2015 Index of Economic Freedom

Kuwait

overall score62.5
world rank74
Rule of Law

Property Rights45.0

Freedom From Corruption43.0

Limited Government

Government Spending61.1

Fiscal Freedom97.7

Regulatory Efficiency

Business Freedom58.6

Labor Freedom64.2

Monetary Freedom74.0

Open Markets

Trade Freedom76.2

Investment Freedom55.0

Financial Freedom50.0

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Quick Facts
  • Population:
    • 3.9 million
  • GDP (PPP):
    • $154.5 billion
    • 0.8% growth
    • 0.6% 5-year compound annual growth
    • $39,706 per capita
  • Unemployment:
    • 3.1%
  • Inflation (CPI):
    • 2.7%
  • FDI Inflow:
    • $2.3 billion
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Kuwait’s economic freedom score is 62.5, making its economy the 74th freest in the 2015 Index. Its score is 0.2 point better than last year, reflecting improvements in the management of government spending, business freedom, monetary freedom, and labor freedom that offset declines in property rights, freedom from corruption, and trade freedom. Kuwait is ranked 7th out of 15 countries in the Middle East/North Africa region, and its overall score is slightly above the regional and world averages.

Over the past five years, economic freedom in Kuwait has declined by 2.4 points. Score declines have occurred in six of the 10 economic freedoms, led by deteriorations in the control of government spending, business freedom, and trade freedom.

High oil revenues have excused policymakers from making tough choices to liberalize the economy, including privatizing some state-owned enterprises. Structural reforms remain critically necessary to spur dynamic growth and ensure long-term economic development. While Kuwait continues to benefit from an open trading regime that attracts investment flows, rising protectionism must be controlled in order to maintain international trade linkages.

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Background

Kuwait, one of the richest Arab nations, is a constitutional monarchy ruled by the al-Sabah dynasty. During the Arab Spring of 2011, young activists called for political reforms, and residents unlawfully in the country demanded citizenship and jobs. After Islamists scored major gains in parliamentary elections in February 2012, Amir Sabah al-Ahmad al-Jabr al-Sabah annulled the results and changed the election laws. This sparked protests and triggered a boycott of the new election in December. The results of that election were annulled by the Constitutional Court, and in new balloting held in July 2013, pro-government Sunni candidates achieved a significant majority. Kuwait controls roughly 6 percent of the world’s oil reserves. The oil and gas sector accounts for nearly 50 percent of GDP and 95 percent of export revenues.

Rule of LawView Methodology

Property Rights 45.0 Create a Graph using this measurement

Freedom From Corruption 43.0 Create a Graph using this measurement

Five opposition members of parliament resigned in May 2014 after they were denied a request to question the prime minister about corruption. There are occasional accusations of attempted bribery in the government’s lengthy procurement process. The legal framework is not well developed, and the rule of law remains weak. Foreigners face difficulties enforcing contract provisions in the local courts.

Limited GovernmentView Methodology

Kuwait has no individual income tax. Foreign-owned companies are subject to a 15 percent tax. Taxes make up a small portion of government revenue, with most financing coming from oil and gas windfalls. Overall tax revenue is less than 1 percent of domestic output. Public expenditures equal 36 percent of domestic production, and government debt amounts to 5 percent of gross domestic product.

Regulatory EfficiencyView Methodology

Progress in improving Kuwait’s regulatory framework has been uneven. Incorporating a business still takes more than 30 days, and bureaucratic hurdles continue to add to the cost of business. Overall labor regulations lack flexibility. The government has an extensive system of subsidies and price controls through state-owned utilities and enterprises, although diesel fuel subsidies were cut in 2014.

Open MarketsView Methodology

Kuwait’s average tariff rate is 4.4 percent. Government procurement may favor domestic firms, and imports of books and media deemed detrimental to public morals are not allowed. The relatively well-developed financial system offers a wide range of services. Restrictions on foreign banks include a ban on competing in the retail sector. Foreign banks are limited to providing investment banking services.

Country's Score Over Time

Bar Graph of Kuwait Economic Freedom Scores Over a Time Period

Country Comparisons

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Regional Ranking

rank country overall change
1Bahrain73.4-1.7
2United Arab Emirates72.41.0
3Qatar70.8-0.4
4Israel70.52.1
5Jordan69.30.1
6Oman66.7-0.7
7Kuwait62.50.2
8Saudi Arabia62.1-0.1
9Morocco60.11.8
10Lebanon59.3-0.1
11Tunisia57.70.4
12Egypt55.22.3
13Yemen53.7-1.8
14Algeria48.9-1.9
15Iran41.81.5


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