Kuwait rating affirmed at AA

Fitch Ratings has affirmed Kuwait’s long-term foreign and local currency issuer default ratings (IDRs) at AA with a stable outlook. The country ceiling has been affirmed at AA+ and the short-term foreign and local currency IDRs have been affirmed at F1+.

“Kuwait’s key credit strengths are the sovereigns exceptionally strong fiscal and external metrics and, at a forecast $46 a barrel, one of the lowest fiscal breakeven Brent oil prices among Fitch-rated oil exporters,” Fitch said in a statement. “These strengths are tempered by Kuwait’s heavily oil- dependent economy, geopolitical risk, and weak measures of governance and ease of doing business. A generous welfare state and the large economic role of the public sector present challenges in the long term, given robust growth of the Kuwaiti population.”

“The low oil price environment has not yet meaningfully dented economic sentiment and activity, but this may change as the utility price increases feed through to inflation in 2017-2018,” Fitch said. “We expect GDP growth of 3.2 per cent in 2016, supported by strong growth in oil production, government capital spending, and private credit. Banks remain highly capitalised, liquid, and profitable and would be well-placed to cope with any foreseeable deterioration in their loan portfolios. The combination of robust domestic demand growth and low export revenues is expected to lead to Kuwait’s first-ever current account deficit in 2016.”