oil exporting nations. Meanwhile, the International Monetary Fund (IMF) has revised its forecasts for the Kuwaiti economy for the current year, projecting a deficit of 1.4% in GDP for 2024, a significant improvement from the previously anticipated 3.6%. Additionally, the IMF expects Kuwait’s GDP to grow by 3.8% in 2025, reports Al-Qabas daily.

According to the IMF’s April 2024 forecast report titled “The Recovery of the Global Economy Is Steady but Slow and Varies According to Regions,” Kuwait’s financial balance is expected to decline from 32.8% of GDP in 2023 to 30.1% in 2024 and further to 27.1% in 2025. Inflation rates in Kuwait are forecasted to reach 3.2% in 2024 and 2.7% in 2025, down from 3.6% in 2023. The IMF also adjusted its expectations for the Middle East and Central Asia region, forecasting growth to rise from 2% in 2023 to 2.8% in 2024 and further to 4.2% in 2025. This adjustment is attributed to a decline in non-oil activity and oil revenues in some regional countries. Globally, the IMF raised its expectations for economic growth to 3.2% in 2024, driven by the strength of the US economy and certain emerging markets. It maintained its 2025 growth forecast at 3.2% but cautioned about ongoing inflation and geopolitical risks.

Despite the upward revision in global economic growth, the IMF warned of potential short-term challenges stemming from rising borrowing costs and reduced financial support in some countries. It stressed the need for decisive economic measures and highlighted the ongoing battle against inflation, particularly in low-income countries facing pressure from a strong dollar and high food and fuel costs. The IMF identified several risks to global economic growth, including indirect effects of conflicts like the Russian-Ukrainian war and regional violence in the Middle East, which could fuel inflation and lead to expectations of interest rate hikes, impacting global markets and economic sentiment. Moreover, Standard & Poor’s credit ratings agency highlighted increased geopolitical risks in the Middle East region, particularly citing ongoing tensions in Gaza and Iranian pressure on Israel.

The agency warned that a major regional conflict could destabilize economic, social, and financial stability in the region, potentially leading to negative credit rating measures and significant economic repercussions for affected countries. Standard & Poor’s emphasized that sovereign ratings for Middle Eastern countries are sensitive to regional geopolitical fluctuations, with the possibility of long-term conflicts negatively impacting economic growth, financial flows, and government finances. However, countries like Abu Dhabi, Kuwait, Qatar, and Saudi Arabia are expected to mitigate these pressures in the near term through their substantial financial reserves and international investments.

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