2019 Index of Economic Freedom

Kuwait

overall score60.8
world rank90
Rule of Law

Property Rights52.9

Government Integrity35.3

Judicial Effectiveness43.3

Government Size

Government Spending17.3

Tax Burden97.7

Fiscal Health99.1

Regulatory Efficiency

Business Freedom57.4

Labor Freedom61.7

Monetary Freedom70.6

Open Markets

Trade Freedom79.0

Investment Freedom55.0

Financial Freedom60.0

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Quick Facts
  • Population:
    • 4.4 million
  • GDP (PPP):
    • $291.5 billion
    • -2.5% growth
    • -0.1% 5-year compound annual growth
    • $66,163 per capita
  • Unemployment:
    • 2.1%
  • Inflation (CPI):
    • 1.5%
  • FDI Inflow:
    • $300.5 million

Kuwait’s economic freedom score is 60.8, making its economy the 90th freest in the 2019 Index. Its overall score has decreased by 1.4 points, the result of a steep drop in the score for judicial effectiveness and declining scores for government spending and monetary freedom. Kuwait is ranked 8th among 14 countries in the Middle East and North Africa region, and its overall score is below the regional average and exactly at the world average.

Although the government routinely pledges reforms to reduce reliance on hydrocarbons, Kuwait’s failure to diversify its economy or bolster the private sector stems from an entitlement culture that stifles economic dynamism, as well as from a poor business climate, institutional deficiencies, a large and inefficient public sector that employs three-quarters of the workforce, and friction between the legislative and executive branches that has stymied most reforms. The judicial system is subject to political influence and lacks transparency.

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Background

The former British protectorate of Kuwait is a constitutional monarchy and has been ruled by the al-Sabah dynasty since the 18th century. Islamists scored major gains in 2012 parliamentary elections, and Emir Sabah al-Ahmad al-Jabr al-Sabah’s efforts since then to repress growing opposition from Islamists and tribal populists have sparked protests. In the 2016 parliamentary elections, opposition candidates won almost half of the seats, complicating economic reform efforts. Kuwait controls approximately 6 percent of the world’s oil reserves. Oil and gas account for nearly 60 percent of GDP and about 92 percent of export revenues. The government saves at least 10 percent of revenue annually to cushion itself against the possible impact of lower oil prices.

Rule of LawView Methodology

Property Rights 52.9 Create a Graph using this measurement

Government Integrity 35.3 Create a Graph using this measurement

Judicial Effectiveness 43.3 Create a Graph using this measurement

Noncitizens of Gulf Cooperation Council countries may not own land without special permission; they also face additional hurdles in the poorly developed legal system. The emir appoints all judges. There were several reports of corruption in 2018, but the ruling family blocked attempts by the parliamentary opposition to investigate them. Government opacity is exacerbated by the weakness of the rule of law.

Government SizeView Methodology

Individual income is not taxed. Foreign-owned firms and joint ventures are the only businesses subject to the flat 15 percent corporate income tax. The overall tax burden equals 1.6 percent of total domestic income. Over the past three years, government spending has amounted to 52.5 percent of the country’s output (GDP), and budget surpluses have averaged 3.4 percent of GDP. Public debt is equivalent to 20.6 percent of GDP.

Regulatory EfficiencyView Methodology

In an effort to enhance 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. Although the government’s 2015–2019 development plan committed to a gradual phasing out of Kuwait’s extensive system of subsidies, the 2018–2019 budget increased them by more than 12 percent.

Open MarketsView Methodology

The combined value of exports and imports is equal to 94.7 percent of GDP. The average applied tariff rate is 3.0 percent. As of June 30, 2018, according to the WTO, Kuwait had four nontariff measures in force. The economy benefits from openness to foreign investment, but some sectors are not open. The banking sector remains well capitalized, with nonperforming loans declining. Kuwait’s stock exchange has been privatized.

Country's Score Over Time

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Regional Ranking

rank country overall change
1United Arab Emirates77.60.0
2Israel72.80.6
3Qatar72.60.0
4Jordan66.51.6
5Bahrain66.4-1.3
6Morocco62.91.0
7Oman610.0
8Kuwait60.8-1.4
9Saudi Arabia60.71.1
10Tunisia55.4-3.5
11Egypt52.5-0.9
12Lebanon51.1-2.1
13Iran51.10.2
14Algeria46.21.5


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