Country Economic Forecasts > Kuwait

Rating agency Moodys has put Kuwaits Aa2 sovereign credit rating on review for a downgrade, along with Qatar and the UAE, citing Kuwaits oil dependence and uncertainty regarding the policy response as key issues. The government has made recent announcements about fiscal adjustment including plans for a corporate tax covering local firms, subsidy cuts, privatisation of some state-owned projects and issuance of domestic and international bonds. While implementation will face the inevitable public and parliamentary opposition, we assume that there will be significant progress and have pencilled in notable further cuts in government spending over the next two fiscal years.Although helping to narrow the fiscal deficit from a forecast 16% of GDP in FY2016/17, austerity measures and the absence of a notable recovery in oil prices will impact business confidence and growth in consumer spending. Accordingly, we see non-oil GDP growth remaining weak averaging just 3% in 2016 and 2017. With oil production constrained by lack of spare capacity, overall GDP growth is forecast at a modest 2.2-2.3% per year.