Kuwait’s economic growth is likely to remain flat to slightly negative in 2024 on the back of additional oil sector cuts, the National Bank of Kuwait said in its latest quarterly economic brief.

The non-oil sector will likely rise over 3%, spurred on by refining gains and still-growing private consumption.

The recent GDP figures, published after a long delay, showed non-oil growth accelerating to 1.5% year-on-year (YoY) in Q2 2023, after several quarters of contraction. However, overall GDP growth was -1.3% due to declining oil sector output.

Growth in the second quarter was driven by solid gains in the transportation and construction sectors, with the latter reflecting the rebound seen in project awards in 2023.

Crude price

NBK expects Kuwait export crude (KEC) to stay at $82 per barrel "on softer but still solid oil demand growth and supportive OPEC+ supply management,” the report said.

During the ministerial meeting in November 2023, Kuwait agreed with the OPEC+ proposal to deepen and extend 2023’s voluntary production cuts into Q1 2024 and possibly longer to balance the market and prevent further oil stock builds.

Kuwait’s output in Q1 2024 will fall by 135,000 barrels per day (bpd) to 2.41 million bpd.

Oil prices fell sharply in Q4 2023, with KEC ending the year at $79.6 a barrel, down 18.7% quarter-on-quarter and 3.3% YoY, erasing most of Q3’s OPEC supply-curtailment gains.

Meanwhile, the Kuwaiti central bank card data showed that consumer spending growth continued to normalise post-pandemic. Total card spending grew 8.7% YoY in Q3 2023, similar to the 8.4% rise in Q2 2023.

Consumer spending faces headwinds this year, including an uncertain global macroeconomic backdrop, lower year-on-year oil prices, heightened geopolitical risk and still-elevated international interest rates. However, these are expected to begin easing in H2 2024.

“But the bulk of the slowdown in spending growth is likely behind us, with growth now more in line with historic trends after a post-pandemic surge. Consumer confidence could be boosted if the government tackles its economic agenda with renewed vigour.”

Inflation notched a decline in December 2023 to reach 3.4% YoY after spending most of the year stuck at 3.8%, NBK added.           

(Editing by Brinda Darasha; brinda.darasha@lseg.com)