The ongoing conflict in the Middle East has led to a significant deterioration in the performance of Kuwait's non-oil private sector during March 2026. For the first time in 19 months, the Purchasing Managers' Index (PMI) from Standard & Poor's fell below the neutral level of 50.0, recording 46.3 points compared to 54.5 points in February.
This decline reflects the largest downturn in business conditions since January 2022, driven by a sharp contraction in production levels and new orders, which were directly impacted by the instability in the region.
Details of the Event
Companies participating in the survey reported that the suspension of flights and disruptions in shipping operations were key factors contributing to the decline in business activity and new orders. The impact was not limited to the local market; it extended to external orders, which fell due to the inability to receive new international requests because of the war conditions. In addition to geopolitical factors, fluctuations in exchange rates and intense competition deepened the decline, reaching levels not seen since May 2021.
In response to the declining workload, Kuwaiti companies took precautionary measures, including reducing the number of employees for the first time in over a year, marking the fastest rate of job cuts since July 2022. Purchasing activity and inventory levels also saw significant declines in line with the drop in new orders, with the decrease in purchasing production inputs being the most pronounced since the COVID-19 pandemic outbreak in April 2020.
Context and Background
These developments come at a time when the Kuwaiti economy is facing multiple challenges, suffering from the effects of the war in the region, which has led to disruptions in supply chains. Reports indicate that Kuwaiti companies are struggling to obtain raw materials, increasing pressures on production.
Moreover, businesses in Kuwait expressed a pessimistic outlook regarding business activity over the next year for the first time in 26 months, amid fears that the continuation of the conflict will negatively impact production in the coming months. Despite this pessimism, a positive signal emerged with the first decline in overall operating expenses in nearly six years, attributed to reduced demand for production inputs and lower employee costs.
Consequences and Impact
The ramifications of these conditions are evident in the overall decline in business activity, as product prices continued to rise slightly due to increased transportation costs, although the overall inflation rate remained moderate and at its lowest level in four months. The performance of the non-oil private sector in Saudi Arabia also declined during the same period, directly affected by the repercussions of the ongoing war in the Middle East.
This downturn in business activity indicates the urgent need for the Kuwaiti government to take measures to support the private sector and enhance economic stability. The current situation also requires a reassessment of economic policies to ensure sustainable growth in the future.
Impact on the Arab Region
The impact of the conflict in the Middle East is not limited to Kuwait alone; it extends to other countries in the region that are suffering from the consequences of the war. Many Arab countries have experienced a decline in economic activity due to political and economic disruptions, increasing the need for effective strategies to address these challenges.
In conclusion, the current situation in Kuwait and the Arab region as a whole requires a concerted effort from both governments and the private sector to confront economic challenges and achieve stability and sustainable growth.