An Extraordinary Recovery: Kuwait Following the Gulf War

Manal Shehabi
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Manal Shehabi: Business School, University of Western Australia

No 15-20, Economics Discussion / Working Papers from The University of Western Australia, Department of Economics

Abstract: Petrostates rely heavily upon revenues from petroleum exports and commonly face similar policy challenges in balancing the benefits of pertro-revenues against associated predicaments. Their economic performance has been shown to depend upon both pre-existing heterogeneous conditions and the quality of policy regimes. This paper addresses the particular case of Kuwait, with a focus on its extraordinary recovery following the Gulf War, teasing out policy lessons that are potentially applicable to other resource-rich states. It investigates factors favorable to the recovery while assessing the extent to which this recovery adhered to theoretical expectations or characteristics unique to Kuwait. Petroleum resources contributed to the advent of the war, the peace, and the expedited recovery. While the ability to generate petroleum wealth was central to Kuwait’s reconstruction, the successful economic recovery was made possible through the interaction of three distinct yet indispensable factors—(a) the pre-existing political economy; (b) the country’s economic policy, particularly its prior asset accumulation abroad in its sovereign wealth fund; and (c) the response of the global petroleum market postwar.

Pages: 48 pages
Date: 2015
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