Sept. 20 (UPI) — Though oil represents a mixed blessing for Kuwait, its credit rating is stable and balanced by high levels of wealth, Moody’s Investors Service reported.
Kuwait is a member of the Organization of Petroleum Exporting Countries and a contributor to its effort to ease supply-side strains by trimming production. Secondary industry sources reporting to OPEC economists said Kuwaiti crude oil production has held steady for most of the year at 2.7 million barrels per day.
Moody’s said its outlook for Kuwait was stable with aa Aa2 rating. Fiscal challenges brought on by historically low crude oil prices are balanced by sovereign wealth and a reform program meant to reduce the economy’s exposure to the oil market.
Firas Raad, the World Bank country manager for Kuwait, said last month the OPEC-led production agreement “added strains on the Kuwait economy” for 2017, though the economy will still grow by 3 percent for gross domestic product over the next two years. The latest assessment from the International Monetary Fund, meanwhile, found non-oil sectors of the Kuwaiti economy were expanding, but at a slower pace than in previous years
The oil sector for Kuwait represented about 60 percent of total nominal gross domestic product for the five years ending in 2015. Moody’s cautioned Tuesday that Kuwait was reforming its economy slower than its peers and additional lags would result in a negative rating action. According to the official Kuwait News Agency, strains at the domestic or regional political level could make the situation even worse.
A report last week from Moody’s, emailed to UPI, found lingering regional disputes with Qatar posed a credit risk to members of the regional Gulf Cooperation Council, though Qatar and Bahrain are the most exposed to risk. Countries like Kuwait and Oman, however, could actually benefit because of trade diversions that resulted from the dispute, though the overall impact on growth will be negligible.
Qatar is accused of supporting terrorist networks.