|09 January, 2020

GCC sovereigns' 2020 outlook is negative, says Moody's

Negative outlook reflects slow progress on fiscal reforms, weak growth and higher geopolitical risks

Various currency notes from Saudi, UAE, Kuwait and Oman. Image for illustrative purpose.

Various currency notes from Saudi, UAE, Kuwait and Oman. Image for illustrative purpose.

Moody’s Investors service said in a report that the outlook for sovereign creditworthiness in the Gulf Cooperation Council (GCC) in 2020 is negative.

The negative outlook reflects slow progress on fiscal reforms at a time of moderate oil prices, weak growth and higher geopolitical risk, the ratings agency said.

"The pace of fiscal consolidation will remain slow in the GCC in 2020 and fiscal strength will continue to erode in the absence of significant new fiscal measures and reforms," said Alexander Perjessy, a Moody's Vice President - Senior Analyst.

"This will be exacerbated by existing commitments to limit oil production, which will reduce government revenue," Perjessy added.

The ratings agency expects a further gradual erosion in GCC credit metrics as oil prices remain moderate over the medium-term. It also pointed that lower oil revenue available to fund government spending will constrain growth in the non-oil sector which will in turn discourage governments from undertaking more fiscal tightening.

Moody’s sees the region’s geopolitical risk as higher and broader in nature than in the past, amid ongoing tensions between the United States and Iran.

(Writing by Gerard Aoun; editing by Mily Chakrabarty)

(gerard.aoun@refinitiv.com)

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© ZAWYA 2020

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