S&P Affirms Kuwait’s at AA-/A-1+ with Stable Outlook

S&P Global Ratings has affirmed Kuwait’s sovereign credit rating at AA-/A-1+ with a stable outlook, underscoring the country’s strong financial position despite mounting geopolitical risks and disruptions to oil exports caused by the closure of the Strait of Hormuz.

In a report released Wednesday, the agency highlighted Kuwait’s vast financial buffers as a key pillar of resilience. Government financial assets, held largely through the Kuwait Investment Authority, are projected to reach roughly 490% of GDP in 2026, providing substantial capacity to absorb external shocks.

Kuwait has cut oil production by half and declared force majeure on parts of its export contracts following the effective shutdown of Hormuz, a critical artery for global energy flows. However, S&P expects output to rebound once security conditions improve.

The disruption is already feeding into weaker macroeconomic indicators. The agency forecasts Kuwait’s current account surplus will narrow to around 16% of GDP in 2026, down from 24% a year earlier, while economic growth is projected to slow to below 1%, compared with 2% in 2025.

S&P estimates Kuwait’s fiscal deficit will widen significantly to about 17% of GDP in 2026, with deficits averaging 12% between 2027 and 2029. The shortfall is expected to be financed through a combination of debt issuance and withdrawals from the general reserve fund.

Despite these pressures, the agency views Kuwait’s balance sheet as exceptionally strong by global standards, allowing it to sustain spending and economic stability during periods of volatility.

The report also pointed to the relative strength of Kuwait’s banking system. Non-performing loans stood at just 1.5% across the country’s eight largest banks at the end of 2025, with provisions covering 252% of impaired assets.

While credit growth is likely to slow in 2026 due to geopolitical tensions, S&P said Kuwaiti banks remain well-positioned to withstand potential capital flow pressures. Authorities are also expected to provide support to the financial system if needed.

The affirmation reflects confidence that Kuwait’s extraordinary sovereign wealth and prudent financial management will continue to offset the risks posed by regional conflict and energy market disruptions.

However, prolonged instability in the Gulf, particularly any extended closure of the Strait of Hormuz, could deepen fiscal and external imbalances, testing even Kuwait’s substantial financial defenses.