Credit metrics in oil-exporting sovereigns in the Middle East and North Africa (MENA) will be supported by another year of fiscal and external surpluses in most cases, based on Fitch Ratings’ assumption that Brent crude oil averages $85 a barrel and that production levels broadly stabilise, Fitch Ratings said.

MENA oil exporters’ growth will be much weaker in 2023 as oil output stabilises, following a sharp rebound in 2022 when Opec+ countries unwound Covid-19 pandemic-era cuts for much of the year, before a new much smaller cut in November, it said.

Slower global growth in 2023 could prompt further Opec+ cuts if the oil market shifts decisively into surplus, but concerns persist about potentially tight supply, including related to Russia, Fitch Ratings said.

Gulf Cooperation Council (GCC) non-oil growth will retain some momentum but will slow, from 4.5% on average to 3%, given spillovers from oil prices, higher interest rates and weaker global growth; some post-pandemic gains in 2022 will also fade in 2023.

In MENA non-oil economies, credit fundamentals in many countries face risks from high debt burdens and tight external financing conditions amid higher global interest rates; domestic interest rates will also remain high given inflation trends, it said.

Growth is likely to be weaker in most cases, affected by lacklustre global trade, higher interest rates, limited fiscal space and risks to particular sectors, including tourism. Multilateral and bilateral financial support is an important mitigant in some countries, alongside some progress with economic and fiscal reforms, the agency said.

Fitch Ratings said it added two Positive Outlooks in 2022, for Ras Al Khaimah and Saudi Arabia. Of the 15 MENA sovereigns that Fitch rates, only Egypt is on Negative Outlook, while Lebanon and Tunisia do not have outlooks as Fitch typically does not assign outlooks to sovereigns with a rating of 'CCC+' or below. Lebanon remains in default. Tunisia is rated ‘CCC+’, upgraded in December from ‘CCC’. 

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