S&P affirms Kuwait’s AA/A-1+ rating; stable outlook

Standards & Poor’s Financial Services (S&P) has affirmed its “AA” long-term and “A-1+” short-term foreign and local currency credit ratings on Kuwait, the ratings agency said in a report on Friday.

“The stable outlook reflects our expectation that Kuwait's public and external balance sheets will remain strong over the forecast horizon, backed by a significant stock of financial assets,” S&P said. “We expect these strengths to offset risks related to lower oil prices, Kuwait's undiversified economy, and rising geopolitical tensions in the region.”

The ratings could be lowered if the policy response to lower oil prices failed to lift income levels and monetary flexibility assessments changes, and if the country’s political stability deteriorates or geopolitical risks escalates.

Despite higher oil prices of $55 per barrel in 2017, Kuwait likely experienced a contraction in real gross domestic product (GDP) growth of 2.3 percent, mainly due to a 5-6 percent decline in oil production implemented under the OPEC deal, S&P said.

Kuwait is expected to have a surplus of 8 percent GDP for the fiscal year ending March 31, compared to a deficit of nearly 16 percent of GDP at the central government level.

The recurrent investment income will allow the general government to remain in surplus over the forecast horizon, with the surplus widening to 13.7 percent of GDP in 2021-22, the report added.