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Which GCC countries did Moody’s downgrade?

A persisting drop in oil prices has been the key driver to the negative outlook

Credit rating agency Moody’s has released its ratings for many GCC countries, including the United Arab Emirates, Saudi Arabia, Bahrain, Qatar, Kuwait and Oman.

 

Some of the countries studied by the credit rating agency have been downgraded, while others’ long-term issuer ratings were confirmed. However, a general negative outlook was seen across almost all of the countries.

 

Below is a recap of the GCC countries’ performances as announced by Moody’s Investors Service.

 

UAE

Moody’s confirmed the Aa2 long-term issuer ratings for the United Arab Emirates, assigning a negative outlook for the country.

 

It noted that the capital of Abu Dhabi, the wealthiest of the seven emirates, has “large fiscal buffers in the form of diversified offshore investments,” making the emirate and the union resilient during uncertain times of lower oil prices and slow growth.

 

However, it was the “lack of clarity” around policies regarding the controlling of large deficits that earned the UAE a negative outlook.

 

Saudi Arabia

Moody’s Investors Service has downgraded long-term issuer ratings for the Kingdom of Saudi Arabia, assigning it A1, down from Aa3.

 

Naturally, the rating reflects the global agency’s view “that lower prices have led to a material deterioration in Saudi Arabia’s credit profile,” a Moody’s statement read.

 

“A combination of lower growth, higher debt levels and smaller domestic and external buffers leave the Kingdom less well positioned to weather future shocks,” the statement added.

 

Despite the downgrade, Moody’s assigned a stable outlook for the country, as the Kingdom’s officials seem to have ambitious plans to diversify the economy and delve into a post-oil era, such as through the Saudi Vision 2030.

 

Qatar

Qatar’s rating has remained stable at Aa2, but the small yet rich Gulf country also faces a negative outlook.

 

Moody’s found Qatar’s overall credit profile consistent and unchanged, thanks to the country’s generally strong economy and government finances, despite “the negative effect from a protracted period of low-oil prices.”

 

However, potential risks stemming from the “comparatively general government debt increase” are one of the reasons behind Moody’s decision to give the country a negative outlook.

 

 

Oman

Moody’s has announced a downgrading of the government of Oman’s long-term issuer ratings, from A3 to Baa1, while assigning a stable outlook.

 

In Moody’s view, “despite the sizable fiscal consolidation efforts undertaken by the government, a protracted period of low oil prices will negatively affect Oman’s sovereign credit profile beyond the level Moody’s anticipated in February when it downgraded the rating to A3 from A1,” the rating agency stated, explaining what is referred to as the key driver for the rating’s downgrade.

 

Bahrain

Bahrain was also downgraded by Moody’s latest rating, from Ba1 to Ba2, and the country was assigned a negative outlook as well.

 

Moody’s views that the government of Bahrain will continue to “weaken materially” in coming years.

 

“The rating agency expects Bahrain’s government debt burden and debt affordability to deteriorate significantly over the coming two to three years,” a Moody’s statement read.

 

Consequently, the negative outlook reflects the downside risks to the rating.

 

Kuwait

While confirming Kuwait’s long-term credit issuer ratings at Aa2, Moody’s assigned the country a negative outlook.

 

According to Moody’s, Kuwait sovereign overall credit profits remain consistent, despite the negative effect of a protected period of low oil prices.

 

Despite the overall strength and resiliency displayed by the government of Kuwait, “material uncertainties” around its ability to implement fiscal and economic reforms is the main reason behind assigning a negative outlook for the country.