Economics & Development

The conflict in the Middle East is affecting Kuwait's economy through multiple channels. Disruptions to shipping in the Strait of Hormuz have completely halted oil exports and inflated import costs. Infrastructure damage, emergency military spending, and weaker investor sentiment are straining a public spending model that has long relied on hydrocarbon windfalls. Further prolongation or escalation of the conflict could exacerbate existing fiscal pressures.

Growth in 2025 was supported by strong mining activity and lower inflation due to moderation of global prices of food and fuel. Investments to develop the Colluli potash mine and upgrade Eritrea’s power stations are expected to support growth of around 3.5 percent in the near term. Downside risks include production delays at the Colluli mine, volatility in global commodity markets, geopolitical risks, and climate vulnerabilities.

Growth momentum is robust, driven by infrastructure investment and agricultural recovery. Labor markets remain weak, with high inactivity and unemployment. Fiscal consolidation progresses but spending pressures could strain public finances. The current account deficit is widening but contained, supported by tourism and FDI. Near-term prospects are favorable, with growth projected at 4.2 percent in 2026, though downside risks remain, including Middle East conflict.

Driven by a modest recovery in agriculture, growth is projected at 2.3 percent in 2026, a contraction in per capita terms. Ongoing fiscal consolidation and debt restructuring are expected to place public debt on a gradual downward path. However, modest growth, high inflation, widespread exchange rate distortions, and limited job creation mean poverty reduction will remain constrained, with only limited gains in household incomes.

While growth remains robust, the Middle East conflict is introducing heightened economic risks for Saudi Arabia, potentially slowing progress towards its Vision 2030. Elevated uncertainty may weigh on recent growth momentum supported by oil and non-oil sectors. Before the conflict, inflation was contained and unemployment declined, though fiscal pressures intensified. Risks stem from oil supply disruptions, Strait of Hormuz exports, and threats to critical infrastructure.

GDP growth accelerated to 8.1 percent in 2025, driven by services and industry, and is projected to moderate to 7.1 percent in 2026–28. Inflation eased to 1.1 percent but will rise due to rising global fuel prices. Poverty continues to decline but remains high at 40.1 percent. Fiscal consolidation reduced the deficit to 2.9 percent of GDP and public debt declined to 56.8 percent. Key downside risks include the Middle East conflict, insecurity, climate shocks, and political risks.

Economic growth was volatile over 2018–2024, rebounding strongly in 2023–2024 after contractions in 2020–2022. GDP growth reached 10.5 percent in 2024, while inflation eased to 3.6 percent after peaking at 12.0 percent in 2023. Fiscal performance strengthened markedly, with the overall balance rising to 10.1 percent of GDP and debt falling to 27.1 percent. The current account shifted to a surplus of 2.4 percent of GDP. External trade recovered, supported by services and exports growth.

Growth accelerated to 3.1 percent in 2025, driven by infrastructure investment and tourism, and is expected to remain robust despite moderation as major projects conclude, reflecting increased productive capacity. The fiscal deficit is projected to decline as capital outlays decrease and revenue measures are implemented, supporting debt sustainability. External shocks could weaken growth and employment, pushing vulnerable households into poverty.

GDP growth moderated to 1.8 percent in 2025 and is expected to converge to around 2.0 percent over the medium term, supported by domestic demand. Inflation fell to 3.6 percent year-over-year in 2025, within the central bank’s tolerance band, while the fiscal position deteriorated. The labor market and household incomes improved moderately, but sustained productivity and real wage growth remain essential for lasting welfare gains.

Real GDP grew 3.8 percent in 2025, driven by consumption fueled by record-high remittances and robust coffee exports. In 2026, growth is projected to slow to 3.4 percent with declining remittances and rising inflation moderating household consumption. Labor income has driven poverty reduction although challenges persist with job quality, fragmented social transfers, and insufficient basic services coverage, hindering further progress.

Growth moderated to 2.1 percent in 2025, reflecting weak construction and subdued investment, partially offset by solid performance in agriculture and mining. Rising remittances, resilient labor market conditions, and strong FDI supported household incomes and contributed to improved welfare. Economic growth is forecast to recover to 3.6 percent in 2026, driven by investment recovery and resilient private consumption, resulting in further poverty reduction.

Growth accelerated to 4.6 percent in 2025 on resilient exports, but it is projected to moderate to 3.6–3.7 percent over 2026–2028 as external demand eases. While fiscal consolidation has continued, revenue growth has flatlined and central government debt remains high at 60.4 percent. Although real wage growth reduced poverty to its lowest rate since 2010, falling participation rates and persistent inequality pose challenges.

Barbados’ tourism-dependent, import-heavy economy remains exposed to external and climate shocks. Growth cooled in 2025 as domestic demand normalized, but with stable prices, resilient tourism, job creation, and modest fiscal gains, while poverty continued to fall. Public debt, though easing, still limits fiscal flexibility, prompting the continuation of priority reforms to foster green energy, diversification, and stronger safety nets.

Economic growth remained strong in 2025, reaching 11.1 percent, supported by robust private consumption and investment. Rapid growth continued to generate price pressures, with average inflation rising to 8.2 percent. The fiscal balance remained in surplus, underpinned by buoyant revenues. Over the medium term, growth is expected to moderate, inflation to accelerate and the fiscal position to shift into deficit.