KUWAIT: Preliminary Central Statistical Bureau (CSB) estimates show non-oil GDP in Q3 2024 declined by 2.5 percent y/y after a solid H1 and driven by contractions in manufacturing and public administration and defense output. Oil GDP also fell, by 5.3 percent, constrained by OPEC-linked production cuts that were extended through the second half of the year. As a result of the above sector moves, total GDP fell 3.9 percent in Q3. The near-term outlook is more constructive, with crude output cuts set to be unwound in 2025, interest rates on a downward trajectory, project awards rising strongly of late and the government expected to accelerate implementation of its economic development plan.

Non-oil sector contracts

The decline in non-oil GDP in Q3 represented a weakening versus the downwardly revised 2.5 percent y/y recorded in Q2 (previously 4.2 percent). The year-over-year contraction in non-oil activity was broad-based, with growth negative in most non-oil subcomponents and particularly steep in the manufacturing sector (-10.8 percent y/y), despite output gains in refined petroleum products from the Al-Zour refinery, according to official data submitted to the Joint Organizations Data Initiative. Meanwhile, the contraction in activity in other large economic sectors, including public administration and defense (-2.5 percent y/y), financial intermediation (-2.5 percent), and wholesale and retail trade (-3.3 percent) was less acute though still notable. Output gains in the hotels and restaurants (5 percent) and education (3.1 percent) segments as well as in the transport sector (2.2 percent) helped mitigate some of the contraction.

Looking forward, the non-oil economy should benefit in Q4 2024 from an influx of tourists linked to Kuwait’s hosting of the Arabian Gulf Cup football tournament. Moreover, average non-oil private sector output for Q4, using the Purchasing Managers’ Index survey readings, pointed to the strongest quarter of expansion (57.4) in the history of the series. For 2025, the growth outlook remains broadly constructive given the expected, albeit modest recovery in consumer spending, recent improvements in credit growth and project awards, which hit a near 8-year high in Q4, potentially lower interest rates and a possible rise in public investment as the government advances the Vision 2035 economic agenda. We see non-oil GDP growth at around 2.6 percent this year, up from an estimated 2.0 percent in 2024.

Oil sector output declines

The contraction in oil sector GDP continued for a sixth consecutive quarter in Q3 2024, albeit less negative than Q2’s (-6.8 percent y/y), and output did improve on a quarter-on-quarter basis (1.0 percent). Since the start of 2024, Kuwait has kept its monthly crude production steady at 2.41 mb/d in accordance with its OPEC+ quota and voluntary production cut obligations, which in 2024 called for a further reduction of 135 kb/d at the outset. These cuts were scheduled to be unwound in H2 2024 but due to weaker-than-expected market fundamentals and prices were extended three times. On the basis of the December 2024 OPEC+ meeting, Kuwait’s crude production will only start rising in April 2025, at the rate of 7 kb/d per month until all 135 kb/d is restored and production reaches 2.548 mb/d by September 2026. On this schedule, which assumes no further extension of output cuts, oil GDP growth will turn positive in Q2 2025.

Economy escaped recession

The latest release was once again accompanied by significant revisions to the historical series across several non-oil components, but especially public administration and defense, manufacturing and ‘taxes less subsidies’. As a result, Kuwait’s non-oil economy looks to have escaped recession in 2022 and 2023 amid significant upgrades to public administration and defense, electricity, gas and water, and construction. In 2022 and 2023, non-oil GDP growth was revised up to 1.6 percent (from -0.1 percent previously) and 1 percent (from -2.9 percent), respectively. In 2021, though, growth was downgraded to 4.2 percent from 5.4 percent previously. Similarly, the latest figures for Q3 2024 are preliminary and subject to revisions in future releases.