Fitch Ratings has affirmed Kuwait’s long-term foreign and local currency Issuer Default Ratings (IDR) at AA with a stable outlook. The country ceiling has been affirmed at AA+ and the short-term foreign currency IDR at F1+.
Fitch says Kuwait’s ratings reflect its exceptionally strong fiscal and external position, balanced against a heavily oil-dependent economy, a degree of geopolitical risk, and weak scores on measures of governance and ease of doing business.
Sovereign net foreign assets were an estimated 270 per cent of GDP at end-2014. The General Reserve Fund (GRF), the purpose of which is to cover government expenditure, had domestic and foreign assets of an estimated at 56 per cent of GDP at the end of fiscal year 2014/15 in March.
The Reserve Fund for Future Generations, which by law receives at least 10 per cent of all government revenues before transfers to the GRF, was 196 per cent of GDP. Gross government debt was only 5.5 per cent of GDP.
Fitch forecasts that lower oil-related revenues combined with continued spending growth will cause the general government surplus (including investment income) to fall to 10.6 per cent of GDP in 2015/16 from an estimated 20.7 per cent of GDP in the preceding fiscal year. The current account surplus is forecast to fall to 15.1 per cent of GDP in 2015 before recovering to 20 per cent of GDP in 2016.
Real GDP growth is forecast to rise to 1.8 per cent in 2015 and 2.0 per cent in 2016, from an estimated 0.9 per cent in 2014.
“There has been mixed progress on reforms to address Kuwait’s structural weaknesses,” Fitch says. “A recent attempt to raise the subsidised price of diesel and kerosene was partially reversed in February after fierce opposition. However, new laws on foreign direct investment and public private partnerships have recently been implemented and are a step towards bringing Kuwait’s business environment more in line with its peers.”