Standard & Poor's raised its sovereign credit ratings for Kuwait on Wednesday citing revisions to the agency's methodology which have placed a heavier weight on the country's high GDP per capita and strong external and fiscal balance sheets.
"The rating actions are supported by Kuwait's high GDP per capita and strong external and fiscal balance sheet positions, which carry a larger weight under Standard & Poor's recently revised sovereign rating criteria," it said in a statement.
Analysts polled by Reuters in June expect the country's economy to expand by 4.4 percent in 2011.
The world's fourth largest oil exporter has seen limited demonstrations but, thanks to a generous welfare system, avoided the mass protests that toppled rulers in Egypt and Tunisia.
"We see that economic activity remains weak with a difficult political environment, and limited implementation of the investment programme. However there has been some improvement with higher government spending," said Monica Malik, chief economist at EFG-Hermes.
On Tuesday, Kuwait's central bank governor said the OPEC member needs to increase government spending and support the private sector to overcome imbalances in its economy.
Kuwait, which sits on 10 percent of global crude reserves, grants more political freedom than Gulf neighbours such as Saudi Arabia where few dare criticise the government or members of the ruling family.
"The spillover from recent political events in the Middle East and North Africa into Kuwait appears minimal," S&P said.
Kuwait's net budget surplus increased to KD6.5bn ($23.7bn) in its 2010/11 fiscal year as oil income jumped, according to preliminary data released in May.
The net figure is after a transfer of 10 percent of revenues to a fund for future generations, managed by the OPEC producer's sovereign wealth fund.
"Kuwait's public finances remain exceptionally strong, and the general government budget has been recording surpluses at double-digit percentages of GDP for almost a decade," S&P said.
"We estimate the 2010/2011 budget year... to have concluded with a budget surplus of 20 percent of GDP, after 28 percent the previous year."
Last month, the Gulf Arab state's parliament approved a 2011/12 budget worth KD19.4bn, the country's biggest since at least 2003.
In January, the government announced plans to spend nearly $5bn, or around 4 percent of its GDP, on cash grants and free food rations.
"The rating weaknesses of Kuwait include an ineffective political setup leading to sustained gridlock between the government and parliament, a strong dependence on hydrocarbons, slow progress thus far on structural reform, and a lack of transparency regarding government assets," Kai Stukenbrock, director for Middle East and CIS sovereign ratings, told Reuters.For all the latest business news from the UAE and Gulf countries, follow us on Twitter and Linkedin, like us on Facebook and subscribe to our YouTube page, which is updated daily.
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