Kuwait Economy Facts
Since the Second World War, Kuwait has undergone dramatic development from poor desert land with pearl fishing as the main source of income to one of the world’s richest countries. Today, the economy is completely dominated by oil – it accounts for about 95 percent of export revenue and almost 90 percent of Treasury revenue. At the same time, this poses problems: there is a great need to reform and diversify the government-dominated, bureaucratic and oil-centric economy.
Almost all oil recovery is done by the state. Kuwait Petroleum Corporation (KPC) is the world’s twelfth largest oil company with its own super tanker fleet, refineries and thousands of Q8 gas stations in Europe (in Sweden under the name OK-Q8). During the oil boom in the 1970s, the country was able to make huge investments abroad. Kuwait, among other things, bought into major international oil companies.
- Countryaah.com: Major imports by Kuwait, covering a full list of top products imported by the country and trade value for each product category.
The cost of the extensive and rapid reconstruction of the country after the 1990-91 war (see Modern History) more than halved Kuwait’s foreign assets. Also, the Fund for Future Generations, where money is set aside for the welfare of future generations, had to be cut down and in 1992 Kuwait was forced for the first time in 30 years to take out loans from foreign banks.
After that, the country recovered more than well. GDP growth was just over 13 percent in 2003, compared with 0.7 percent in 2001. In 2005-2010, GDP grew by between 3.5 and 8.5 percent annually. In 2009, however, the economy shrank as a result of the international financial crisis. After a few good years, GDP growth fell again in 2013 and then continued at a longer level as a result of the decline in the world market price of oil. The budget deficit that arose due to the price race was offset by surpluses of around 30 percent that Kuwait had for 15 years. Some of the surpluses have gone to the Future Fund, whose value according to industry analysts in 2017 amounted to almost US $ 600 billion.
- Abbreviationfinder.org: Check this abbreviation website to find three letter ISO codes for all countries in the world, including KWT which represents the country of Kuwait. Check findjobdescriptions to learn more about Kuwait.
At the beginning of 2018, Kuwait stated that the only occasion when the Future Fund’s resources were put into operation was just after the Iraq invasion of 1990 and the subsequent war, when major damage to infrastructure was achieved. Among other things, a lot of oil sources are set on fire. Provisions for the Future Fund, 10 per cent of the income annually, have continued even when the state calculated budget deficits and raised new loans. At the same time, it has happened that the value of the fund’s assets has decreased, depending on how the investments have developed. The fund is a major owner in, among other things, German car manufacturers and the French nuclear power industry.
In 2020, oil-producing countries, with concern, saw two circumstances that drastically lowered oil prices. The Corona pandemic, which disrupted industrial production in China (“the world’s workshop”), among other things, reduced global demand for oil. At the same time, the two major producers Saudi Arabia and Russia launched a price war to cut market share. Prices fell to levels not seen since the first years after the turn of the millennium. The price war does not only threaten the extraction of oil shale in the US and Canada, which takes place at higher costs than the Saudi and Russian ones. Most oil countries, when the price war broke out, had built their state budgets on much higher oil prices than those listed in 2020.
Despite mostly good economic development, Kuwait has made it increasingly difficult to finance its oversized public sector, which has expanded significantly since the 1970s. Four out of five professional Kuwaiti people are civil servants. Of these, only a small part is expected to perform productive work; most of them constitute a pure burden on the state budget, of which about four-fifths are devoured by the salaries and various subsidies of civil servants. In addition to generous salaries, the government has guaranteed citizens short working hours, free health care and free education. In 2013, the government appointed a commission with the task of reviewing the extensive government subsidies; Already, it has been warned that the sweet bread days, that is, the system that guarantees the Kuwaiti generous state subsidies from the cradle to the grave, cannot continue as hitherto. However, cutting state aid has proved difficult. In 2016, the country’s ruler disbanded the parliament following an upset debate on reduced fuel subsidies. Even before other measures, Oman has hesitated. Saudi Arabia introduced VAT in 2018 when it was initiated in the Gulf Cooperation Council (GCC), but both Kuwait and Oman have stepped up to increase taxation.
Already in the mid-1990s, the first privatizations were proposed, but reform work has been very slow. Politicians do not want to make themselves unpopular by introducing income tax and reducing the generous subsidies. And the political opposition is afraid that the ruling Sabah clan will become even richer through privatizations.
The private sector is small and employs almost exclusively foreign workers. In addition, the privately owned companies have traditionally been largely owned by a small number of influential Kuwaiti families. Through increased privatization, advocates hope to create more jobs. Since 1991, the government has had the goal that every 10 jobs in the private sector should go to Kuwaiti citizens.
Foreign companies can since 2001 establish themselves in the country without Kuwaiti sponsor or partner. In 1999, the country’s first tax-free zone was opened for foreign companies (see Industry).
Despite strong opposition in Parliament, in 2010, a privatization law was passed, which however excluded the oil and gas, as well as the health and education sectors. The year before, the government had also presented a plan for economic development; this meant that over $ 100 billion would be invested over a five-year period in sectors other than oil and to increase private investment. Mail and telecommunications are among the areas affected by privatization plans – on the other hand, not news distribution, which remains under state control.
FACTS – FINANCE
GDP per person
US $ 34,244 (2018)
US $ 141,678 million (2018)
1.2 percent (2018)
Agriculture’s share of GDP
0.5 percent (2018)
Manufacturing industry’s share of GDP
7.9 percent (2018)
The service sector’s share of GDP
59.2 percent (2017)
1.5 percent (2019)
Government debt’s share of GDP
14.7 percent (2018)
US $ 77,080 million (2018)
US $ 31 370 million (2018)
US $ 24,049 million (2018)
Commodity trade’s share of GDP
76 percent (2018)
Main export goods
crude oil and refined oil products, fertilizers
Largest trading partner
China, USA, Japan, United Arab Emirates, EU
Minister of Information Muhammad al-Sanusi resigns before the threat of being questioned by Parliament that he would have restricted media freedom before the June parliamentary elections.
New electoral law is adopted
The new parliament adopts a new electoral law that reduces the number of constituencies from 25 to 5, giving voters the opportunity to choose up to four candidates. The changes are considered to favor the opposition.
Reform friends are leading in parliamentary elections
Since the new emir dissolved Parliament in May, new elections are held. Reform-friendly candidates who are in opposition to the government – both liberals and Islamists – are increasing their majority in parliament from 29 to 33 of the 50 seats. The choice is the first with female participation: 28 of the 249 candidates are women, as well as 57 percent of eligible voters. However, no woman enters Parliament. The new government is also dominated by the Sabah family; Nasir continues as prime minister.
Women vote for the first time
For the first time, women are allowed to vote, in a local filling election.
New crown prince, new prime minister
Emir Sabah appoints his brother Nawaf al-Ahmad al-Jabir al-Sabah as crown prince and his nephew Nasir al-Muhammad al-Sabah as prime minister.
The Emir of Jabir al-Ahmad al-Jabir al-Sabah dies after being ruler of the country since 1977. He is succeeded by his cousin, Crown Prince Saad al-Abdullah al-Salim al-Sabah, but he resigns after only nine days. New emir finally becomes the then prime minister Sabah al-Ahmad al-Jabir al-Sabah.