Moody's: Kuwait is Witnessing a Decline in its Financial Strength

  • Kuwait City, State of Kuwait
  • 19 June 2020
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“Moody's” Rating agency predicted that Kuwait will witness a deterioration in its financial strength, despite the fact that the very large assets of the sovereign wealth fund provide great financial bumpers.

According to Moody's, Kuwait is the least Gulf state in terms of the net expected effects of fiscal stimulus measures, which are located in the negative region, pointing out that the size of the shock of the country's oil revenues is close to the level of 30 percent of GDP for 2020.

The agency expected a significant decline in the revenues of all the Gulf states, after adjusting its estimates for the average oil prices to about 35 dollars a barrel during the current year.

While the countries of the region provided some targeted support to protect the economy from the shock of the Coronavirus, Moody’s indicated that most countries have taken fiscal control measures that significantly exceed the cost of stimulus in order to offset the expected revenue losses, stating that the differences in the financial response are somewhat proportional with the level of exposure of the Gulf economies to the shock, but in the end, it reflects the differences in the institutions of those countries and their governance strength, which embodies their ability to adapt, and indicates how low oil prices permanently affect the features of sovereign credit.

Moody's noted that Kuwait has not witnessed the implementation of any new revenue collection measures that have been implemented in a number of countries in the region, such as value-added tax or consumption taxes, stating that the government has only made modest spending adjustments, such as the move to partial price hikes of fuel, whose growth in the public sector wage bill has largely overtaken its impact.

Source (Al-Rai Newspaper-Kuwait, Edited)

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