All of Kuwait‘s wealth comes from its petroleum industry, either directly or through its outside assets. Since the 1970s, the steady and fast rise of Kuwait’s oil sector has been the most eye-catching aspect of the country’s economic progress. By the mid-1980s, Kuwait was marketing over 250,000 barrels per day under the brand name “Q8” at its own retail outlets across Europe.
By the 1980s, Kuwait had one of the world’s highest per capita incomes, thanks to its oil wealth and the investment money it produced. Although income levels dropped significantly in the 1980s due to increased volatility in the global oil market and the Iraqi war (which nearly depleted Kuwait’s outside investment incomes), they surged again in the early 21st century as oil prices soared drastically.
In comparison to the oil and gas industry, the agricultural, industrial, and commercial sectors contribute very little to Kuwait’s GDP.
The citizens of Kuwait have a very high per capita income because of the country’s wealth and the development of a welfare state. Lower oil output and weaker oil prices offset the steady rise of the non-oil sector in 2019, resulting in negative economic growth of 0.6% for Kuwait in 2019.
As a result of the COVID-19 pandemic, it dropped to -8.9% in 2020 before rising to 1.3% in 2021 and 8.7% in 2022. Depending on the strength of the global economy following the pandemic, the IMF predicted a slowdown to 2.6% in both 2023 and 2024.
Short-term economic activity is predicted to be supported by government expenditure, employment growth, and credit expansion, although this is contingent on stable oil prices and increased oil output.
A Background of Kuwait’s Economy
Since the 18th century, the al-Sabah dynasty has ruled Kuwait as a constitutional monarchy. Protests, cabinet reshuffles, and the dissolution of the National Assembly have all resulted from opposition from Islamists and tribal populists. Sheikh Ahmed Nawaf al-Ahmad al-Sabah, the emir’s eldest son, will take over as prime minister after succeeding his father as emir in 2020.
About 6% of the world’s oil is located in Kuwait. More than half of GDP and almost 92% of export profits come from oil and gas. To protect itself from the potential consequences of falling oil prices, the government sets aside at least 10% of its yearly earnings.
The decline in the price of oil has been particularly hard on the countries of the Persian Gulf, which were among the world’s wealthiest at the turn of the century. The quality of life in Bahrain, Kuwait, Oman, and Saudi Arabia has declined to the point where these countries are no longer among the world’s top 20.
The bulk of employees (particularly those from Asia) are forced to endure appalling living circumstances while the wealthy few control the vast majority of the country’s wealth. There is hardly any unemployment.
Covid 19 effects on the economy of Kuwait
The International Monetary Fund (IMF) maintains a policy monitoring tool called Policy Actions to COVID-19, where you can get the most recent information on the most important economic actions from countries to address the economic effect of the COVID-19 pandemic.
The citizens of Kuwait have a very high per capita income because of the country’s wealth and the development of a welfare state. Lower oil output and weaker oil prices offset the steady rise of the non-oil sector in 2019, resulting in negative economic growth of 0.6% for Kuwait in 2019. As a result of the COVID-19 pandemic, it dropped to -8.9% in 2020 before rising to 1.3% in 2021 and 8.7% in 2022.
In 2020, Kuwait’s state finances were sound, with debt to GDP at just 11.7%. In 2021, the percentage fell to 8.7%, and in 2022, it fell to only 7.1%, despite the global context produced by the COVID-19 pandemic. In 2023, it is projected to be 6.9%, and in 2024, it is projected to be 6.5%.
It is anticipated that government expenditure will rise in the next years as a result of initiatives meant to expand credit, employment, and salaries. While the government has postponed the implementation of a value-added tax and an excise tax on cigarettes and sugary beverages, tax collections have remained low.