S&P Affirms Kuwait’s AA-/A-1+ Rating

S&P Global Ratings affirmed Kuwait’s sovereign credit rating at AA-/A-1+ with a stable outlook, citing the country’s substantial external assets and financial buffers despite ongoing geopolitical tensions and oil-market disruptions linked to the Middle East conflict.

The agency said Kuwait’s large stockpile of accumulated liquid assets would help shield the economy from the impact of regional instability and supply disruptions in the Strait of Hormuz, one of the world’s most critical energy transit routes.

S&P expects Kuwait’s oil production to gradually recover to pre-war levels between 2.5 million and 2.6 million barrels per day by 2027, following temporary disruptions caused by regional tensions and shipping instability in Gulf waters.

Despite Kuwait’s strong net external and government asset position, the ratings agency warned that fiscal pressures remain elevated due to persistently high public spending levels, excluding investment income generated by sovereign assets.

As a result, S&P forecasts Kuwait’s fiscal deficit to remain significant, reaching around 15% of gross domestic product in fiscal year 2027, ending March 31, 2027, compared with approximately 10% in fiscal year 2026. The agency noted that higher oil prices are expected to partially offset the financial impact of reduced production volumes.

Under its baseline scenario, S&P assumes supply disruptions in the Strait of Hormuz will begin easing during the second half of 2026, although periodic volatility is likely to persist.

The agency also cautioned that even after the full reopening of maritime routes, global shipping and energy flows could take several months to normalize, with trade activity potentially remaining below pre-conflict levels through the end of 2026.

Following a temporary economic slowdown in 2026, S&P expects Kuwait’s real GDP growth to rebound to around 3% annually between 2027 and 2029, supported by recovering oil output and large-scale investment programs across non-oil sectors.

The agency further projected that the Kuwaiti government would continue advancing a medium-term financing strategy aimed at broadening non-oil revenue sources and strengthening fiscal sustainability over the coming years.