ARABIAN TIMES NEWS NETWORK
After showing surprising resilience in the first half of 2025, the global economy began to lose momentum toward the end of the year. What initially appeared to be a strong recovery is now widely understood to have been driven by temporary factors, such as front-loaded trade, early investment decisions, and inventory adjustments, rather than deep-rooted economic strength. As a result, uncertainty over the global outlook remains high, with economic growth in 2026 expected to remain subdued.
Despite tariff shocks announced by the United States in April, global economic activity held up better than anticipated. Much of the impact was softened through bilateral negotiations and trade resets. However, the broader consequences of these tariff announcements continue to weigh heavily on the global economy. Rising protectionism, fragmented trade relations, and the spread of non-tariff barriers have increased uncertainty and could dampen growth prospects in 2026.
According to the International Monetary Fund (IMF), global growth is projected to slow from 3.3 percent in 2024 to 3.2 percent in 2025 and further to 3.1 percent in 2026. Advanced economies are expected to grow by around 1.5 percent, while emerging and developing economies may expand slightly above 4 percent. Global trade volumes are also forecast to decelerate, averaging about 2.9 percent in 2025–26, compared to stronger growth in previous years. Inflation, meanwhile, is expected to ease globally, though it may remain stubbornly above target in the United States.
The IMF’s latest World Economic Outlook warns that risks remain tilted to the downside. Persistent policy uncertainty, restrictive trade measures, labor supply shocks due to tighter immigration policies, and disruptions to supply chains could weaken consumption and investment. There are also concerns that artificial intelligence may fail to deliver the productivity gains markets expect, potentially unsettling financial stability. Climate-related commodity price spikes and geopolitical tensions pose additional risks, particularly for low-income countries.
Yet, amid this cautious global outlook, Kuwait stands out as a country positioning itself for growth through structural reform. Recent legislative updates are expected to play a key role in supporting economic expansion in 2026, aligning development with global sustainability goals and advancing Kuwait Vision 2035.
Insights from the National Bank of Kuwait (NBK) reinforce this positive outlook. Analysts expect non-oil GDP growth to reach a five-year high of 3.3 percent in 2026, supported by higher project awards, stronger real estate activity, and improving credit growth. With rising oil production, overall GDP growth could reach around 4.5 percent. While the fiscal deficit may widen in the short term, it is expected to narrow again as revenues improve and spending remains controlled.
A series of reforms introduced over the past year aim to reduce investor risk, improve transparency, encourage innovation, and enhance competition. Key measures include new regulations for digital commerce, strengthened financial and debt management laws, enhanced transparency in real estate transactions, updates to bankruptcy and housing development laws, and clearer tax rules for multinational enterprises.
Together, these reforms signal a broader shift toward institutional modernization. By balancing economic efficiency with social justice and legal accountability, Kuwait is laying the groundwork for sustainable growth. As global headwinds persist, the country’s proactive reform agenda offers a measure of resilience, and a roadmap for navigating uncertainty in the years ahead.
