Kuwait’s GDP drops 4.4 percent in Q4 2023 on oil sector recession: Report

Kuwait’s gross domestic product (GDP) fell by an annual 4.4 percent in the final quarter of 2023, down slightly from a 5.8 percent contraction in the third quarter. The latest preliminary estimates from the National Bank of Kuwait’s (NBK) economic report reveal that the country’s oil sector remains under pressure from OPEC crude oil production cuts, while the non-oil sector saw a sharper contraction than in the third quarter of 2023.

The oil sector still has limitations

The NBK report revealed that Kuwait’s GDP from the oil sector fell 6.4 percent year-on-year in the fourth quarter of 2023, a slight improvement from the third quarter. Kuwait maintained oil production at 2.55 million barrels per day, in line with its OPEC+ production cut commitments.

The country’s oil-based GDP shrank by 4.3% in 2023, a reversal from the strong expansion Kuwait experienced in 2022 as a tightening oil market prompted OPEC to boost production.

However, the positive performance of the oil sector in 2022 largely defied global trends. Hence, Kuwait’s GDP growth in the oil sector has been negative for seven of the last 10 years, fluctuating in line with OPEC’s supply policies. Kuwait’s oil production in 2023, at 2.59 million barrels per day, is about 10 percent lower than in 2014, when it was 2.87 million barrels per day.

Looking ahead, Kuwait’s oil-related GDP growth will likely pick up from the fourth quarter of 2024, after OPEC+ announced in June that it would begin easing production cuts from October.

NBK expects Kuwait’s GDP to grow by 0.9 percent quarter-on-quarter in the fourth quarter of 2024. It further expects growth of 4 percent annually in 2025 if production returns to normal levels. However, OPEC has left open the possibility that it could halt or even reverse these supply increases if market conditions require it.

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Non-oil contracts for fifth consecutive quarter

Kuwait’s non-oil GDP continued to decline in the fourth quarter of 2023, falling by -2.3% year-on-year, marking a continued decline for the fifth consecutive quarter.

Non-oil activity fell 2.9% in 2023, the second consecutive annual decline after a 0.1% decline in 2022. Despite the decline, the transportation and warehousing sector grew 20%, while the hotels and restaurants sector grew 17.4%. Meanwhile, household employment rose 13.1%.

That said, the performance of larger non-oil sectors such as manufacturing, which fell 17 percent annually, weighed on Kuwait’s non-oil GDP. Trade fell 2.8 percent, while other services and real estate fell 2 percent.

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