Kuwait and Bahrain see limited growth in government spending
Kuwait and Bahrain have had their current long-term foreign and local currency issuer default ratings (IDR) affirmed by US rating agency Fitch, with both Gulf countries given a stable outlook.
Kuwaits rating remains at AA, reflecting its strong sovereign balance sheet fuelled by strong oil exports. The country enjoys large fiscal and current account surpluses, averaging 29 per cent and 34 per cent of GDP respectively over the past 10 years.
Kuwaits current account surplus stood at a high 33.1 per cent of GDP in 2013, but Fitch says the surplus is likely to decline in line with a forecast decline in oil prices. The rating agency predicts a surplus of 22 per cent of GDP in 2016.
The countrys capital spending is far less than its neighbours in the Gulf, only accounting for about 10 per cent of total spending. Economic growth has also been limited over the past five years, growing at an average of 0.9 per cent.
Fitch says there are signs that Kuwaits economy is growing more rapidly, due to an increase in lending to the private sector and the award of contracts for several infrastructure projects this year so far.
Bahrain has retained a long-term foreign currency IDR rating of BBB from Fitch. This rating has been bolstered by a rebound in oil production last year following disruptions in 2012.
The disbursement of funding from the GCC countries to the small island Gulf state has also begun, helping boost the economy. Of the $4.4bn-worth of projects approved to date, a total of 10 tenders worth up to $1.4bn have been awarded so far.
Bahrain is expected to see its deficit widen, due to anticipated increases in spending. Total debt reached about 44 per cent of GDP in 2013.
Political instability in Bahrain has also made it difficult to implement subsidy and wage reforms, while parliamentary elections planned for November will further stall the introduction of new initiatives.
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