International Monetary Fund Concludes Official 2021 Article IV Consultation with the State of Kuwait
The Central Bank of Kuwait (CBK) issued a press statement on the conclusion of the International Monetary Fund’s (IMF) Article IV Consultation to the State of Kuwait, held virtually from April 4th to 8th 2021. CBK, in coordination with IMF and the relevant national authorities, made the necessary arrangements including information and data compilation, and scheduling meetings with the senior officials of the government and non-government entities to discuss the economic, financial and monetary conditions and the resilience of the banking and financial sector. The concluding statement of the IMF mission commended CBK’s efforts in reinforcing the soundness and resilience of the banking and financial sector.
Commenting on the findings of the 2021 Article IV Consultation report, His Excellency Dr. Mohammad Y. Al-Hashel, the Governor of the Central Bank of Kuwait, briefly stated that the IMF mission commended CBK’s sustained proactive monitoring of credit risks and efforts to strengthen the regulatory and supervisory frameworks aimed at bolstering financial stability. The report also stated that the banking sector remains resilient, well-capitalized, and liquid benefiting from the skillful regulatory oversight by the Central Bank of Kuwait, notwithstanding the shocks in 2020.
Dr. Al-Hashel added that the IMF’s concluding statement highlighted the structural challenges faced by the Kuwaiti economy and the ways to address them. It also mentioned Kuwaiti authorities’ swift and well-coordinated policy responses to protect public health and limit the economic impacts of the COVID-19 crisis, although the challenges posed by the pandemic remain significant. As in other GCC countries, the COVID-19 pandemic, together with oil price shock and cuts to oil production under the OPEC+ agreement, weighed heavily on economic activity and fiscal balances in 2020.
Article IV Consultation Findings
At the 2020 economic performance, the real GDP, as per the IMF 2021 Article IV Consultation mission report, is estimated at -8 percent with a contraction of non-oil growth of -6 percent. The overall fiscal balance significantly deteriorated compared to the previous year. Going forward, a gradual recovery is expected in 2021, supported by the rebound of domestic and external demand as vaccinations proceed. However, considerable uncertainty surrounds the outlook, including from the persistence of the pandemic and related global and domestic containment measures.
The mission concluded that combating the pandemic and mitigating its effects, particularly those on the most vulnerable, should remain a priority until the recovery is firmly underway. As the recovery firms up, strong fiscal consolidation and structural reforms would be needed to preserve fiscal buffers and strengthen growth.
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