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Economic Insight
12.05.2025Preliminary official estimates show GDP declining 0.7% y/y in Q4 2024 as an annual decline in oil output more than offset a robust expansion in the non-oil economy. Oil GDP fell 5.7% y/y, with crude production weighed down by extended OPEC+ cuts but non-oil activity rebounded strongly from the contraction in Q3. For 2024 as a whole, total GDP declined for the second year in a row on the steeper fall in oil activity though non-oil GDP growth accelerated.
Non-oil GDP rebounds in Q4 2024 after declining in Q3
The figures, which did not include any revisions to the historical data, show non-oil GDP expanding 4% y/y in Q4, recording the fastest pace since Q1 2022 and recovering from a 2.5% contraction in the previous quarter. (Chart 1.) Growth was led by a rebound in manufacturing activity, which rose 12.2% y/y, reversing a steep annual decline in Q3. Other sectors, especially real estate, transport, and restaurants & hotels also exhibited robust performance. On a quarter-on-quarter basis, non-oil GDP rose by 14.6%, solidly outperforming the seasonal increase usually observed in this quarter (which has averaged 11.5% q/q over the last ten years), with output in the construction (38.7%), manufacturing (15.6%) and hotels & restaurants (12.8%) surging, the latter possibly helped by tourism arrivals for the Arabian Gulf Cup in December.
For 2024 as a whole, non-oil activity grew 1.8%, accelerating from 1% recorded in the previous year, though still notably below the pre-Covid 2011-2019 average of 3.3%. At the sectoral level, real estate, renting, and business activities contributed the most to non-oil growth, followed by education and financial intermediation services. (Chart 2.) Manufacturing output, the second largest component in the non-oil economy, recorded a marginal gain of 0.4% y/y despite a 3.5% annual increase in refined petroleum production following the inauguration of the Al-Zour refinery in late 2023. Figures for refining output were not reported explicitly in the latest release, but it has traditionally accounted for 30-40% of manufacturing activity, and its weight is only expected to have increased after the new refinery expansions came on stream. This seems to imply that subdued value-add from the manufacturing sector overall is due to weakness in the other subcomponents. (Chart 3.)
Oil sector decline continues, though reversal nears as OPEC+ unwinds production cuts
Oil GDP remained in contraction territory in Q4 2024 (-5.7% y/y) for the seventh consecutive quarter due to Kuwait’s OPEC+ obligations, which have called for reduced crude oil production from members to keep the market from being oversupplied. In 2024, Kuwait’s production had to be maintained at 2.413 mb/d post-cuts of 128 kb/d and 135 kb/d, respectively the previous year. Consequently, oil GDP shrank 6.9% y/y for the full year, steepening from 2023’s decline of 4.2%. (Chart 4.) The outlook for the sector is set to improve this year and next, however, owing to the unwinding of OPEC+ voluntary cuts, which commenced in April and will accelerate in May and June (+21 kb/d in both months). This would bring output up to 2.466 mb/d by end-Q2 and return oil GDP to growth. Crude output should reach 2.54 mb/d by 2026.
Growth heading back into positive territory in 2025
While the economy shrunk by 2.6% last year amid reduced oil production, we expect it to return to positive territory this year. Non-oil growth is forecast at 2.5%, supported by ongoing gains in the refining, real estate and projects sectors and increased momentum in government reform and investment initiatives. Together with expanding oil production, total economic growth should reach 1.9% this year, its first positive figure since 2022. This is despite intensifying global economic headwinds, including deteriorating global trade relations sparked by trade tariffs and heightened geopolitical uncertainty. The potential for lower oil prices will, however, remain a key downside risk to the outlook, especially as it might trigger spending cuts as the government attempts to preserve the fiscal position.
