Kuwait

After two years of recession, Kuwait returned to growth in 2025 (estimated at +2.5% y/y). This trend is expected to continue in 2026 and 2027 (+3.3% and +3% respectively), aligned with broader GCC performance – despite relatively subdued global oil prices – and primarily driven by non-oil sectors. Oil production is projected to remain close to 2025 levels given the recent OPEC decisions to keep output and the ongoing oil market dynamics, new fields are expected to come online through 2030 which should increase the country’s oil output. Hydrocarbons remain the backbone of Kuwait’s economy, accounting for roughly 40% of GDP, and diversification efforts have been more limited compared to peers due to political gridlock and delays in implementing structural reforms.

Unlike Bahrain’s early push into energy-intensive industries, Kuwait’s diversification strategy has focused on financial services and infrastructure development, though execution has been uneven. Inflationary pressures remain a concern in Kuwait, as prices have increased more than in the rest of the GCC. As a result, Kuwait Central Bank did not follow the latest 25bps Fed cut, and its policy rate remained lower than the rest of the region, peaking at 4.25%, just below Bahrain’s 6%. 

Looking ahead, Kuwait’s growth outlook hinges on accelerating reform momentum, and reducing dependence on hydrocarbons. Risks remain linked to fiscal vulnerability and exposure to oil price volatility, which will continue to weigh on long-term sustainability. 

Kuwait is pursuing a targeted "dual strategy" that maintains a strict Kuwaitization policy while simultaneously opening doors for high-value investment. While the government has mandated the exit of thousands of expatriates from public sector and administrative roles to prioritize national employment, it has balanced this with reforms that allow 100% foreign ownership, 15-year residency permits and real estate ownership for major investors. Ultimately, the country is tightening restrictions on the general expatriate workforce while aggressively competing to attract global capital and specialized talent to drive its New Kuwait 2035 vision. 

In mid-2025, new capital market reforms were implemented that aligned Kuwait to international standards, allowing for increased participation of foreign investors, encouraging new listings. Kuwait’s stock market was the best performing in the GCC, growing by 19% through Q3 2025.

However, structural weaknesses persist. Judicial effectiveness, property rights and bureaucratic inefficiency remain major constraints, compounded by corruption risks. Despite progress, Kuwait’s regulatory framework still lags behind other GCC states. Meanwhile, fiscal pressures are driving new taxes: excise duties on harmful goods, corporate tax extended to local and GCC firms and a low-rate VAT planned for 2028-30. Personal income tax remains politically sensitive and off-limits.