By Andy Sambidge
Rating agency says Gulf state capable of managing any global oil price shocks next year
Structural fiscal and current account surpluses are the main drivers behind Kuwait's Aa2 government bond ratings and its stable outlook, according to a new report by Moody's.
The rating agency said a gradual improvement in the Kuwaiti government's effectiveness has been reflected in the recent privatisation and labour laws and a four-year development plan.
Moody's rating for the Gulf state put it on a par with the likes of Bermuda, Qatar and the UAE.
According to the report, the country's vast hydrocarbon reserves underpin its "very high" economic strength assessment by Moody's.
"These reserves generate a relatively high trend GDP growth rate and have boosted the country's per capita income to a level comparable with the median of advanced countries," Moody's added.
It said Kuwait's fiscal break-even oil price was low relative to recent price levels, which "indicates that the country has ample budgetary headroom to manage global oil price shocks".
Moody's "moderate" assessment of the country's institutional strength, it said, reflects relative institutional shortcomings identified by the World Bank governance surveys, as well as transparency issues.
The Moody's report noted that surging hydrocarbon revenues, a wide fiscal surplus and the Kuwaiti government's large cushion of off-shore financial assets drove the "very high" assessment of the country's government financial strength.
Despite widespread resignations among its leading politicians, the rating agency said it considers domestic political risks to be low.
"Kuwait has not experienced contagion from regional political unrest, in large part because of its very high standard of living," the report added.