São Paulo – The International Monetary Fund (IMF) said on Thursday (18) that Kuwait’s economy is expected to grow 2.6% this year and 3.8% next year, before stabilizing at 2% in the medium term. Growth will be driven by higher oil revenues and the expansion of the country’s non-oil sector, which is forecast to grow 2.7% this year, 3% next year, and 2.7% in the medium term. The estimates were made by IMF staff during the fund’s periodic review of the country’s accounts, as is done for all IMF members.
According to the IMF, however, for growth to be sustained and less dependent on oil as a source of revenue, Kuwait needs to implement structural reforms that encourage the expansion of the non-oil sector.
The reforms will need to foster fiscal consolidation, extend corporate income tax to all domestic companies, and reduce the wage gap between private- and public-sector employees, whose pay is the highest among Gulf countries. Energy subsidies must be gradually phased out, which will result in higher water, electricity, and fuel tariffs.
The IMF also recommended expanding infrastructure. “Public investment should be further scaled up by around 2.5 percent of GDP over the medium term, which together with structural reforms would mitigate the contractionary impact of fiscal consolidation on the economy,” the report reads. The fund noted that Kuwait is exposed to international economic instability, but its monetary policy remains appropriate, and its banks are well capitalized.
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Translated by Guilherme Miranda
