S&P Global affirmed on Tuesday Kuwait’s long-term credit rating at “A+” with a stable outlook, forecasting the country’s economy to grow 2% in 2025-2026.
In its latest report, the US-based agency said that due low oil prices and large expenditure, Kuwait is forecast to run a high fiscal deficit in the upcoming two to three years.
“Amid less favorable economic conditions due to global trade tensions and weaker oil prices, Kuwait’s large stock of external public-sector assets should provide a buffer for a policy maneuver, if needed,” said S&P Global.
The report further noted that Kuwait’s fiscal deficits will remain elevated, averaging around 8.9% of gross domestic product from 2025 to 2028, compared to 2% in 2024.
“Kuwait’s fiscal deficits will remain elevated as subdued oil prices and high expenditure levels, particularly on wages and subsidies, continue to weigh on public finances,” S&P said.
It also assumed Brent oil prices of $65 per barrel in 2025 and $70 per barrel beyond then.
The agency said fiscal deficits are forecast at 6% of GDP on average by 2028 from around 14% in 2025 due to a modest increase in production during 2027-2028 and government efforts to increase non-oil revenues.
“S&P Global is recognizing that Kuwait is undergoing technical preparatory work for several fiscal reforms, including corporate income tax, production tax, subsidies rationalization, and improved government procurement,” it noted, adding that the government is seeking to increase non-oil revenues through raising taxes and improving revenue collection through digital transformation.
The agency stressed that one key development is the recent passage of the Financing and Liquidity Law, which enables the government to tap capital markets for the first time since 2017.
“Our base case assumes that government capital expenditure and part of the fiscal deficit will be partially funded via debt issuance. We forecast issuance of about $10 billion in 2025 and about $5 billion of debt annually in 2026-2028,” the agency added.
Meanwhile, S&P warned that potential indirect effects of low oil prices and global policy uncertainty could dampen growth in Kuwait.
It said the US administration imposed a 10% tariff on Kuwaiti exports to the US, but imports of oil, gas, and refined products, which constitute the majority of Kuwait’s exports, were exempt from the new measures.
The agency stated that it expects Kuwait’s economy to grow 2% in 2025-2026, compared to a 2.7% forecast, while rebounding to 2.6% in 2027-2028 as oil output rises.
