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Economic Insight
27.05.2025Kuwait’s external current account surplus remained huge in 2024, despite narrowing for the second straight year to reach 29% of GDP, mainly on lower oil exports. A smaller trade surplus on goods was partially offset by improvements in the services and investment income balances – the latter surplus reaching 21% of GDP. Meanwhile, the financial account revealed a notable rotation toward debt instruments and rising hedging activity. Looking ahead, the current account is expected to remain in surplus but may moderate further due to lower oil prices, a stabilization in worker remittances, and evolving trends in investment allocations due to the prospects of lower interest rates. Financial account outflows may continue to favor investment in high-yield and lower-risk assets amid global macroeconomic uncertainty and elevated trade tensions.
The current account surplus narrowed to KD14.3 billion (29.1% of GDP) in 2024 from KD15.8 billion (31.1% of GDP) in the previous year. (Chart 1.) This moderation was driven primarily by weaker oil export revenues and a recovery in workers’ remittances. Oil exports continue to dominate current account credits, accounting for 88.9% of total exports and 53% of total credits—though these shares declined from 92.7% and 58.6%, respectively, in 2023. Non-oil exports (domestic exports and re-exports) saw a strong rebound, increasing by 40% in 2024 from a 2.7% decline in the previous year, which is mainly related to higher exports of organic chemicals (18% versus -25% in 2023), plastics & thereof (66% versus 9%), and vehicles, parts and accessories (112% versus 6%). In addition, the services account deficit narrowed by KD1.0 billion mainly due to the decline of Kuwaiti’s travel spending abroad by KD0.6 billion — which also includes Kuwaiti students and state-sponsored medical travelers. This smaller services deficit helped partially offset the impact of a smaller goods trade surplus on the current account balance.
Investment income growth eased though remaining at a historical high
Net investment income, which represents the returns on capital invested abroad, stood at an extremely strong KD10.2 billion in 2024, edging up by 2.3%. (Chart 2.) This increase came mainly on higher portfolio investment returns (KD6.1 billion), though these gains were partially offset by a fall of Kuwait’s direct investment earnings from abroad (KD2.3 billion) and the increase in profits of non-resident direct investment in Kuwait, in line with a rebound in Kuwait’s stock market last year. The small increase in net investment income last year follows a much stronger performance in 2023, which was supported by higher returns on deposits and short-term treasuries in response to elevated US policy rates, and strong growth in US equity markets especially. Investment income from abroad in 2024 was worth 57% of oil exports, up from 40% in 2019, signaling a growing and strategic role for external investment income in supporting Kuwait’s current account surplus, especially amid fluctuations in hydrocarbon earnings.
Workers’ remittances rebounding from prior year’s contraction
The secondary income account, predominantly composed of workers’ remittances, rose by 11.8% in 2024, reversing the steep 28.4% contraction in 2023. The recovery was likely supported by the relative stabilization of the Egyptian pound and Indian rupee since H2 2023—currencies of origin for nearly half of Kuwait’s expatriate workforce. Nonetheless, remittance levels remain 24% below their pre-pandemic level (2019), suggesting that rising domestic living costs—amid the highest inflation rates among GCC peers in 2024—and exchange rate concerns are prompting expatriates to retain more funds locally.
Financial outflows relatively stable in 2024
On the other side of the balance of payments, financial account outflows were broadly stable in 2024, declining slightly to KD15.3 billion (31% of GDP) (Chart 3.). Most of these outflows were within the portfolio investment segment with a notable shift toward investing in debt instruments, which increased to KD 10.1 billion, compared to a nearly balanced composition in 2023. This reallocation likely reflects heightened investor appetite for fixed-income securities, driven by attractive global yields and growing expectations of monetary easing in advanced economies. The decline in outflows also came due to lower direct investments abroad, which fell to KD3.2 billion (-7.9%) as well as a fall in reserve assets by KD0.9 billion to reach KD13.7 billion, underscoring Kuwait’s robust external liquidity position (covering about 8.7 months of imports, well above the IMF’s three-month threshold) (Chart 4.). It is worth noting that banks’ assets of financial derivatives increased by almost tenfold in 2024, indicating a surge in hedging activity against global market volatility and changes in monetary policy. Furthermore, the “other/ general government” liabilities saw a significant increase of KD1.4 billion, up from KD107 million in 2023, which could point to an increase in government related entities’ debts.