Abu Dhabi, Kuwait retain ratings due to huge assets

dubai — On the back of large stocks of external assets, the economies of Abu Dhabi and Kuwait could retain their sovereign ‘AA’ ratings irrespective of a sharp fall in oil prices, S&P Global Ratings said.

“Large stocks of external assets, as a percentage of gross domestic product, provided the economies of these two sovereigns with a significant buffer following the sharp fall in oil prices in mid-2014,” the ratings agency said in its Middle East and North Africa sovereign ratings outlook. “The stable outlook on Abu Dhabi reflects our expectation that economic growth will gradually pick up and Abu Dhabi’s fiscal position will remain extremely strong over the next two years,” S&P said.

The ratings agency said it would consider raising the ratings on if it could observe pronounced improvements in data transparency, including on fiscal assets and external data, alongside further progress in institutional reforms. “What’s more, measures to improve the effectiveness of monetary policy, such as developing domestic

Abu Dhabi’s fiscal position will remain extremely strong over the next 2 years S&P Global Ratings

capital markets, could be positive for the ratings over time.”

Until 2014, ratings in the Middle East Africa region had been broadly split between the net hydrocarbon exporters, which had a higher average rating of close to ‘A+’, and hydrocarbon importers, which had an average rating close to ‘BB+’. However, since the fall in oil prices, the creditworthiness of some of the hydrocarbon exporters has significantly deteriorated, in S&P’s view.

“We have downgraded Oman by six notches, Bahrain by five, Saudi Arabia by three, and Qatar by one since then, though these downgrades were not all a direct result of lower oil prices. Now the net hydrocarbon exporters’ average rating is closer to ‘BBB+’, while the hydrocarbon importers’ average rating remains around ‘BB+’. Ratings on MENA sovereigns came under additional strain in the second half of 2017,” the report said.

— issacjohn@khaleejtimes.com