Kuwait’s economy contracted by 4.4 per cent in 2009, marking the worst performance among the states of the GCC, according to the Washington-headquartered International Monetary Fund (IMF).

The fall in economic output came on the back of significantly lowered demand and prices for crude oil, which accounted for 98.5 per cent of Kuwait’s exports in 2009, the IMF said in a 21 July summary of its latest consultation with the government.

Kuwait produced an average of 2.26 million barrels a day (b/d) of oil in 2009, selling it at an average price of $58.2 a barrel and earning a total of $46.7bn from exports. In 2008, the country produced 2.68 million b/d of oil, selling it at an average $93.7 a barrel and earning $82.6bn.

Five Kuwaiti investment companies defaulted on debt in 2009 and 2010, according to the IMF, meaning that financial services contributed little to growth in the economy. Non-oil economic activity remained flat during the year as a result.

“In 2009, real gross domestic product (GDP) is estimated to have contracted by about 4.5 per cent,” IMF analysts say in the report. This came because of a “decline in real oil GDP of more than 11 per cent and flat real non-oil GDP, mainly reflecting weaker activity in the financial and construction sectors”.

Despite this, the IMF says that the outlook for the country’s economy is “broadly positive”, with a government development plan key to renewed growth along with improved demand and prices for oil.

“The economy is expected to rebound in 2010 and to grow steadily over the medium term as the global recovery boosts the demand for oil and the government implements its four-year development plan, starting with an expansionary budget in 2010-2011,” the IMF says. “The fiscal and current account balances are expected to remain stable in 2010–2011 and improve in subsequent years, as oil receipts and investment income recover.”

However, the IMF expects that the financial sector will remain troubled in the short term because of non-performing loans, heavy investment in real estate, investment companies and equities.