The discovery of oil in 1934 transformed the economy. Kuwait's enormous oil reserve of 94 billion barrels and huge quantities of natural gas have provided the base for an economic presence of worldwide significance. The Kuwaiti standard of living was among the highest in the Middle East and in the world by the early 1980s. Oil wealth has stimulated trade, fishery development, and service industries. The government has used its oil revenues to build ports, roads, an international airport, a seawater distillation plant, and modern government and office buildings. The public has also been served by the large-scale construction of public works, free public services, and highly subsidized public utilities, transforming Kuwait into a fully developed welfare state.
Prudent management of budgetary allocations and development priorities, as well as substantial interest from overseas investment, helped cushion the adverse impact of the collapse of the Souk al-Manakh—an unregulated curbside securities market—in 1982, the collapse in world oil prices during the mid-1980s, and the 1980–88 Iran-Iraq War. In addition, acquisition of 5,000 retail outlets in Western Europe (marketed under the name "Q-8") and expansion into the manufacture and sale of refined oil products have bolstered the Kuwaiti economy.
Oil extraction and processing accounts for about 50% of GDP, 95% of export earnings, and 75% of government revenues. Kuwait's economy suffered enormously from the effects of the Gulf War and the Iraqi occupation, which ended in February 1991 with the destruction of much of Kuwait's oil production capacity and other economic infrastructure. The damage inflicted on the economy was estimated at $20 billion.
The Gross Domestic Product (GDP) in Kuwait was worth 112.81 billion US dollars in 2015. The GDP value of Kuwait represents 0.18 percent of the world economy. GDP in Kuwait averaged 41.81 USD Billion from 1962 until 2015, reaching an all time high of 174.16 USD Billion in 2013 and a record low of 1.83 USD Billion in 1962. GDP in Kuwait is reported by the World Bank.
Water resources are very scarce in Kuwait due to the desert nature of the country. Therefore, Kuwait does not have any agricultural lands, which prevents any development of the agricultural sector. Actually, the major part of the production of this sector is fish, cattle, and pearls.
Kuwait depends on several other sectors that play a considerable role in elevating the economy of the country, including the banking and financial sector, which covers local banks, Islamic local banks, foreign banks subject to the control of the Central bank of Kuwait, the investment sector, Kuwait Stock Exchange, the industrial sector, the services sector and some other sectors that humbly participate in the GDP, like wholesale trade, retail trade and real estate, etc.
Economic Role of Kuwait in the region
Kuwait adopted the first Arab economic summit on the 19th of January 2009 under the title of “The Arab Economic Developmental and Social Summit”, which aimed at enhancing economic integration among Arab countries and completing the elements of the Arab Common Market.
Kuwait also established The Kuwait Fund for Arab Economic Development in 1961 as a Kuwaiti organization concerned with providing and managing financial and technical aid to developing countries. The Activity of the fund was confined to providing economic assistance to Arab countries till 1974, after which it extended to cover all the countries of the developing world.
Most of the fund projects were in the fields of agriculture, irrigation, transportation, communication, power, industry, water and sanitary. Social fields were later added, including educational and health constructions.