Kuwait 2026: Macro momentum and steady earnings drive growth

Macroeconomic Recovery and Reform Momentum 

Kuwait’s macroeconomic foundation for 2026 is positive, with real GDP projected to expand by 3.9%, a significant increase from the 2.6% estimated for 2025. This growth is expected to be driven by a 5.4% expansion in oil GDP as OPEC+ production cuts unwind, alongside a 2.6% growth in non-hydrocarbon sector.

Reform momentum has gained traction since 2024, supported by the enactment of the Financing and Liquidity Law and increased investment spending. Inflation is forecast to remain stable at 2.2%, aided by the currency peg which serves as a credible nominal anchor for monetary policy. While the fiscal deficit is projected to widen to 4.5% of GDP in 2026 due to softening oil prices (projected at USD 55 per barrel), Kuwait’s substantial sovereign wealth assets continue to provide a formidable buffer.

Sectoral Earnings Trends 

Following a robust 17.1% earnings growth in 2025, corporate earnings are projected to moderate to a 5.0% growth rate in 2026. The telecommunications sector is expected to be one of the key drivers of this growth, whereas the real estate sector may face a slowdown due to softer rental growth and slower asset monetization.

The financial sector remains the cornerstone of the Kuwaiti market, with banks constituting 70.6% of total market earnings in 2025. While the sector is expected to benefit from steady domestic credit growth and stable asset quality, anticipated interest rate cuts are expected to compress margins of the banking sector. However, these margin compressions may be partially offset by higher lending volumes. Notably, NBK and KFH stocks delivered strong returns of 22.7% and 21.3% respectively in 2025.

Valuation Attractiveness 

After a stellar 21.0% market return in 2025, which significantly outperformed the broader S&P GCC index, valuations appear less attractive entering 2026. The P/E ratio in 2025 stood at 15.6x, which is above the five-year average of 15.1x. However, healthy dividend yields of 3.4% are expected to remain a key support, offering an attractive income cushion for investors.

Overall, Kuwait stock market enters 2026 with a neutral outlook, balancing improving macroeconomic momentum and reform-led non-hydrocarbon growth against moderating earnings and valuation constraints. While higher oil production and sustained investment activity should support real GDP growth and corporate fundamentals, equity returns are likely to increase modestly, driven by earnings delivery and dividends rather than multiple expansion, following the strong rally in 2025.

To read the full Kuwait Equity Market 2026 Outlook report visit Macro & Markets GCC - Kuwait Outlook - January 2026