Annual data2008(a)Historical averages (%)2004-08Population (m)3.4Population growth6.2GDP (US$ m; market exchange rate)148,618Real GDP growth8.3GDP (US$ m; purchasing power parity)144,473Real domestic demand growth9.1GDP per head (US$; market exchange rate)43,180Inflation4.9GDP per head (US$; purchasing power parity)41,976Current-account balance (% of GDP)41.2Exchange rate (av) KD:US$0.269(b)FDI inflows (% of GDP)0.1(a) Economist Intelligence Unit estimates. (b) Actual.

Background: Formerly a British protectorate, Kuwait gained independence in 1961 as an emirate under the hereditary rule of the Al Sabah family. The economy has come to be almost entirely dominated by oil, allowing the government to enjoy substantial powers of patronage, and drawing in expatriate workers. Kuwait has long had a troubled relationship with Iraq, which periodically contested the countries' shared border arrangements during the late 1960s. In 1990, Kuwait was temporarily absorbed by Iraq under the regime of Saddam Hussein. A US-led military coalition ousted Iraq in the 1991 Gulf war, after which Kuwait became closely aligned with the US. Although the overthrow of Saddam Hussein in 2003 was welcomed in Kuwait, proximity to Iraq's troubled southern border has resulted in new security problems.

Political structure: Ultimate executive power is held by the emir, who appoints the prime minister and the government—in which the ruling Al Sabah family usually holds key ministries. Kuwait also has a strong electoral tradition, however, with a vocal National Assembly (parliament), which can reject government legislation and cross-examine cabinet ministers. Previously kept in check by the ruling family's power of patronage, the largely elected legislature of 65 MPs has grown in confidence in recent years, forcing the resignation of several ministers. Nevertheless, the emir retains the right to dissolve parliament and, in practice, the government has significant influence over "opposition" MPs.

Policy issues: Executive-legislative tensions have resulted in repeated early elections, but do not endanger Al Sabah dominance. Many of the political elite continue to reject foreign investment in the upstream oil sector to boost production capacity. Iran is seen as a potential security threat. Sunni-Shia relations are broadly good, but can be affected by regional developments. Although poorly paid expatriate workers have sometimes rioted, they do not threaten political stability.

Taxation: There is no tax on the income of individuals, and tax on nationals is limited to zakat (charitable) deductions. Long-standing proposed tax reforms that would introduce a 15% flat-rate income tax applied to Kuwaiti nationals remain highly unlikely to be approved by parliament. There is no general consumption tax, and few indirect taxes. Taxes on foreign businesses, which formerly ranged up to 55% in the energy sector, were cut to a flat rate of 15% in early 2008, and capital gains tax on stockmarket holdings was abolished.

Foreign trade: The trade surplus was equivalent to 38% of GDP in 2007. Exports are dominated by oil sales, which comprised over 95% of total exports in 2007, in turn financing a rising level of imports.

Major exports 2007% of totalMajor imports 2004% of totalCrude oil95.2Consumer goods42.3Non-oil4.8Intermediate goods31.8  Capital goods20.5    Leading markets 2007% of totalLeading suppliers 2007% of totalJapan14.0US14.1South Korea12.3Japan9.2Singapore7.3Germany8.1US6.2China7.7