Sunday 24 March 2019

Kuwait's budget surplus to soar on higher oil price, says Moody's

KUWAIT, June 8, 2018

Kuwait's fiscal surplus this year is poised to reach 7 per cent of the country's gross domestic product (GDP) driven largely by rising oil prices, said top ratings agency Moody's Investors Service in its annual report published last week.

Kuwait's credit profile of Aa2 reflects the country's substantial oil and gas reserves, historic fiscal and balance of payments surpluses and comparatively low government debt levels, with a stable outlook, it stated.

According to Moody's, Kuwait's key credit challenge is its very high dependence on oil and the resulting volatility for its economy, exports and government finances.

The country has been slower than its regional peers in developing its non-oil and private sectors, it stated.
"Kuwait's credit profile would be supported by a steady diversification of government revenues and economic activity away from the oil sector," said Thaddeus Best, a Moody's Analyst and co-author of the report entitled "Government of Kuwait -- Aa2 Stable, Annual Credit Analysis."
"Sustained improvements to the institutional framework, in particular government transparency and reporting standards, would also be positive," he added.

The importance of the oil and gas sector leads to huge swings in the Kuwaiti economy during times of volatile global oil prices.

Non-hydrocarbon growth has been supported by the current five-year National Development Plan (2015-19), which provides direction for prioritising capital expenditure, encouraging private investment, and creating jobs for nationals in the private sector, said the top ratings agency.

Public and private investment are expected to sustain non-hydrocarbon growth rates of 3.5 per cent to 4 per cent between 2018 and 2021, it stated.

Institutional strength and government effectiveness were tested during the oil price slump, with Kuwait's pace of reforms being much slower than for other Gulf Cooperation Council (GCC) peers. Reform implementation is likely to be further delayed as oil prices rise, it added.-TradeArabia News Service

Tags: Kuwait | Fiscal surplus |

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