DOHA: The sharp drop in oil prices since mid-2014 is likely to lead to weakening economic, external and fiscal profiles for the region, particularly for the GCC. However, of the 12 Mena sovereigns rated, only the ratings on Bahrain and Oman have been decreased since July, said a new report released by Standard & Poor’s.
The average rating for the hydrocarbon-endowed sovereigns of Qatar, Abu Dhabi, Bahrain, Kuwait, Oman and Saudi Arabia, is currently close to “A+”, while for those without hydrocarbon resources it is closer to ‘BB+’, added the Mena Sovereign Rating Trends 2015 from S&P’s Ratings Services.
On Qatar, the S&P report said: “The stable outlook reflects our view that Qatar’s high economic wealth levels and strong external and fiscal positions will balance its institutional shortcomings and limited monetary flexibility over the next two years.”
“We could lower the ratings on Qatar if developments in hydrocarbon production and prices or in the banking sector were to significantly weaken the country’s external or fiscal positions, for example, should the government’s liquid assets fall significantly below 100 percent of GDP by our estimates”.
The S&P said it could raise the ratings on Qatar if it saw domestic institutions mature faster than expected, alongside significant improvements in transparency regarding government assets and external data quality. “In our view, the net hydrocarbon importers — Egypt, Morocco, Jordan, and Lebanon — could see some modest improvement in macroeconomic indicators as a result of the fall in the oil price, but we do not believe this will be significant enough to lead to positive rating actions.”
S&P rate nine of the 12 Mena sovereigns in the ‘BBB’ rating category or above. The average Mena sovereign rating is ‘BBB+’. When weighted by GDP, however, the average moves closer to ‘A’ because we rate the larger economies — measured by nominal GDP — higher than the smaller economies.
“Of the 12 Mena sovereigns we rate, 10 currently have a stable outlook despite the still-challenging political and economic backdrop. Our rating outlooks are intended to indicate our view of the potential direction of a long-term credit rating, typically over six months to two years for investment-grade ratings and six months to one year for speculative-grade ratings,” it said.
A positive or negative outlook is intended to designate at least a one-in-three likelihood of a rating change in the indicated direction.
The S&P view most Mena sovereigns’ external, budget, and debt assessments as strengths. This largely reflects the significant foreign currency inflows into government revenues and current account receipts of the economies in the GCC.The Peninsula
