In 2015, Kuwait's economic growth is expected to decrease to 1.7% due to the lower oil price and decreased oil production.
Middle East and North Africa economies
Atradius STAR Political Risk Rating*:
Algeria: 6 (Moderate-High Risk) - Positive
Egypt: 6 (Moderate-High Risk) - Negative
Jordan: 5 (Moderate Risk) - Negative
Kuwait: 3 (Moderate-Low Risk) - Stable
Morocco: 5 (Moderate Risk) - Positive
Saudi Arabia: 3 (Moderate-Low Risk) - Negative
Tunisia: 5 (Moderate Risk) - Negative
United Arab Emirates: 3 (Moderate-Low Risk) - Positive
* The STAR rating runs on a scale from 1 to 10, where 1 represents the lowest risk and 10 the highest risk.
The 10 rating steps are aggregated into five broad categories to facilitate their interpretation in terms of credit quality. Starting from the most benign part of the quality spectrum, these categories range from ‘Low Risk’, ‘Moderate-Low Risk’, ‘Moderate Risk’, ‘Moderate-High Risk’ to ‘High Risk’, with a separate grade reserved for ‘Very High Risk.’
In addition to the 10-point scale, rating modifiers are associated with each scale step: ‘Positive’, ‘Stable’, and ‘Negative’. These rating modifiers allow further granularity and differentiate more finely between countries in terms of risk.
For further information about the Atradius STAR rating, please click here.
Head of state: Emir Sabah Al-Ahmad Al-Jaber Al-Sabah (since January 2006)
Head of government: Prime Minister Jaber Al-Mubarak Al-Hamad Al-Sabah (since November 2011)
Government type: Constitutional emirate
Population: 4.1 million - immigrants make up about 70% of the total population.
Risk of sectarian tensions has increased
The political situation in Kuwait is relatively stable. Sheikh Sabah and his ruling Al-Sabah family are still firmly in power, holding most of the cabinet posts. The Emir is chosen from within the ruling family and confirmed by parliamentary vote; the Emir appoints the Prime Minister and Deputy Prime Ministers. In recent years, tensions between the government and the parliament have increased after crackdowns of people critical of the government and demanding more political reforms.
While there were no instances of terrorism until recently, in June 2015 a suicide bomber killed more than 20 worshippers at a Shiite mosque in Kuwait, increasing the risk of sectarian tensions between Sunnis and Shiites, which make up about 30% of Kuwait’s indigenous population.
Still a budget surplus despite decreasing oil revenues
The Kuwaiti economy is highly dependent on oil and gas sales, which account for 50% of GDP, 95% of export revenues and 85% of government earnings. Economic growth is expected to decrease to 1.7% in 2015 due to the lower oil price and decreased oil production. However, in the medium term, investments in infrastructure will support economic growth.
Despite its high dependence on oil revenues, the public budget is not expected to record a deficit in 2015. The budget surplus, however, is forecast to decrease to 4% of GDP (from more than 25% of GDP in 2013). Government spending has increased sharply in the past years, but is expected to decrease in 2015.
Kuwait’s external position remains very strong, with large current account surpluses, low foreign debt (25% of GDP in 2015) and high foreign exchange reserves. Additionally, Kuwait has a sovereign wealth fund with estimated assets of more than USD 548 billion. Therefore, it is capable of easily managing the lower oil price for the time being.