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Standard & Poor’s affirms Kuwait’s outlook stable

London: Standard & Poor’s affirmed Kuwait’s long- and short-term foreign and local currency sovereign credit ratings at ‘AA/A-1+’ with a stable outlook on Friday, saying that it is supported by the sovereign’s high levels of wealth and very strong external and fiscal balance sheet positions.

However in a statement it said “the ratings are constrained by Kuwait’s difficult political environment, lack of transparency regarding decision-making and government assets, and limited monetary policy flexibility.”

The ratings agency estimates that the country’s trend economic growth, which is a criteria defined as a weighted 10-year average of the change in real GDP per capita, will see a contraction of about 0.8 per cent.

“We expect countries with similar wealth levels to Kuwait to grow by 0.3 per cent-1.5 per cent. In our view, Kuwait’s high wealth level — we estimate GDP per capita at $60,000 in 2014 — means that its weak economic growth performance is not an immediate ratings concern.

“However, over the medium term, Kuwait’s economic risk position could deteriorate compared with faster-growing economies.”

It also pointed to the uncertainty surrounding the size of the resident population is uncertain, especially the size of the non-national population, which accounts for about two-thirds of the total population. This makes the calculation of output per capita more challenging than in most other rated sovereigns.

Standard & Poor’s forecast that general government and current account surpluses will remain above 15 per cent and 25 per cent of GDP, respectively, until 2017.

“We also expect that Kuwait’s political system will remain confrontational, often resulting in the inefficient implementation of government policy,” the statement noted.

“We anticipate that transparency with regard to government assets will remain low and that geopolitical tensions in the region will not escalate. We expect only marginal diversification of the economy over the next two years and estimate trend growth as a contraction in per capita economic output of 0.8 per cent. We also estimate that Kuwait’s GDP per capita will rise to about $60,000 in 2014.”