‘Kuwait’s sovereign rating stability relies on oil prices, fiscal reforms’

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KUWAIT CITY, Dec 18: In a recent report, Standard & Poor’s (S&P) outlined that Kuwait’s sovereign rating stability is mainly due to favorable global oil prices and production prospects over the next two years, given the absence of financial financing mechanisms, reports Al-Rai daily. The report also indicated that Kuwait is expected to implement additional financing mechanisms, potentially including the removal of long-standing borrowing restrictions through the passage of a new debt law. Such measures could provide a broader range of financing options when fiscal deficits reappear. The S&P report warned that Kuwait’s rating might decline if comprehensive and sustainable financing arrangements are not established in the next two to three years. This could result from ongoing tensions between the government and the National Assembly, hindering the implementation of fiscal reforms or the passage of a debt law.

Rating
On the positive side, S&P suggested that Kuwait’s rating could improve if the government successfully implements comprehensive structural reforms, enhancing financial financing mechanisms, diversifying the economy, and reducing the non-oil deficit, supported by positive GDP growth dynamics. The agency provided institutional, economic, external, financial flexibility and performance, financial related to the debt burden, and monetary evaluations for Kuwait. S&P estimated Kuwait’s per capita share of GDP to decrease from $37.61 thousand in 2022 to $36.16 thousand in 2023 before rising to $37.26 thousand in 2024. GDP growth is expected to be 0.1 percent in 2023 and 2 percent in 2024, with an estimated decrease in the inflation rate from 3 percent in 2023 to 2.5 percent in 2024.

Stabilized
In the broader context, S&P noted that sovereign rating trends in the 55 emerging market countries in the Europe, Middle East, and Africa region have stabilized, with expectations of this stability continuing until 2024. The agency reported six upgrades and five downgrades in 2023, mainly benefiting major energy and commodity exporters. The report highlighted ongoing challenges for many emerging countries in the region, including internal and external shocks and the impact of long-standing cost-of-living crises on economies. Globally, S&P expects a soft landing with supportive fiscal policies and flexible labor markets contributing to growth. However, concerns persist about the effects of prolonged higher interest rates on businesses and households. For 2024, S&P anticipates strong recoveries in Hungary, Poland, and Romania, although uncertainties remain about fiscal consolidation in Poland and Romania. Looking at the broader global landscape, 2024 is an election year for several countries in the Europe, Middle East, and Africa region, with potential policy fluctuations and officials responding to rising food and energy prices. S&P highlighted challenges in debt restructuring for Ghana, Lebanon, and Zambia, with complexities related to official creditors, legal barriers, and local repercussions from defaults.

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