Kuwait Country Risk Rating

Kuwait’s overall risk rating remains at medium. The economy has been plunged into a deep recession by the closure of the Straits of Hormuz triggered by the U.S./Iran war.  The hydrocarbon sector, which accounted for nearly 45%of GDP and 84% of government revenue in 2025 means that GDP will likely fall by 15-20% in 2026. The government budget deficit is also likely to reach 15-20% of GDP versus the traditional large surplus, as the government is committed to expenditure to ensure social and political stability.  Even so, Kuwait’s financial wealth is over 500% of GDP and some of this will be rundown to finance the government deficit.  Additionally, the government debt/GDP was 14% in 2025 according to the IMF, which is very low and allows for one or two years of an awful budget deficit without problems. Thus, the sovereign non-payment risk is at medium-low, while banking sector vulnerabilities are also at medium-low. However, the long-term problem remains that the vast bulk of Kuwait’s exports goes through the Straits of Hormuz and a pipeline alternative is not currently being built.  This leaves Kuwait dependent on U.S./Iran negotiations. 

Domestic politics remain tense but stable. Political violence and legal and regulatory risk scores remain at medium. Parliament has been dissolved for up to 4 years, to help get necessary reforms through.  Though Kuwait is moving towards some long overdue structural reforms, the country faces pressure from the IMF to do more while the economy remains very reliant on fossil fuels. However, Kuwait will likely put priority on a new oil pipeline, rather than speeding up reforms or reducing non-oil expenditure.