On: Monday – October 19, 2020
The “Covid-19” pandemic affected the economies of the Middle East countries, and left its imprint on all financial indicators, including the countries’ sovereign ratings, which measure the expected credit risk and the ability of countries to repay debts. Most of the countries in the region witnessed a decline in their creditworthiness or the outlook, with the exception of Abu Dhabi and Egypt, whose credit ratings were stabilized at the same levels while maintaining a stable outlook. While the credit rating of Kuwait, Bahrain, Oman and Lebanon has declined, Saudi Arabia has retained its rating with Moody’s changing its outlook to negative, and the same is true for Morocco, whose rating has been confirmed by the three institutions with Fitch and Standard & Poor’s changing their outlook. To the Moroccan economy from stable to negative. Jordan also maintained its rating with Fitch’s change of the outlook as well to negative. In the following report, Forbes Middle East sheds light on the changes made by the three rating agencies: Standard & Poor’s, S&P, Fitch, and Moody’s over the past months. Kuwait On September 22, Moody’s downgraded Kuwait’s sovereign rating from Aa2 to A1, changing the outlook to stable. The decision came due to the increase in government liquidity risks, and the weak evaluation of Kuwaiti institutions and governance. In April 2020, Fitch affirmed Kuwait’s credit rating at AA with a stable outlook. In July, Standard & Poor’s revised its outlook for the Kuwaiti economy from stable to negative and maintained the rating at AA-, citing risks related to the depletion of cash flow in the country. Government, General Reserve Fund reserves. Saudi Arabia In conjunction with the height of the Corona virus outbreak and the decline in oil prices, Moody’s changed its view of the Saudi economy from stable to negative, with the credit rating fixed at A1 in early May. The negative outlook reflects the increased risks of declining financial strength of the Kingdom due to the shock of oil demand and lower prices with the outbreak of the pandemic, as well as the uncertainty about the government’s ability to compensate for the decline in oil revenues, and to maintain the stability of debt and asset burdens in the medium term. At the same time, Fitch maintained its rating for Saudi Arabia at A in a stable outlook, and returned its decision to the kingdom’s strong financial budget, which includes exceptionally large international reserves and a low level of debt. Standard & Poor’s also affirmed its rating for the Kingdom at A- with a stable outlook. The emirate of Abu Dhabi issues credit rating agencies for each emirate separately. Abu Dhabi has witnessed the stability of its rating by “Moody’s” despite the “Covid-19” pandemic at Aa2 with a stable outlook. It also received a rating of AA with a stable outlook also by “ Fitch and Standard & Poor’s. According to S&P, the stable outlook for the emirate’s economy reflects expectations that the financial situation will remain strong over the next two years, despite the possibility of continuing structural and institutional weakness. The agency said in one of its reports that it may consider upgrading the rating if it notices an improvement in the transparency of data, including financial assets and external data, as well as further progress in institutional reforms, while it may conduct a downgrade of the rating if expectations of a fundamental deterioration in the balance sheet and net External assets. Bahrain With the spread of “Covid-19”, “Standard & Poor’s” revised its view of the Bahraini economy from positive to stable, following the collapse of oil prices, and it established the credit rating at B +. While Moody’s assigned Bahrain a B2 rating with a stable outlook, last August Fitch downgraded Bahrain’s credit rating from BB- to B + with a stable outlook. According to “Fitch”, the downgrade reflects the dual effect of the “Covid-19” pandemic and the decline in oil prices on the Gulf economy, which causes a noticeable increase in the budget deficit and government debt, as well as puts pressure on already low foreign exchange reserves and leads to a sharp contraction of GDP. The Sultanate of Oman this week, Standard & Poor’s lowered the sovereign rating of the Sultanate of Oman for the second time this year from BB- to B +, with a stable outlook, after the Corona epidemic and the decline in oil prices left their effects on the country’s economy. Moody’s also cut the Sultanate’s credit rating twice this year to Ba3, and changed its outlook to negative. Fitch also took the same action after lowering the country’s rating to BB- with a negative outlook last August. Standard & Poor’s expects that net government debt will continue to rise, reaching 37 percent of GDP by 2023. It also speculated that the exacerbation of financial pressures and the rise in debt stocks of government-owned companies will pose a threat to the Sultanate’s government budget.