Kuwait economy to dip as crisis disrupts oil exports
Kuwait’s economy is projected to shrink by 6.4 percent in 2026 due to disruptions in oil exports and the closure of the Strait of Hormuz, according to an IMF seminar. The war in the Middle East has caused oil prices to surge to $112 per barrel, worsening inflation and slowing regional economic growth to 1.8 percent, with GCC nations facing declines in non-oil sectors like tourism and trade.
An IMF-organized seminar warned that the war in the Middle East has escalated into a prolonged economic crisis, threatening growth and stability across the MENA region. The conflict has disrupted hydrocarbon production, trade routes, and investor confidence, with oil prices rising to $112 per barrel—a 60 percent increase—while inflation and financing costs climb. Kuwait’s economy is expected to contract by 6.4 percent in 2026 due to halted oil exports and the closure of the Strait of Hormuz, according to IMF Deputy Director Giovanni Melina. The seminar, featuring IMF economists and Islamic Development Bank Chief Economist Sheikh Ahmed Diop, highlighted that while higher oil prices may temporarily boost Gulf economies, non-oil sectors like tourism and financial services are suffering. Tourism, a key diversification driver, has collapsed under regional instability, while food security risks have surged due to reliance on imports. The World Bank reported MENA economic growth slowing from 4 percent in 2025 to 1.8 percent in 2026, with GCC growth revised down to 3.1 percent. Experts noted that prolonged conflict could trigger another wave of oil price hikes, deepening economic strain. Low-income nations in the region face the highest risks, as food and energy import costs rise amid shrinking fiscal space. IMF officials cautioned that the crisis coincides with limited policy flexibility, as public debt and inflation pressures mount. The baseline scenario assumes disruptions will ease by mid-2026, but risks remain high if the war escalates. Kuwait’s decline reflects broader GCC vulnerabilities, where oil-dependent economies now confront dual pressures: soaring energy costs and collapsing non-oil revenue. The IMF seminar underscored the need for urgent policy adjustments to mitigate the fallout, particularly in food security and trade stability. Analysts stressed that the war’s economic impact is spreading rapidly across interconnected MENA economies, exacerbating existing fragilities.
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