'Al-Watani': 4.6% decline in GDP in the first quarter of 2026
Coinciding with contractions in the oil, transport, and hospitality sectors... and expectations of continued weakness in the second quarter
The economic analysis at Kuwait National Bank stated that the initial official estimates revealed that gross domestic product (GDP) fell by 4.6% on an annual basis in the first quarter of 2026, due to a contraction in oil-related GDP linked to a decline in crude oil production caused by the war between the United States and Iran. Conversely, non-oil GDP recorded moderate growth after the exceptional contraction it experienced in the previous quarter, despite weak performance in the transport and hospitality sectors.
Political Studies
News Bulletin
The analysis added that since the first quarter included only one month of the conflict period, GDP weakness is expected to persist during the second quarter, especially with oil exports severely affected by the closure of the Strait of Hormuz for most of the quarter.
Oil GDP contracted at the fastest pace since the pandemic
Oil GDP (which accounts for approximately 42% of total GDP) contracted by 12.5% on an annual basis in the first quarter of 2026, reversing three consecutive quarters of growth amid disruptions related to the regional conflict.
Oil production fell to 1.2 million barrels per day in March, compared to approximately 2.58 million barrels per day in February and 2.41 million barrels per day a year earlier, after the effective closure of the Strait of Hormuz halted Kuwait’s oil exports.
Production declined further, averaging 570,000 barrels per day during April and May, as local storage capacities filled up, forcing production cuts. This was followed by a temporary improvement after a ceasefire agreement was signed between the United States and Iran in mid-June, which helped restore some exports and raised production to 1.65 million barrels per day in June.
However, the resumption of confrontations between the United States and Iran in mid-July, and Iran’s subsequent announcement to re-close the strait to ship traffic, are likely to negatively impact Kuwait’s oil production during the month.
This first-quarter contraction follows a period of improvement in the oil sector’s activity, supported by OPEC+’s gradual phase-out of voluntary production cuts that began in May 2025.
It is worth noting that OPEC+ continued to raise its production targets despite disruptions linked to the conflict, which constrained actual output. As a result, Kuwait’s production quota rose to 2.66 million barrels per day in August, and is expected to increase further to 2.68 million barrels per day in September, as the final phase of the voluntary production cut rollback is completed. While actual production remains constrained by regional developments, the higher production quota offers significant growth potential for Kuwait’s oil sector once shipping conditions through the Strait of Hormuz return to normal and export flows resume.
Slowdown in the Non-Oil Sector Growth
The non-oil gross domestic product (GDP) grew by 1.9% year-on-year in the first quarter of 2026, recovering from a contraction of 1.4% recorded in the previous quarter. This growth was supported by strong performance in major weighted sectors, including real estate and business activities (+7.2% year-on-year), public administration and defense (+4.1%), and financial intermediation and insurance (+2.5%). Growth was also robust in the health and social services sector (+7.8%) and telecommunications (+3.9%).
Conversely, this positive performance was weighed down by a sharp decline in the manufacturing sector (-8.6% year-on-year), due to a drop in refined petroleum product output to 668,000 barrels per day in March, bringing the quarterly average production to 1.143 million barrels per day (-9.7% year-on-year). Additionally, disruptions stemming from the conflict affected tourism-related sectors such as hotels, restaurants, and transport, which contracted by 9.1% and 8.7%, respectively. The electricity, gas, and water sector also performed weakly, with electricity, gas, and water production declining by 9% year-on-year.
Second Quarter Contraction
With the conflict ongoing, its negative impact on the non-oil economy is likely to intensify, as reflected by recent high-frequency economic indicators. The Purchasing Managers’ Index (PMI) readings remained in contraction territory throughout the second quarter, while real estate activity stayed weak, continuing the downturn that began in the first quarter. Project awarding also slowed noticeably, falling by nearly half compared to the high levels recorded in the first quarter, amid rising uncertainty and a shift in government priorities toward increased defense spending. Overall, current geopolitical tensions are likely to continue pressuring non-oil economic activity in the near term, leading to another weak economic performance in the second quarter.
Sharp Decline in GDP
Reflecting the developments mentioned in the oil and non-oil sectors, total GDP contracted by 4.6% year-on-year in the first quarter of 2026, after registering growth of 2.4% in the fourth quarter of 2025. Economic performance is expected to remain under pressure in the coming quarters, amid the continued closure of the Strait of Hormuz and heightened regional tensions. Although visibility remains limited at present, we currently forecast that oil GDP will contract by 26% this year due to ongoing production disruptions, while non-oil GDP is expected to decline by 2%, driven by weakening business confidence, subdued investment activity, and elevated uncertainty linked to the conflict. Looking further ahead, the outlook for 2027 appears more positive, with oil production anticipated to rebound strongly as shipping activity returns to normal levels and Kuwait benefits from higher production quotas within OPEC+. Meanwhile, the non-oil economy is expected to benefit from the recovery of project activity, along with improved consumer and business confidence.
... ALT Summer Program to Develop Youth Skills and Enhance Future Readiness
As part of its commitment to supporting educational initiatives aimed at empowering youth and honing their capabilities, National Bank of Kuwait sponsors the ALT Summer Program, designed for middle-school students aged 11 to 15. The program offers a comprehensive educational and training experience that combines skill acquisition with practical application.
Running for two weeks, the program engages students in a variety of educational sessions and workshops designed to strengthen their personal and leadership skills, while instilling values of initiative and teamwork. It also aims to develop communication, creative thinking, and problem-solving abilities.
The practical component is one of the program’s key features, providing participants with hands-on experience by working in selected stores at 360 Mall. This exposure deepens their understanding of the work environment and fosters a sense of responsibility and self-reliance.
Most sessions and activities take place at the Rafa Nadal Academy, which provides an inspiring educational and training environment that encourages student interaction, learning, and the acquisition of new experiences.
The program also includes a special visit to the National Bank of Kuwait’s headquarters, offering students insight into the operations of the banking sector and allowing them to learn more closely about the bank’s activities, corporate culture, and professional values, thereby broadening their knowledge and career horizons.
Mohammed Al-Sarraf, Head of Public Relations and Events at National Bank of Kuwait (NBK), said: “Our sponsorship of the ALT summer program aligns with NBK’s ongoing commitment to supporting educational initiatives aimed at developing young people’s skills and empowering them to acquire the knowledge and experience needed to prepare them for a promising future. We believe that investing in the next generation is an investment in the future of society, and it constitutes one of the core pillars of the bank’s strategy in the field of corporate social responsibility.”
He added: “We consistently strive to provide comprehensive educational and practical opportunities that enable students to develop their personal and leadership skills, and to familiarize themselves with diverse work environments. This contributes to broadening their horizons and enhancing their readiness for the future. Through this program, we also offer high-quality experiences that combine theoretical learning with practical application, helping participants acquire valuable skills and experiences at an early stage in their lives.”
Al-Sarraf emphasized that supporting such initiatives falls within the bank’s vision of empowering youth and developing their capabilities. He noted that NBK continues to reinforce its leading position as one of the foremost national institutions supporting community development by embracing initiatives that generate positive and sustainable impact, and contribute to preparing a generation that is more confident, capable of innovation, and actively engaged in the development process.
The first cohort of the program will conclude with a special ceremony held at NBK’s headquarters, where participating students will be honored and celebrated for their achievements during the program. The second cohort is scheduled to launch in August next year.
