IMF Predicts Ongoing Recession for Kuwait Amid OPEC+ Oil Cuts

The International Monetary Fund (IMF) has forecasted that Kuwait's economy will continue to struggle in recession through 2024 due to the ongoing OPEC+ oil production cuts. These cuts, which saw a reduction of 2.2 million barrels per day extended until April 2025, have significantly impacted the country's oil sector.

Kuwait's GDP contracted by 3.6% in 2023, largely driven by a 4.3% decline in its oil sector, and continued to shrink by 1.5% in the second quarter of 2024 as the oil sector further contracted by 6.8%. These negative growth rates are a sharp contrast to the country's previous boom, when high oil prices fueled a remarkable 8.5% GDP growth and a reduction in the fiscal deficit by 70% just two years ago.

The IMF's analysis aligns with predictions from a Reuters poll, which indicated that Kuwait would fare the worst among Gulf Cooperation Council (GCC) nations. The country is expected to experience the highest inflation in the region while remaining in recession, primarily due to its heavy reliance on oil. Despite its significant oil reserves—holding 101 billion barrels, the 7th largest in the world—Kuwait's dependence on oil for 91% of its exports and revenue leaves it vulnerable to fluctuations in global oil prices. In contrast, neighboring Saudi Arabia has seen substantial growth in non-oil revenue, bolstered by its Vision 2030 economic diversification plan.

Amid these economic challenges, Kuwait's state-run oil company, Kuwait Foreign Petroleum Exploration Company (KUFPEC), is actively seeking to expand its international footprint. KUFPEC plans to bid for oil and gas blocks offshore Indonesia and explore the Natuna Sea for potential hydrocarbon reserves. However, challenges lie ahead, including high carbon dioxide content in the gas reserves and the evolving geopolitical landscape surrounding oil production.

Despite the downturn, Kuwait’s government is pushing ahead with its energy diversification efforts, with KUFPEC leading the way in offshore exploration. Meanwhile, Indonesia's government is working to attract more oil and gas investments, aiming to reverse its declining oil production and enhance domestic energy security.