Kuwait Investment Outlook 2025: Navigating Challenges and Opportunities

By Giorgia Sgueglia

Kuwait’s economic trajectory is set for transformation, guided by the government’s Vision 2035 initiative, which aims to position the country as a financial and trade hub both regionally and internationally. This ambitious vision underscores the nation’s commitment to economic diversification, infrastructure development, and private-sector growth.

Vision 2035, also known as “New Kuwait,” aims to transform the nation into a financial and trade hub for the region by 2035. This ambitious plan focuses on creating an economy led by the private sector, fostering competitiveness, and enhancing production efficiency under a government that enables progress. By emphasizing values, safeguarding social identity, and promoting human resource development, Vision 2035 seeks to ensure balanced development supported by adequate infrastructure.

To achieve these goals, Kuwait has outlined seven pillars and aims to rank within the top 35 percent on key performance indicators across these areas. The Fourth Kuwait National Development Plan (2025–2030) will prioritize the knowledge economy, while the Fifth Plan (2030–2035) will transition towards a “Smart Kuwait.”

However, the road ahead is fraught with challenges, including an aging population, skill gaps, and a heavy reliance on hydrocarbons.

Kuwait’s economy is poised for recovery in 2025, following a period of contraction. The oil sector, which faced a decline of 6.8 percent in 2024, is expected to rebound with a 3.4 percent growth in 2025 as OPEC+ unwinds voluntary production cuts. This recovery will contribute to a total GDP growth of 3.0 percent in 2025, up from -2.4 percent in 2024. Meanwhile, the non-oil economy is projected to grow by 2.6 percent, reflecting a gradual shift towards diversification.

Structural reforms have improved, but their successful implementation remains critical for sustained growth. EFG Hermes identifies Kuwait as a potential “dark horse” in 2025, with a strong budget and the lowest public debt levels in the Gulf. However, the country’s economic growth base remains low compared to its regional counterparts. Key reforms include tightening fiscal measures, accelerating project execution, and fostering private sector competitiveness.

Investment in Infrastructure and Key Sectors

The Kuwaiti government is fast-tracking US$26 billion worth of projects in water and energy to stimulate credit growth and address energy shortages. Additionally, sectors such as utilities, housing, transport, tourism, and entertainment are expected to see significant expansion. For instance, the hotel market is projected to grow in 2025. According to Report Linker, an analytics firm, the travel & tourism market in Kuwait is expected to generate a revenue of US$973.9 million and is projected to grow at an annual combined annual growth rate (CAGR) of 2.98 percent between 2024 and 2029. This projected growth should result in an estimated market volume of US$1.128 billion by 2029.

The government also revealed plans to renovate museums and promote cultural festivals and international exhibitions as part of this tourism expansion strategy. Kuwait joins a host of other Gulf countries like Saudi Arabia that have intensified their investments in tourism as a means of reducing overreliance on oil.

Private equity investments are also gaining traction, with deal values expected to reach US$7.62 million in 2025. According to Statista, the number of deals in the Private Equity market in Kuwait is expected to amount to 5.95 by 2025. This market is increasingly focused on technology-driven investments, signaling a shift towards innovation and economic diversification.

Fiscal Challenges and Policy Adjustments

Kuwait’s fiscal position remains a pressing concern. The draft municipal budget for 2025–2026 is set at 300 million dinars (approximately $978 million), reflecting tight spending plans. The country’s heavy reliance on oil revenues exposes it to volatility in global oil prices. For example, the price of oil is expected to reach US$75 per barrel in 2025, a level considered high enough to sustain the expansionary fiscal positions of governments in the region. However, Hermes further stated that Kuwait is more exposed to the risk of falling oil prices in financial terms, as the budget’s oil price benchmark is US$82 per barrel. Without fiscal reforms, the government may struggle to implement its investment plans.

To address these challenges, Kuwait is introducing a Value Added Tax (VAT) and a 15 percent minimum top-up tax on multinational enterprises starting January 2025. These measures aim to diversify revenue sources, curb tax evasion, and stabilize finances. Additionally, anti-money laundering laws have been strengthened, ensuring robust compliance controls.

Non-Oil Economic Performance

Kuwait’s non-oil economy is emerging from two years of negative growth, with key indicators showing improvement. Consumer spending stabilized at +5.4 percent year-on-year in Q2 2024, while bank credit and real estate sales increased by 2.2 percent and 24 percent respectively. Project awards have also picked up, signaling a potential growth turnaround.

Inflation, which eased to 2.9 percent in 2024, is expected to decline further to 2.5 percent in 2025. However, rising housing costs and consumer demand remain areas of concern. The unemployment rate is forecasted to rise to 7.33 percent in 2025, reflecting challenges in integrating Kuwaiti nationals into the workforce.

Vision 2035 aims to foster a skilled workforce to drive economic transformation. Sectors such as IT, healthcare, and financial technology (FinTech) require professionals with expertise in cloud computing, cybersecurity, and data analytics. Addressing skill shortages in these specialized fields is essential for overcoming challenges in infrastructure development and digital transformation.

Kuwait is also making significant investments in sustainable infrastructure and renewable energy to address environmental challenges. The recommendations from the Environmental Affairs Committee on water resource management and energy efficiency are being incorporated into municipal plans. These efforts are in line with global trends focused on sustainability and resilience.

Outlook and Risks

Kuwait’s economic outlook for 2025 remains cautiously optimistic, with several factors shaping its future trajectory. While key risks such as fluctuating oil prices, potential global economic slowdowns, and climate-related shocks persist, the country is poised for recovery. Kuwait’s heavy reliance on hydrocarbons and the ongoing political changes continue to present challenges for the investment climate. However, the full commissioning of the Al-Zour refinery and the anticipated increase in oil production provide encouraging signs of growth and stability.

As Kuwait progresses with its Vision 2035 objectives, its focus on economic diversification, fiscal reforms, and infrastructure development will be crucial in shaping the future. For businesses and investors, navigating these evolving opportunities and challenges will be essential to leveraging Kuwait’s transformation into a leading financial and trade hub in the region

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