Fitch forecasts stable outlook for Middle East sovereigns

15 December 2013

Egypt and Tunisia on negative outlook

The creditworthiness of Middle Eastern and North African sovereigns is expected to remain stable in 2014, according to ratings agency Fitch Ratings.

Only Egypt and Tunisia are on a negative outlook. The other countries rated by Fitch are viewed as stable, with the exception of Saudi Arabia and Israel, which have positive outlooks.

Oil exporters are likely to see better rates of economic growth, compared with the region’s oil importers, says the agency’s 2014 outlook report. However oil exporters will face some deterioration of their fiscal position due to lower crude prices and planned increased spending.

Fitch estimates that total government spending within the GCC region has risen by an average of 14 per cent a year over the past nine years and is set to rise by 6 per cent in 2014.

The report forecasts increased efforts by states to create employment in the private sector. Frustrations with stagnating economies and a lack of employment opportunities were some of the reasons behind the political uprisings seen across the region in 2011.

Given the strong fiscal positions of the majority of oil exporters in the GCC, Fitch does not forecast many GCC rated oil exporters to make any external issuances. Oman has been considering their first international bond issue since 1997, while Bahrain is deemed one of the most likely GCC states to seek external financing. Yet, Fitch notes the country’s $1.5bn bond issuance made in mid-2013 has given the country some financial flexibility.

Among the oil importers, Fitch does not expect Egypt to borrow on the international market, as billions of dollars of funding has already been pledged by GCC countries.

Morocco maintains market access and Fitch says further international issuance is possible after its recent $2.3bn Eurobond.

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