Oil-producing countries on review for a credit downgrade

THE CREDIT ratings of more than 10 oil-producing nations in the developing world were placed on review for a downgrade by Moody’s Investors Service, which cited the shock of depressed oil prices on these economies.

The list includes Russia, Kazakhstan, Nigeria, Angola, Gabon and Trinidad and Tobago, according to statements released by Moody’s on Friday in New York.

Five of the six Gulf Cooperation Council nations – Kuwait, Saudi Arabia, the United Arab Emirates (UAE), Bahrain and Qatar – were also put on review for a cut, Moody’s said, adding that it expected to complete its review within two months.

The ratings of Bahrain and Congo were downgraded in addition to being placed on review, while the credit outlook for Venezuela was lowered to negative from stable.

The moves follow Standard & Poor’s, which has already issued a spate of downgrades in reflection of the sell-off in oil and its impact on the creditworthiness of producers in emerging markets. The collapse in commodity prices has forced governments to trim the spending that has helped fuel their economic growth over the past decade. Fiscal deficits are on the rise as these countries increase borrowing to make up for the shortfall in revenue.

“This sends a bearish signal to the markets, even though a plunge in oil prices is not news to anyone,” Wayne Lin, a New York-based money manager at QS Investors, said.

“As oil prices are plunging, revenue of these commodity exporters are greatly impaired, which creates a challenge to their ability to balance the budgets, run the country and control and service the debt.”

Moody’s has shown Russia needs to adapt its budget to the new realities of the commodities market, according to Russian Finance Minister Anton Siluanov. The government was working on measures to balance the budget in the medium term, and the finance ministry would be in “constant contact” with the rating company during its review to provide all necessary information, he said in Moscow on Saturday.

Moody’s affirmed Norway’s AAA rating in a separate statement, saying that while oil prices would remain low for several years it had not affected the credit profile of western Europe’s biggest oil and gas producer.

Oman, the poorest GCC country on the basis of economic output per person, was cut for the first time by Moody’s last month. That rating is also under review for a further downgrade. – Bloomberg

Fiscal deficits are on the rise as these countries increase borrowing to make up revenue shortfall.