Growth is projected to rebound to 3.5% in 2019 as OPEC+ production cuts taper off, and oil output and exports increase. Plans to invest US$115 billion in the oil sector over the next five years should also boost oil production. With additional support coming from public investment spending, growth should rise to about 2.7% over the medium term. Current account and budgetary pressures are expected to continue easing on the back of a partial recovery in oil revenues, and as government spending is gradually trimmed.
The baseline assumes gradual implementation of spending and revenue reforms including the introduction of a VAT in the second half of 2018 as part of efforts to diversify revenues. Inflation is expected to rise moderately to 3% during the implementation of the VAT, before easing to 2.5% in the medium term.
Absolute poverty and involuntary unemployment are virtually nonexistent. 80% of employed Kuwaiti nationals work in the public sector. In contrast, expatriates, who make up two-thirds of the population, constitute the bulk of lower-income residents. Additional concerns for expatriate workers include unpaid or delayed wages, difficult working conditions and fear of a crackdown.