Kuwait’s gAA3(pi) rating reaffirmed on exceptional fiscal, external resilience
KUCHING: RAM Ratings has reaffirmed Kuwait’s global-scale rating of gAA3(pi)/stable, mainly premised on its sturdy fiscal and external balance sheets underlined by a net asset position of around five times the size of its Gross Domestic Product (GDP).
The country’s enormous sovereign reserves provide an ample buffer to withstand shortterm credit deterioration from its significant exposure to energy price volatility.
Kuwait’s growth momentum has strengthened and is projected by the IMF to accelerate to 3.6 per cent in 2016, supported by sustained investments under its medium- term development plan along with a recovery in hydrocarbon production after previous disruptions.
“While Kuwait’s fiscal and external positions have shown stronger resilience amid depressed oil prices compared to most of its oil-producing peers, the country’s political landscape poses risks to government effectiveness and policy reforms,” said Esther Lai, RAM’s head of Sovereign Ratings in a statement yesterday.
Kuwait managed to register a marginal fiscal surplus of 0.7 per cent of GDP in fiscal 2016 and an estimated current account surplus of 7.5 per cent of GDP, despite both surpluses declining from previously robust levels as a result of the average oil price plunging a steep 52 per cent y-o-y.
Nonetheless, RAM projects both fiscal and current account surpluses to be on a stronger footing and rise to a respective four per cent and 13.2 per cent next year, largely driven by gradually recovering oil prices.
“The Kuwaiti National Assembly election in November had resulted in representatives of opposition groups garnering close to half of the parliamentary seats,” RAM added.
“While the implication of this development on future government policy effectiveness remains to be seen, differences between the parliament and government in policymaking could re-emerge if the objectives of both branches are not aligned.
“The country had seen a faster pace of growth and development in the previous parliamentary term, during which opposition groups were absent after having boycotted the previous election.
“All said, Kuwait’s strong sovereign balance sheet and significant reserves will continue to anchor its sovereign ratings, despite its less favourable political framework and institutional settings.”