Economic expansion in Q1 2025 exhibits a slight upward trend in GDP figures
In the first quarter of 2025, Kuwait's economy has shown signs of recovery and diversification, as the country continues to pursue its strategic goals of reducing oil dependency and mitigating the impact of global oil market volatility.
According to the latest Al-Shall report, Kuwait's GDP at constant prices for Q1 2025 stands at KD 10.335 billion, a 1.0% increase from Q1 2024's KD 10.237 billion. This growth is largely due to the 4.3% rise in the non-oil sector's value added, which now stands at KD 7.367 billion.
The non-oil sector's growth has been driven by various sectors, including manufacturing, real estate, and transportation. Despite a slight slowdown from the previous quarter's 4.0%, the trend remains positive, with projections for further growth as oil production normalizes post-OPEC+ cuts.
On the other hand, the oil sector recorded a slight decline of 0.3% at constant prices in Q1 2025. The oil sector's value added in Q1 2025 is lower than Q1 2024, with a 3.1% decline. The average oil price in Q1 2025 is $78.2 per barrel, a decrease from Q1 2024's $82.1 per barrel.
Wholesale/retail trade, hotels, and restaurants contributed 5.3% to Kuwait's GDP in Q1 2025, while public administration, defense, and social security contributed 12.5%. Financial services and insurance contributed 9.4%, and education accounted for 6.1% of the total GDP. Transport and communications contributed 6.6%, and manufacturing accounted for 7.7%.
The report does not mention any government policies or initiatives that may have contributed to the GDP growth. However, it emphasizes that Kuwait's economy remains fundamentally dependent on oil, either directly or through government-financed sectors.
To further diversify its economy, Kuwait is actively pursuing significant economic diversification efforts. Central to this strategy is the proposed establishment of a massive investment entity named Al-Kout Investment Company, with a capital of 50 billion Kuwaiti dinars (approximately $165 billion). This company is designed to channel investments into diverse sectors such as energy (including renewables like solar, wind, and green hydrogen), transport, infrastructure, industrial zones, smart cities, tourism islands, and economic zones.
In addition to this, Kuwait is implementing new tax regulations on multinational corporations, which are expected to generate around 250 million Kuwaiti dinars ($819 million) annually. This tax reform is another facet of Kuwait's diversification strategy, intended to create a fairer investment environment and increase non-oil revenues to build a resilient and sustainable economy.
The country’s 2025-2026 budget underscores this pivot by earmarking $6 billion for infrastructure projects such as railways, roads, water and electricity networks, and port construction, notably the Mubarak Al Khabeer Port, which supports diversification by improving logistics and trade capacities.
These combined measures reflect Kuwait’s commitment to reducing oil dependency and building a more sustainable and varied economic base in response to global oil market uncertainties. The oil sector's share of GDP fell from 43.2% in Q1 2024 to 41.4% in Q1 2025, excluding contributions from post-extraction activities. The non-oil sector grew by 2.0% in Q1 2025 at constant prices.
However, the report does not provide any forecasts or predictions for future GDP growth. It also does not provide specific information about the growth or decline of the overall oil sector in terms of current prices or about the growth or decline of other sectors besides the non-oil and oil sectors.
In conclusion, Kuwait's economy has shown a positive trend towards diversification, with the non-oil sector driving much of the growth. The country's continued efforts in this direction, including the establishment of Al-Kout Investment Company, tax reforms, and infrastructure investments, are expected to further strengthen Kuwait's economic base and reduce its dependence on oil.
The financial services and insurance sector contributed 9.4% to Kuwait's GDP in Q1 2025, demonstrating the role of finance within the nation's business landscape. In line with their strategic goals, Kuwait is establishing the Al-Kout Investment Company, aiming to channel investments into diverse sectors and further diversify their economy.
