Kuwait’s economy is in a decisive transformation, as the authorities implement long -awaited reforms to develop a non -oil sector and diversify income.
Kuwaiti economy at a turning point. In early February, the Cabinet approved a budget project for the fiscal year 2025-2026, indicating an increase of 11 % on an annual basis in a slightly low revenue deficit. The proposal, which is still awaiting approval of Prince Michel Al -Amad Al -Hashd, comes at a time when the Persian Gulf state is wrestling with the need to diversify the economy in the face of continuous dependence on oil production.
Kuwait’s economy signed a contract by 1 % in 2024 after a decrease in 3.6 % during the recession period 2023. With hydrocarbons representing 90 % of government exports and revenues, economic performance remains closely related to the OPEC+ production policy, global demand, and competing production. While the growth of GDP of the World Bank will exceed 2 % this year, the recent calls by US President Donald Trump to reduce global oil prices are pressure on Kuwait to accelerate diversification efforts.
For years, GRIDLOCK has stopped for reforms. Since 2020, the Council of Ministers has resigned 10 times and Kuwait has obtained four legislative elections. But the transformation is underway. Last May, the prince was dissolved and the constitution was partially suspended for up to four years, a dramatic step aimed at the main structural reforms of rapid tracking in coordination with international institutions.
“We were very skeptical at the beginning, because they had made promises before, but we can see the procedures and seriousness about some reforms,” says Ahmed Al -Duwaisan, Acting Director General of Banking Services of Companies at Al Kidy Bank in Kuwait (ABK.
Changing games for games such as public sector wages and subsidies, which represent 80 % of total spending; Provide an added tax (value -added tax); Update the mortgage law of the emirate (See the side ribbon, page 78); And passing a new debt law aimed at allowing Kuwait to borrow on international markets, is still in discussion. However, some legislation was approved, indicating momentum towards reform.
In line with the Organization for Economic Cooperation and the Development Pillar two tax bases, Kuwait provides 15 % corporate tax for foreign companies with revenues exceeding 750 million dollars in at least two years of the past four years. Finance Minister Nora Al -Fassam estimates that the tax will target more than 300 companies, winning up to 825 million dollars annually.
“This is part of a government strategy to build a more diverse economy, attract foreign investment, and create job opportunities for citizens,” Al -Fassam told local media. It also explains that Kuwait is “serious about moving forward in financial and economic reforms.”
While some multinationals may look forward to increasing local partnerships or transferring the regional headquarters away from Kuwait to reduce compliance costs, the total goal of new measures is Kuwait as a competitive business center, compatible with international and regional best practices.
Ali Khalil, CEO of Markaz, one of the assets, investment, investment and investment, says: “Kuwait’s agreement with global tax standards can improve credibility in a global stage and prevents the country as a tax haven for foreign investors, which can drive sustainable investment asset flow The base of the additional tax reforms, which can diversify the sources of revenue for the government.
In parallel, the government aims to improve investment frameworks and litigation procedures, and to reduce foreign ownership rules.
“The economic reforms in Kuwait pave the way for important opportunities for financial institutions. “Initiatives aimed at strengthening the business environment, such as public and private sectors and organizational simplicity, will facilitate greater flow of investment.”
Infrastructure renewal
Improving infrastructure is also a priority. The Kuwait road system, which was once worse in the Gulf Cooperation Council (GCC), will be renewed, thanks to $ 1.3 billion in maintenance contracts signed last October with 18 companies.
The project activity has increased in sectors including housing, health, water, waste management, electricity, oil and gas (See side ribbons, page 80). Last year, projects worth $ 8.7 billion were granted, which represents an increase of 44 % on an annual basis and the highest value since 2017, according to reports from the National Bank of Kuwait (NBK), the largest bank for the emirate. In addition to the 2025-2026 budget, the Council of Ministers approved approximately $ 5.6 billion for 124 projects.
Kamco Invest, one of the leading financial institutions in Kuwait, expects, “prosperous economic activity, the government’s intention to implement projects before the final dates, a supportive and strong banking sector, and the expected interest rates, stability in the regional geopolitical scenario, and the rise in oil prices for government policies supporting participation in the private sector.
In general, Kuwait $ 121 billion of planned projects in the pipeline, with many of this year.
Among the latest, Turkey’s consultations in January won the first stage of the 110 -kilometer railway tender for Kuwait to connect Kuwait to the Kingdom of Saudi Arabia by 2030. The new line will be part of a wider network, and areas with an area of 2100 km, extending last month, which precedes China’s counterparts last month, which is taking place in China funds last month. A company to implement, manage and operate the new port of Mubarak Kabir.
For banks, this is all good news. Capital reforms and expenses can enhance the momentum of economic recovery and growth, in turn pushes more lending activity.
“As a bank, we have to benefit from the contracts that are put forward while we are talking,” Al -Duwaisan says, noting that ABK has received a fair share of new projects. “We have very good coverage in multiple industries, whether it is infrastructure, civil, power, energy.”
“I see growth capabilities in the sectors that are decisive to the infrastructure of the global economy and energy: specifically, oil, gas, construction and services,” says Shamelan from KFH.
Changing the landscapes of banks
The financial sector stands at the cornerstone of Kuwait’s economy other than oil. Despite the volatility of global energy and tense regional geopolitical landscapes, Kuwaiti lenders show flexibility.
The Standard & Poor’s (S&P) appointed a straight view of Kuwaiti banks in January, noting that it “works with strong capital stores and usually retains 50 % or more of the end result, which supports value. The capital quality is still strong, with a modest share of hybrid tools.”
However, the financial scene passes a major change.
In July, the government provided legislation to support transparency and reduce fraud by adding tougher examination measures to open bank accounts. At the same time, the banking sector began to reflect regional trends as unification efforts gain momentum.
In December, Burghan announced plans to obtain Gulf United Bank in Bahrain in a $ 190 million deal, to be closed in the coming months. “The deal is in line with the strategy of allocating the new assets of the bank and the efforts made to build new and varied revenue flows.” With the subsidiaries in Algeria, Tunisia and Turkey, as well as the companies of companies in the United Arab Emirates, Burghan may benefit from integration to expand in the Middle East and North Africa region.
Other deals in business. In January, Warfa Bank announced that it will buy a 32.75 % stake in Gulf Bank of Trade in Al -Ghaneim, one of the largest family companies in Kuwait. Last summer, Boubyan Bank put forward the idea that he might get GULF Bank, which would create the third largest bank in Kuwait, with assets exceeding $ 50 billion. The transaction was canceled later.
Since 2018, the number of banks in the Gulf Cooperation Council has decreased from 77 to 60, in the first place through the integration and acquisitions that created regional giants. However, Kuwait remained largely on the margin until KFH completed the acquisition of the AHLI United Bank in Bahrain (AUB) in 2022, which represents the first major unification in the Middle East and North Africa region and the construction of the second largest Islamic bank in the world, with $ 120 billion in assets combined.
But with 21 organized banks serving more than 4 million population, Kuwait, like many Gulf Cooperation Council countries, is still high. Moreover, this sector is largely dominated by NBK and KFH, which collectively owns about two -thirds of the banking sector, which leads to intense competition between other players.
“We are all fighting for good customers, and this creates pressure in the margins and return.”
The expected mergers are unlikely to cause a major disorder. Usually in the unification of banks in the Gulf Cooperation Council, the main shareholders-strong families or state-owned entities-have not changed only, with the restructuring of assets only.
In the case of Burgan and UNITED GULF Bank, both entities are the subsidiaries of the company Kuwait Projects (KIPCO), one of the largest holding companies in the Middle East and North Africa region, supported by the royal family. Boubyan Bank is a subsidiary of NBK, and has acquired GULF Bank or any retail bank, it ended with the reinforcement of the already dominant NBK website.
Kuwait’s recent initiatives to enhance the financial sector also focus on building capital markets to advance the growth of the private sector. The Kuwait Stock Exchange (KSE) and reforms began to simplify foreign ownership rules to show the results.
Last year, 69 million shares were trading on KSE, making it one of the most active and best performance markets in the Gulf Cooperation Council. While investors mainly are local, foreign participation in trading activity represents 7.8 % of total deals in 2024, up from 5.8 % in 2021.
Khalil from Marcaz, who was recently launched in investment funds in Kuwait, says: “The reforms made to deepen capital markets and improve liquidity have helped increase the clarity of Kuwait markets among foreign investors and allowed asset managers to launch new products such as traded investment funds and Reits, which were not previously possible,” says Khalil from Marcaz, who was recently launched in investment funds in Kuwait. Marcaz also hopes to expand its product portfolio to focus on money and objectives based on alternative assets categories such as private stocks and private credit.
After the privatization of Borsa Kuwait, which runs KSE, in 2016, the stock exchange was upgraded to the “emerging market” by the global index providers MSCI, FTS Russell and S&P. It is currently in the third stage the ambitious market development plan, while attracting local family companies to include being one of the next main challenges.
“The wave of public subscription is sweeping some other Gulf Cooperation Council countries that have not yet taken off in the Kuwaiti markets,” Khalil notes. Likewise, the activity of the deal in Kuwait is defeated. The measures of stimulating the list of family companies, privatizing the state’s assets, introducing parallel markets, and products such as investment funds circulating in the development of the market. “
The road forward
For the first time in a long time, the change came to Kuwait. By updating its financial framework and intensifying the project’s activity, the authorities clarify a commitment to the enactment of some of the long -awaited changes, the observers said that the country needs to stay away from dependence on oil.
The enthusiasm for continuous reforms, in turn, supports increasingly positive investor morale. But there is still a lot to do to encourage and support the growth of the private sector, which reduces the state’s dependence on hydrocarbons revenue, especially since the government plans to significantly increase oil production.
