2017 Index of Economic Freedom

Kuwait

overall score65.1
world rank61
Rule of Law

Property Rights55.5

Government Integrity41.3

Judicial Effectiveness56.4

Government Size

Government Spending40.8

Tax Burden97.7

Fiscal Health99.8

Regulatory Efficiency

Business Freedom61.2

Labor Freedom61.5

Monetary Freedom73.6

Open Markets

Trade Freedom78.7

Investment Freedom55.0

Financial Freedom60.0

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Quick Facts
  • Population:
    • 4.1 million
  • GDP (PPP):
    • $288.4 billion
    • 0.9% growth
    • 4.0% 5-year compound annual growth
    • $70,166 per capita
  • Unemployment:
    • 3.5%
  • Inflation (CPI):
    • 3.4%
  • FDI Inflow:
    • $293.5 million
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Kuwait is trying to modernize the structure of its economy and scores relatively well in many of the 12 economic freedoms. The economy benefits from high levels of openness to global commerce and good monetary stability. Progress on enhancing the efficiency of business regulations, however, has been mixed.

The availability of high oil revenues has delayed privatization and other structural reforms that would diversify the economy; following the collapse of oil prices in 2015, Kuwait recorded a budget deficit for the first time in 15 years. Institutional deficiencies stemming from state bureaucracy and an entitlement culture stifle economic dynamism. The judicial system is subject to political influence and lacks transparency.

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Background

Kuwait, the first Gulf Arab country to establish an elected parliament, is a constitutional monarchy ruled by the al-Sabah dynasty. After Islamists scored major gains in parliamentary elections in February 2012, Emir Sabah al-Ahmad al-Jabr al-Sabah annulled the results and changed the election laws. This sparked protests and a boycott of the subsequent election, the results of which were annulled by the Constitutional Court. In July 2013 balloting, pro-government Sunni candidates won a significant majority. Kuwait controls roughly 6 percent of the world’s oil reserves. Oil and gas account for nearly 60 percent of GDP and 94 percent of export revenues.

Rule of LawView Methodology

Property Rights 55.5 Create a Graph using this measurement

Government Integrity 41.3 Create a Graph using this measurement

Judicial Effectiveness 56.4 Create a Graph using this measurement

Only citizens of Gulf Cooperation Council countries may own land. The legal system is not well developed, and foreigners face difficulties enforcing contract provisions in local courts. The emir appoints all judges. The ruling family has blocked attempts by the opposition in parliament to investigate corruption. Transparency in government spending and operations is inadequate, and the rule of law is weak.

Government SizeView Methodology

Individual income is not taxed. Foreign-owned firms and joint ventures are the only businesses subject to the corporate income tax, which is a flat 15 percent. The overall tax burden equals 0.9 percent of total domestic income. Government spending has amounted to 44.4 percent of total output (GDP) over the past three years, and budget surpluses have averaged 20.6 percent of GDP. Public debt is equivalent to 10.6 percent of GDP.

Regulatory EfficiencyView Methodology

In an effort to enhance the economy’s overall competitiveness, Kuwait has taken steps to improve its regulatory framework, but progress has been slow. The labor market is highly segmented. The public sector employs over 70 percent of the labor force. In 2016, public opposition slowed implementation of the government’s five-year (2015–2019) development plan for the gradual phasing out of Kuwait’s extensive system of subsidies.

Open MarketsView Methodology

Trade is important to Kuwait’s economy; the value of exports and imports taken together equals 99 percent of GDP. The average applied tariff rate is 3.2 percent. Foreign investment may be screened by the government. The financial sector continues to evolve. The number of nonperforming loans is declining, and the banking sector remains well capitalized. Kuwait’s stock exchange was privatized in 2016.

Country's Score Over Time

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Regional Ranking

rank country overall change
1United Arab Emirates76.94.3
2Qatar73.12.4
3Israel69.7-1.0
4Bahrain68.5-5.8
5Jordan66.7-1.6
6Kuwait65.12.4
7Saudi Arabia64.42.3
8Oman62.1-5.0
9Morocco61.50.2
10Tunisia55.7-1.9
11Lebanon53.3-6.2
12Egypt52.6-3.4
13Iran50.57.0
14Algeria46.5-3.6


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