Tuesday 10, January 2017 by Jessica Combes

S&P Global Ratings publishes Middle East and North Africa sovereign rating trends 2017

Overall sovereign creditworthiness in the Middle East and North Africa (MENA) region has continued to deteriorate, according to a report titled Middle East and North Africa Sovereign Rating Trends 2017 on RatingsDirect.

The report covers the 13 sovereigns we rate in the region: Abu Dhabi, Bahrain, Egypt, Iraq, Jordan, Kuwait, Lebanon, Morocco, Oman, Qatar, Ras Al Khaimah, Saudi Arabia, and Sharjah.

"We rate eight of the 13 MENA sovereigns in the 'BBB' rating category or above. The average MENA sovereign rating is closer to 'BBB' than 'BBB-', but has been trending downward. When weighted by GDP, the average moves closer to 'BBB+'," said S&P Global Ratings sovereign credit analyst Trevor Cullinan.

This average, weighted by nominal GDP, has fallen more sharply than the unweighted average over the past 12 months mainly because the rating on the region's largest economy, Saudi Arabia, has been lowered. Since S&P’s regional publication in July 2016, Bahrain’s rating was lowered to 'BB-' from 'BB'.

Outlooks on Egypt and Lebanon have gone to stable from negative, with outlooks for Oman and Sharjah to negative from stable.

Available data for 2016 shows a weakening trend in GCC economic activity, reflecting the impact of low oil prices and the resulting fiscal consolidation and reduced banking sector liquidity. It is expected that average GCC GDP growth to slow to about two per cent in 2016, compared with closer to four per cent in 2015 and to remain around these relatively weak growth rates in 2017.

Government's across the region implemented expenditure cuts and subsidy reforms that have weakened both corporate and household activity, while reduced hydrocarbon deposits in regional banking systems and government domestic borrowing have increased interbank rates and squeezed banking sector liquidity.

The long-term sustainability of GCC economic growth and the ability of their economies to absorb future increases in their working populations and diversify government revenues away from the hydrocarbons sector will rely on the prospects for growth in the non-hydrocarbon sector. Significant challenges remain in this regard and meaningful diversification will not happen in the short term.



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