Kuwait receives ‘A+’ rating, despite oil dependency: S&P report

A strong stock of government financial assets has cemented Kuwait’s standing as it secures an ‘A+’ rating from Standard & Poor.

In its latest report, the global rating agency affirmed Kuwait’s sovereign rating with a stable outlook, primarily attributing it to government financial assets supporting around 418 percent of the nation’s gross domestic product in 2024.

S&P pointed out that Kuwait’s structural and financial reforms are still lagging behind its peers, and its economy remains highly dependent on the oil sector, making it vulnerable to fluctuations in the oil market.

Despite these challenges, the rating agency anticipates the real GDP to grow by an average of 2.4 percent during the years 2025-2027, compared to a contraction of 2.3 percent in 2024. This forecast assumes a slight easing in the restrictions of the Organization of the Petroleum Exporting Countries agreement on oil production.

The report also highlighted the expected acceleration of large government investment projects, with a focus on public-private partnerships and high-impact projects driven by the New Kuwait 2035 vision.

The national strategy aims to transform Kuwait into a financial and trade hub regionally and internationally, making it more attractive to investors.

The stable future outlook reflects the assumption that Kuwait’s substantial financial and external balances will remain robust during the forecast period, supported by a significant stock of government financial assets projected to reach 447 percent of the GDP between 2024 and 2027.

“We could raise the ratings if the government successfully implemented a comprehensive structural reform package, such as diversifying the economy away from the hydrocarbon sector and increasing its productive capacity, leading to stronger real GDP growth prospects,” the report indicated.

These substantial assets are anticipated to mitigate the economic risks associated with the country’s heavy reliance on the oil sector and potential fluctuations in oil prices.

“Kuwait, largely via KIA (Kuwait Investment Authority) funds but also due to very low levels of government debt, remains in a very large general government net asset position,” the report said.

S&P also emphasized that a downgrade in Kuwait’s sovereign credit rating could be triggered by several reasons.

“We could lower our ratings on Kuwait if fiscal imbalances rise significantly, for instance due to weaker oil prices or the absence of fiscal reforms, and the government were to remain without comprehensive fiscal financing arrangements,” the report said.