Kuwait’s economy is showing signs of recovery, thanks to higher oil production and robust non-oil growth, the International Monetary Fund (IMF) has said.

Real GDP is expected to expand by 2.6% in 2025 with the recent easing of OPEC+ cuts resulting in a 2.4% increase in oil production, and non-oil sector growth rising to 2.7% on the back of strong private domestic spending.

“An incipient recovery is underway,” the IMF said, adding real GDP expanded by 1% year-on-year in Q1 2025.

Real GDP contracted by 2.6% last year, primarily driven by a 6.9% decline in oil sector output resulting from OPEC+ production cuts. Non-oil growth was up 1.8% in 2024, supported by resilient private domestic demand.

According to the IMF, the Gulf state’s fiscal deficit is projected to widen to 7.8% of GDP in 2025/26, up from 2.2% of GDP in 2024/25, primarily due to lower oil revenue.

Meanwhile, the current account surplus is forecast to moderate to 26.5% of GDP in 2025, down from 29.1% of GDP in 2024, mainly due to lower oil exports.

Inflation is projected to moderate to 2.2% in 2025 from 2.9% in 2024, due to the projected stability in import prices for the remainder of the year.

“Inflation continues to moderate, but lower oil prices are weighing on the fiscal and external balances,” the IMF added.

(Editing by Bindu Rai, bindu.rai@lseg.com)