Kuwait worst hit in GCC by low oil prices: Moody’s

By Rahul Vaimal, Associate Editor
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Renowned global credit rating service Moody’s Investors Service (Moody’s) expects Kuwait to be the most exposed GCC country to the prolonged decline in oil prices caused by the COVID-19 pandemic. 

The credit rating agency estimates an oil and gas revenue impact of -29.2 percent to the country while its fellow GCC member Bahrain with an estimated revenue impact of -4.2 percent is considered to the least exposed to the pandemic driven low oil prices.

Moody’s assumptions on the impact of the coronavirus shock on oil and gas revenue are based on the estimates that oil prices will average out at $35 per barrel this year.

Kuwait is followed by Saudi Arabia with a revenue shock of -12.7 percent while neighbors Oman (12.2 percent), Abu Dhabi (-11 percent) and Qatar (7.8 percent) are expected to have better outlooks.

During his interaction at Moody’s webinar on the impact of the pandemic and lower oil prices on GCC countries, Alexander Perjessy, VP & Senior analyst for Moody’s sovereign risk group observed that “The UAE and Qatar are likely to be able to able to offset a fairly large portion of the oil revenue lost this year through spending cuts. “The fiscal measures implemented in Kuwait and Bahrain will not really offset anything, will only widen the deficits.

“Oman’s spending cuts, around 4 percent of GDP, will likely fall short quite significantly offsetting the large oil revenue loss,” Mr. Perjessy maintained.

Mr. Perjessy observed that large spending cuts and the tripling of VAT in Saudi Arabia are likely to create a lower fiscal deficit than would otherwise be the case.