By Amr Adel
Dubai – Mubasher: Standard & Poor's Ratings Services said Tuesday that overall sovereign creditworthiness in the Middle East and North African (MENA) region has deteriorated since Standard & Poor's last published six months ago.
“We rate nine of the 13 MENA sovereigns in the 'BBB' rating category or above. The average MENA sovereign rating is now close to 'BBB'. When weighted by GDP, the average moves closer to 'BBB+',” said the ratings agency.
"This average, weighted by nominal GDP, has fallen more sharply than the unweighted average over the past six months because we have lowered the rating on the region's largest economy, Saudi Arabia," said Standard & Poor's sovereign analyst Trevor Cullinan, in the report published today, "Middle East And North Africa Sovereign Rating Trends 2016."
"During that time, we also assigned 'B-/B' long- and short-term foreign and local currency sovereign credit ratings to The Republic of Iraq, which has a relatively large economic weight compared with other MENA sovereigns."
"These averages mask a clear difference between those sovereigns with a significant hydrocarbon endowment and those without," Cullinan added.
According to S&P, the average rating for the hydrocarbon-endowed sovereigns of Abu Dhabi, Bahrain, Iraq, Kuwait, Oman, Qatar, and Saudi Arabia, is currently close to 'A', having been at 'A+' prior to the downgrade of Saudi Arabia and the inclusion of Iraq in the average. For those with more limited hydrocarbon resources (Egypt, Jordan, Lebanon, Morocco, Ras Al Khaimah, and Sharjah), it is closer to 'BB+'.
“In October 2015 we downgraded Saudi Arabia's ratings to 'A+' from 'AA-' due to the deterioration in the Kingdom's fiscal position. Saudi Arabia's general government fiscal deficit widened to about 15% of GDP in 2015, from 1.5% in 2014, primarily reflecting the sharp drop in oil prices. Absent a rebound in oil prices, we now expect general government deficits of 10% of GDP in 2016, 8% in 2017, and 5% in 2018, based on planned fiscal consolidation measures,” said S&P.
The ratings agency stated that, of the 13 MENA sovereigns we rate, nine currently have a stable outlook despite the challenging political and economic backdrop. Four, Bahrain, Lebanon, Oman and Saudi Arabia, have negative outlooks.
“We have negative outlooks on Bahrain and Saudi Arabia, reflecting weakening fiscal profiles and uncertain policy responses,” it noted.
S&P expects Egypt's economic recovery to remain gradual and its external imbalances to persist.
