Kuwait’s Credit Ratings Affirmed by Fitch Ratings
In a recent report, Fitch Ratings has affirmed Kuwait’s foreign and local currency sovereign credit ratings at AA- with a stable outlook. This rating reflects minimal default risk and a strong ability to meet financial obligations, driven by the country’s robust fiscal and external balance sheets.
Strengths and Challenges
According to Fitch, Kuwait’s fiscal and external balance sheets are among the strongest of Fitch-rated sovereigns. However, the assessment is somewhat limited by the country’s heavy reliance on oil, as well as its generous welfare system and large public sector, which may pose challenges in the long-term.
The political context in Kuwait also presents obstacles, with conflicts between the elected parliament and the cabinet leading to frequent resignations and dissolutions of parliament. Despite these challenges, Fitch projects that Kuwait’s sovereign net foreign asset position will remain strong, averaging 529 percent of GDP in the coming years.
Government Debt and Oil Prices
Fitch expects Kuwait’s average oil price to decrease slightly over the next few years, with the government debt remaining relatively low but projected to increase to 11 percent of GDP by 2025. The agency also anticipates that the government will be able to meet its debt service obligations, even in the absence of a liquidity law.
Looking ahead, Fitch forecasts an average oil price of $79.8 per barrel for 2024, with a further decline to $71 per barrel in 2025. These projections take into account potential changes in crude output and production constraints by OPEC+.