Kuwait reported a negative real economic growth of -1.3% year-on-year (YoY) in Q2 2023 due to oil output weighed down by OPEC-mandated production cuts, the National Bank of Kuwait (NBK) said in a new report.

The contraction in GDP was due to a decline in oil sector output of -3.9% YoY, the report added.

In Q2 23, Kuwait signed up to an additional 128,000 barrels per day (bpd) of voluntary cuts over and above curbs it agreed to in late 2022, lowering its crude production to 2.55 million bpd for 2023.

Crude output will be reduced further to 2.41 million bpd through Q1 2024, following OPEC’s November decision to take additional steps to balance the oil market.

Meanwhile, non-oil activity grew 1.5% YoY during the second quarter, a sharp improvement on the 0.9% YoY contraction recorded in Q1 2023. Growth was driven by strong gains in the transportation (+35%) and construction (+21%) sectors, with the latter reflecting the rebound seen in project awards witnessed in recent quarters.

“Overall, the picture painted by the recent data is less rosy than we had anticipated,” NBK said.

Non-oil growth in H1 2023 stood at just 0.2% YoY, an improvement on the end of 2022 though still short of expected solid growth in other indicators during the same period, such as bank card transactions (+10% YoY in cash terms) and imports (+9%).

“We acknowledge that these provisional GDP data are subject to change in future releases, and we also see scope for growth to have picked up in H2 23, continuing the improvement recorded in Q1,” the bank noted.

NBK said that the latest numbers, if they remain unrevised, would make its 2023 non-oil growth estimate of 3.6% “difficult to achieve.”

“Conversely, however, the weak 2023 base would make meeting our 3.4% non-oil growth forecast for 2024 easier,” the bank added.
Source: Reuters (Editing by Brinda Darasha; [email protected])