Finite natural resources and a compact size with solid economic diversification goals beg for out-of-the-box economic policy for a country to thrive. Kuwait is a prime example of a collaborative economy model that forges partnerships with allies and powerful private players to boost national GDP.
The recent agreement between nation’s flagship Kuwait Airways and the UAE’s world-famous Emirates airlines is a testament to the fact that Kuwait’s path toward growth through complementing policies rather than full-on healthy competition among brotherly states of the GCC.
Inked on November 25, 2025, the agreement allows Kuwait Airways to access 19 international destinations within Emirates’ global network, and in turn allows Emirates to access eight international destinations within Kuwait Airways’ network.
After the signing ceremony, Chairman of Kuwait Airways Abdulmohsen Al-Fagaan said this cooperation with Emirates aligns with Kuwait Airways’ vision to provide more diverse and flexible travel options for passengers in the region and it is within the framework of the national carrier’s strategic plans to strengthen its global presence through effective partnerships with leading airlines.
Earlier in June, Kuwait signed a major tax deal with Qatar to eliminate double taxation. In September, Kuwait also approved a GCC payment link agreement to integrate regional financial systems which will facilitate seamless cross-border payments and financial transactions among GCC countries, boosting intra-regional trade, investment and economic cooperation.
In addition, Kuwait hosted a major joint meeting between the GCC and the United Kingdom in October focused on a Free Trade Agreement which is bound to open broader trade and investment opportunities for Kuwait and other GCC nations.
Kuwaiti economy is in good healthy and 2025 is proving to be a good year for the nation’s growth. National Bank of Kuwait in its November report says that total GDP increased by 1.7 percent year-on-year (y-o-y) in Q2 2025, cementing its return to positive growth following seven consecutive quarters of contraction in 2023-2024 due to prolonged oil production cuts.
“The outlook remains constructive thanks to rising crude output, a more favorable business environment and the government’s reform drive. With interest rates down by 50 bps this year and potentially easing further in 2026, credit growth should be well-supported following robust levels this year (+6% YTD in September),” says the NBK report.
The boost from lower borrowing costs should also help spur further gains in the real estate sector, where activity jumped to an 11-year high in Q3 2025. Meanwhile, project awards activity has been solid this year and is on track to match 2024’s multi-year-high, helped by the government’s commitment to expand oil and power generation capacity and develop infrastructure, says the report.
The economic diversification drive has been in full swing as well in Kuwait. “The non-oil economy expanded by 3.1 percent y-o-y in Q2 2025, quickening over the two percent recorded in Q1 for a third consecutive quarter of positive annual gains. Growth in Q2 was led by an acceleration in the construction (12.6 percent y-o-y), telecommunications (eight percent), real estate (7.2 percent), and health and social work (5.9 percent) sectors, says the NBK report, adding that the construction sector is expected to remain a significant driver of non-oil GDP growth in the near term, as the government doubles down on its large pipeline of infrastructure projects, including the construction of new housing cities, road networks and the development of expanded power and water facilities.
Owing to steady growth with positive outlook, international ratings agency S&P Global (Standard & Poor’s) upgraded Kuwait’s long- and short-term sovereign credit ratings on Kuwait to “AA-/A-1+” from “A+/A-1” in a note published on November 21, 2025.
The S&P upgrade stems from Kuwait’s execution of key fiscal and economic reforms aligned with Kuwait Vision 2035. “These reforms primarily focus on economic diversification, modernizing infrastructure, and diversifying revenue sources to improve fiscal sustainability,” says S&P, adding that Kuwait’s financing and liquidity law, passed in March 2025, has diversified the government’s funding profile and reduced uncertainty around financing arrangements.
The upgrade by S&P is seen as a strong vote of confidence for Kuwaiti economy and is likely to result in greater foreign investment flows and boosting investors’ belief in Kuwait’s long-term economic vision.
KUNA, Kuwait’s official state news service, says in a report published on November 26, 2025, the momentum behind the country’s reform agenda accelerated significantly since mid-2024 with an integrated program covering economic, financial, legislative and structural areas.
According to KUNA report, the enactment of Law No. 60 of 2025 (Liquidity and Financing Law) has been a milestone in the reforms process. This law enables the state to adopt diversified financing tools reducing the pressure on public spending, especially during the periods of oil revenue fluctuations.
In addition, Kuwait has adopted global minimum tax on multinational corporations in 2025 endorsed by G20 and OECD countries improving transparency and accountability.
Whether it is a new smart licensing project to attract institutional investment, new Sukuk Law, sector-specific reforms or US$434 million development spending achieved during the first quarter of 2025-2026 development plan, Kuwait’s economic reforms have accelerated in the past 12 months to keep up with global changes and in wake of new realities.
As Kuwaiti government issued three international bonds totaling $11.25 billion (about seven percent of GDP) in October 2025, its first in the capital market since 2017, S&P Global expects the government will continue to work on a medium-term financing plan that will be supportive of expanding non-oil revenue sources.
“We estimate Kuwait’s liquid assets will average about 534 percent of GDP over 2025-2028, which is among the strongest ratios of all sovereigns we rate, due to large assets accumulated since 1953 within the country’s sovereign wealth fund (SWF) Kuwait Investment Authority (KIA), says the S&P’s Kuwait ratings upgrade document. The assets of KIA, oldest SWF in the world and the fifth largest, are close to US$1.2 trillion.
The ratings agency has also highlighted one of the challenges for Kuwait – rising deficit. “Our assumption of lower oil prices of $60 per barrel (/bbl) for 2026 and $65/bbl from 2027 onward and high expenditure levels mean we forecast headline fiscal deficits to remain high, averaging seven percent of GDP over 2025-2028.
“Based on our financing assumptions, we forecast gross general government debt will increase to about 24 percent of GDP by 2028 from about 13 percent as of yearend 2025,” it said, adding that despite an upward trend in gross debt, S&P expects the Kuwait government will remain in a very strong net asset position due to the large stock of KIA assets.
Speaking of challenges to Kuwaiti economy, the World Bank has highlighted Kuwait’s vulnerability to the global oil-price fluctuations. Even though substantial sovereign assets and oil revenues provide important financial buffers, yet reliance on hydrocarbons leaves the economy vulnerable to commodity price volatility and long-term demand shifts.
“Over the longer term, climate-related risks and the structural decline in global oil demand pose additional challenges to growth and sustainability. Hence, structural reforms are critical to foster private sector-led growth, generate productive employment, and meet the aspirations of a young and growing population,” says the World Bank in its latest report.
The solution, according to the World Bank, is durable fiscal consolidation which will require tighter expenditure control, stronger budget frameworks, and greater mobilization of non-oil revenues. “Moreover, reforms to the business environment and labor market are essential to attract investment and enhance productivity.”
The rising public debt in 2025 and beyond is a big cause of concern but it could be tamed and controlled with the effective implementation of the Liquidity and Financing Law. Kuwait has taken powerful steps in terms of introducing structural reforms, however, the impact depends on the sustainable execution of policies to achieve the goals of Vision 2035.
When it comes to building collaborative economy, Kuwait’s regional and international agreements after reforms, public-private partnerships and the nation’s strong push to enhance entrepreneurship ecosystem along with the focus on quick development of digital economy through fintech and platform-based services will all collectively contribute toward Kuwait’s healthy economic development for a long time to come.
(The author is a senior journalist based in Toronto, Canada)
