Non-oil sectors are slowly reopening but output will not regain its pre-pandemic level until 2022 Oil output will rise only marginally this year Ongoing tensions between the government and parliament bode poorly for reform outlook this year Kuwait’s economic prospects are slowly improving, as it benefits from higher oil prices, though deep oil production cuts set by OPEC+ and the persistence of the pandemic are weighing on the pace of recovery. Our 2021 GDP growth forecast stands at 2.6%, expected to be driven by non-oil sector expansion. We estimate the economy contracted by 8.1% in 2020, the deepest decline since the 1991 war and the worst performance in the GCC region. Oil output will rise only marginally this year, limiting growth in the oil sector (about 50% of GDP) to just 0.9% and thus hampering recovery in the economy more broadly until the OPEC+ agreement expires in April 2022. The non-oil GDP is gradually regaining lost ground but is unlikely to return to its pre-pandemic level until 2022. The recent end to curfew should allow more businesses to reopen, with indoor dining resuming as well, which should boost household spending further. Nonetheless, many activities remain off limits, including in-person teaching, which is not expected to restart until September, highlighting ongoing challenges to business activity posed by the pandemic. We forecast non-oil growth of 3.1% and 4.7% in 2021 and 2022, respectively. Moreover, the vaccine roll-out in Kuwait has accelerated recently but lags many of its neighbours, with only around 27% of the population having received at least one jab, undermining consumer and business confidence in the recovery. The recent decision to ban travel for unvaccinated citizens and their immediate relatives should encourage the uptake of the vaccine among locals and offering optimism for herd immunity before year-end. However, with entry still banned for non-locals, businesses may hit a bottleneck in hiring from abroad as domestic restrictions ease and hiring picks up. Kuwait’s expat population is reported to have dropped by 4% in 2020 as the pandemic hit hiring activity in key sectors, especially construction, real estate and manufacturing and we do not expect a significant rebound in the near-term.

Viewed By: