Country Diagnostic Study – Kuwait

The Country Diagnostic Study (CDS) for the State of Kuwait uses the Hausmann-Rodrik-Velasco growth diagnostics model to identify the binding constraints being faced in its quest for higher economic growth and make recommendations to relax these constraints. Hence, the findings of the CDS can help the Bank in identifying areas where it can have a greater impact and provides an evidence-basis to support the development of the Member Country Partnership Strategy.

The Kuwaiti economy has lost more than one-third of its real GDP per capita since the Global Financial Crisis in 2008. The low growth is underpinned by low private investment and low economic diversification, among other factors. Realizing these problems, the authorities responded by launching Vision 2035 to re-orient the economy towards becoming a regional and international trading and financial hub. This re-orientation depends very much on private investment, which is the lowest in the region.

To bring in private investment and improve growth, both quantity and quality of human capital may need to be scaled up through improving the education system and spending on research and development to support industry-university collaboration on innovations. Efficient institutional governance in the areas of corruption control, regulatory quality and conducive bureaucracy is necessary for the vibrant functioning of the private sector, especially in the labour market and trade.