May 08 2012
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Mena nations' creditworthiness likely to slip further
S&P views political risk as a relative weakness for Mena sovereigns while IMF sees challenging year ahead
S&P said it views political risk as a relative weakness for rated Mena sovereigns. Under their criteria, the primary factor for determining political risk is the effectiveness, stability, and predictability of a sovereign's policymaking and political institutions.
"The Arab Spring uprisings in eight Mena countries since January 2011 increased our view of political risk in the region," said Standard and Poor's credit analyst Tommy Trask.
With growth faltering, unemployment rising, and continued fiscal and external pressures, the IMF expects a challenging year ahead.
S&P sees potential downward ratings pressure for Bahrain, Egypt, Jordan, Oman, and Tunisia, as reflected in their negative outlooks. These countries have experienced significant political unrest since last year, and domestic interest groups and populations at large continue to make irreconcilable demands of their national governments, which in many cases are already fiscally constrained.
"We believe the issues of increased representation, a more even distribution of wealth, and radical changes to political systems could drag on for many years to come," said Trask.
The rating agency warned that it could lower ratings over the outlook period if popular demands for change were to result in an escalation of domestic political turmoil and weakened economic growth prospects and/or fiscal and external balances.
© Gulf News 2012
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