Kuwait’s Economy Picks Up Pace with Growth in Q1 and Rising Business Optimism

Prime Highlights:

Kuwait’s inflation in July rose slightly to 2.39%, mainly due to higher food and beverage prices.

The economy showed recovery, with 1% growth in Q1 2025, ending seven quarters of decline.

Key Facts:

Fitch Ratings reaffirmed Kuwait’s AA- rating, projecting net foreign assets to rise to 601% of GDP in 2025, up from 582% in 2024.

The Purchasing Managers’ Index (PMI) climbed to 53.5 in July, indicating strong momentum in the non-oil sector.

Key Background:

Kuwait’s yearly inflation went up a little in July, mainly because of higher food and drink prices, according to the Central Statistical Bureau (CSB). July was 2.39 compared to June 2.32, which is the indicator that the economy continues to improve, although indicating a mild pressure on prices.

Prices in the food and drinks category, which make up a large part of the Consumer Price Index (CPI), went up by 0.63% in July. On the other hand, transport costs fell slightly by 0.07% due to lower vehicle running expenses. Meanwhile, housing, healthcare, communication, education, and restaurant and hotel prices showed no change during the month.

Overall, the CPI climbed 0.22 percent to 137.2, the CSB reported, noting price increases in recreation and cultural activities, as well as household furnishings and maintenance.

Kuwait’s economy is showing early signs of recovery despite a slight rise in inflation. According to the National Bank of Kuwait, the country’s output grew by 1% in the first quarter of 2025, ending seven quarters of back-to-back declines. An increase in the non-oil sector has dominated the recovery and is an important sector in the diversification of the economy.

Inflation picked up at a time when Kuwait’s economy is beginning to recover. The National Bank of Kuwait reported that the economy grew by 1% in the first quarter of 2025, breaking a streak of seven quarters of decline. According to Fitch, Kuwait’s overseas financial reserves are projected to reach nearly 601 percent of GDP in 2025, rising from 582 percent in 2024.

Private sector momentum is also gaining pace. The latest Purchasing Managers Index (PMI) posted by S&P Global improved to 53.5 in July, as compared to the previous score of 53.1 in June, indicating a healthy rise in non-oil business activity. The report pointed to relief in inflationary pressures on firms, with the prices of purchases and staff costs increasing at the lowest rate in months.

Moving forward, Kuwaiti companies are quite positive, as most of them foresee greater improvements in output in the foreseeable future, which can be seen as a further boost to Kuwaiti economic recovery.