High oil prices obviously bode well for Kuwait’s economy for the year to come, but what constitutes the Gulf state’s strength can, in some ways, also be a weakness. While its strong balance sheet – due in very large part to strong oil prices – provides comfort to the economy, Kuwait’s high dependence on oil also translates into an undiversified economy that puts it at risk of market volatility. The country's growth rate is about three times more volatile than the global median, according to International Monetary Fund (IMF) data.
Kuwait’s finances are strong, however, and its budget surplus should remain high, coming in at about 14% of gross domestic product (GDP) on the back of rising oil prices. The country also has large overseas investments, which provide a steady income stream, and some diversification away from oil revenues.
