KUWAIT CITY, March 28, (KUNA): Standard and Poor’s lowered Kuwait’s Rating to (AA-) from (AA) due to low oil prices given the country’s high reliance on hydrocarbon exports and slow reform progress, but projected stable economic outlook “The oil price drop is happening alongside Kuwait’s slow reform momentum, which has generally lagged that of other regional countries in recent years,” S&P said in a statement, obtained by KUNA in Kuwait. Therefore, it noted, it lowered long-term foreign and local-currency sovereign credit ratings on Kuwait from (AA) to (AA-).
However, said S&P, the “outlook is stable because we believe Kuwait’s sizable fiscal and balance-ofpayments buffers provide the government with headroom for policy measures over the next two years.”
The stable outlook refl ects balance between risks from Kuwait’s high reliance on hydrocarbons sector and delays to structural reforms, against the country’s sizable accumulated fiscal and balance of- payments buffers, which provide the authorities policy space to maneuver over the short to medium term, it said. S&P also affirmed its (A-1+) short-term foreign and local currency sovereign credit ratings.
The rating agency said it could raise ratings if wide-ranging political and economic reforms enhanced institutional effectiveness and improved long-term economic diversification, although we think such a scenario is unlikely over our forecast horizon 2020-23. It mentioned oil prices and said they plummeted after OPEC+ failure to agree on further production cuts during meetings on March 6.
It expected Kuwait to increase output to above budgeted levels of 2.8 million barrels per day (bpd), which should provide some short-term economic support. S&P said around 80 percent of Kuwait’s exports are destined for Asia, where several countries have already been substantially affected by the coronavirus outbreak, leading to a contraction in oil demand. S&P said the outbreak forced businesses to shut down for four weeks, alongside partial curfew, thus it projected GDP per capital at just under $22,000 for 2020, down from $29,000 previously