MARC Ratings has affirmed the State of Kuwait’s sovereign credit rating at AAA with a stable outlook based on the rating agency’s national rating scale. The rating reflects Kuwait’s strong fiscal and external balance sheets, underpinned by its strong position in the global oil market. Kuwait ranked as the fifth-largest Organization of the Petroleum Exporting Countries (OPEC) oil producer in 2023, with an oil output of 2.6 million barrels per day (mbpd), well above the OPEC’s median of 1.2 mbpd.

Kuwait maintained a substantial current account surplus of 32.8% of gross domestic product (GDP) in 2023 (median of peers: 1.8%), leading to significant official foreign reserves of USD54.5 billion, which are sufficient to cover short-term external obligations within Kuwait’s total external debt of USD64.3 billion. Oil revenue is invested abroad through the Kuwait Investment Authority (KIA), which manages the General Reserve Fund (GRF), Kuwait’s budget-stabilisation fund. In 2023, the KIA’s total assets under management was estimated at USD923 billion or over 500% of GDP, significantly higher than the Kuwaiti government’s debt of USD61.9 billion or 3.4% of GDP.

Kuwait’s credit strength is tempered by persistent volatility in oil prices and production, given the country’s heavy reliance on the oil sector. After achieving a high real GDP growth of 8.2% in 2022, Kuwait’s economy contracted by 2.2% in 2023 as the average Brent oil price per barrel declined to USD82 from a recent peak of USD99 in 2022. The ongoing OPEC-mandated oil production cuts since 4Q2022 have further impacted Kuwait’s oil output, reducing it to 2.4 mbpd in 5M2024 (2023: 2.6 mbpd, 2022: 2.7 mbpd). That said, substantial assets in the KIA’s long-term fund provide a strong contingency buffer. Consequently, the motivation to diversify the economy and replenish the GRF has been slow, additionally hindered by legislative gridlocks and the recent suspension of parliament for up to four years. Nonetheless, despite delays in administration, control remains highly centralised within the ruling family, which allows for political stability.

The Central Bank of Kuwait’s gradual approach to raising interest rates has had a limited impact on financing conditions and inflation. Despite the phasing out of forbearance policies in January 2023, Kuwait’s non-performing loans ratio remained low at 1.6% in 1Q2024 (2023: 1.4%). Kuwait’s financial sector remains supportive in financing domestic economic activities and advancing economic diversification plans.