29-05-2025
Kuwait's fiscal deficit to remain high until 2028 amid low oil prices
Kuwait's headline fiscal deficit is expected to remain high, averaging 8.9% of GDP between 2025 and 2028, compared with an estimated 2% in 2024, according to S&P Global Ratings.
The widening deficit is due to low oil prices and high expenditure levels, primarily resulting from wages, subsidies, and grants, which collectively account for about 70% of total expenditure, said Juili Pargaonkar, an analyst at S&P.
Brent oil prices are forecast to average $65 per barrel over the rest of 2025 and $70 per barrel over 2026-2028.
'We forecast the deficit will decline to about 6% of GDP by 2028 from about 14% in 2025, as we expect higher oil revenue due to modestly higher production over 2027-2028 and government efforts to increase non-oil revenue,'' Pargaonkar said.
S&P believed that technical groundwork is underway for several fiscal reforms, including the imposition of corporate income tax and excise tax, subsidy rationalisation, and procurement optimisation.
The government is looking to increase non-oil revenues through higher government fees and improved collection through digitalisation, she said.
According to S&P, Kuwait's economic growth is expected to remain modest at 2% in 2025-2026 amid slow global growth.
Ongoing reforms could improve longer-term growth prospects, Pargaonkar noted.
She expected real GDP growth to moderately rebound to about 2.6% in 2027-2028, supported by an increase in oil production and its positive spillover on the non-oil economy.
Additionally, the implementation of the financing and liquidity law in March 2025 will enable the government to issue debt in both domestic and external capital markets, which will help diversify its funding sources, she stated.
