Press Release No. 22/454

IMF Staff Concludes Staff Visit to Kuwait

December 22, 2022

• Supported by high oil output and prices, Kuwait’s economic recovery is carrying on and fiscal and external balances are improving.
• Inflation has been contained so far, supported by monetary policy tightening and energy and food subsidies. Banks remain well-capitalized and liquid.
• The outlook is subject to uncertainties, including potential repercussions from the global economic slowdown and externally-induced volatility in oil prices and output.

Kuwait City, Kuwait: An International Monetary Fund (IMF) mission, led by Mr. Yasser Abdih, held discussions with the Kuwaiti authorities in Kuwait City during December 11-18, 2022. At the conclusion of the mission, Mr. Abdih issued the following statement:

“Kuwait’s economic recovery continues. Strong vaccination efforts and the authorities’ swift and decisive responses to the COVID-19 crisis have allowed for the relaxation of all social distancing restrictions and supported economic recovery . Overall real GDP growth is estimated to have rebounded from -8.9 percent in 2020 to 1.3 percent in 2021. It is projected to further increase to above 8 percent in 2022, supported by increased oil production, high oil prices, and sustained improvement in domestic demand. In 2023, growth is likely to moderate, reflecting slowing external demand and oil production cuts under the OPEC+ agreement. Direct adverse spillovers from the Russia’s war in Ukraine have been contained so far given the limited trade and financial linkages with both countries.

“Inflation has been contained, benefiting from monetary tightening and limited passthrough from higher global food and energy prices supported by administered prices and subsidies. With higher oil prices and output, the overall fiscal and current account surpluses increased significantly from last year.

“With strong bank buffers and prudent oversight and proactive monitoring of financial risks by Central Bank of Kuwait, the banking system has weathered the recent shocks well. Banks continue to be well-capitalized and liquid, financial soundness indicators are healthy, and private sector credit growth remains strong.

“The authorities continue to implement measures to improve fiscal revenue collection and spending efficiency. Efforts are ongoing to promote digital transformation, advance financial technology, and invest in green energy.

“Nevertheless, the outlook is subject to uncertainties and risks surrounding the external environment, including potential impacts of monetary policy tightening in major advanced economies and further slowdown in global economic activity. And volatility in oil prices and production, stemming from external factors including the geopolitical environment, could weigh on activity and macroeconomic balances. Delays in key fiscal and structural reforms could amplify the risk of procyclical fiscal policies, and hinder progress toward more economic diversification and higher competitiveness.

“The IMF mission team expresses its appreciation to the authorities for their hospitality and the candid and productive discussions. We look forward to continuing our dialogue and close collaboration.”