Kuwait: Fitch Ratings has affirmed Kuwait’s long-term foreign and local currency Issuer Default Ratings (IDR) at ‘AA,’ according to a fresh report released by the internationally renowned agency.
The outlooks are stable; Kuwait’s ceiling has been affirmed at ‘AA+’ and the short-term foreign currency IDR at ‘F1+’.
Key rating drivers, Kuwait’s IDRs, reflect the following key rating drivers: Kuwait is resilient to the decline in oil prices that has occurred so far in 2014, Kuwait News Agency reported.
Very high per capita oil exports have consistently generated large fiscal and current account surpluses and surpluses in excess of 20 percent of GDP are forecast each year to 2016, despite the prospect of lower oil prices.
Fitch estimates that the FY14 fiscal breakeven oil price is $48 and the 2014 external breakeven is percent40. These are among the lowest of all rated sovereigns. An exceptionally strong sovereign balance sheet is the key support for the ratings.
Fitch forecasts that sovereign net foreign assets will rise to 269 percent of GDP at end-2014, the strongest of all rated sovereigns, and that the net creditor position will rise to 54 percent of GDP. Both are expected to improve over the forecast period. Current account surpluses are substantial.
Kuwait posted the second largest current account surplus of any Fitch-rated sovereign in 2013, at 39.7 percent of GDP, the third consecutive year that the surplus exceeded 30 percent of GDP.
Fitch expects the surplus to decline in line with the agency’s forecast of lower oil prices, but still forecasts a surplus of 25 percent of GDP in 2016. The surplus has not been below 20 percent of GDP since 2003. Fiscal surpluses are consistently in double digits.
The general government surplus was the largest of all Fitch-rated sovereigns at an estimated 34.9 percent of GDP in FY14 (ending March). The fiscal breakeven oil price is low, at $48 in FY14, but so is capital spending, which is around 10 percent of total spending, one-third of regional peers.
Despite rising spending and falling oil revenues, the surplus is forecast to only fall to 25 percent of GDP in 2016. QNA
