The Gulf remains the safest bloc in the MENA region.
The general trend improvement in scores, especially in Kuwait and Oman, has prompted Euromoney to declare: Gulf’s strongest performers tipped for rating upgrade.
Despite its score sliding a little in Q1 2013, tier-two sovereign Qatar is still the safest country in the region, ranking 18th out of 186 countries worldwide, separating 17th-placed Taiwan from the UK in 19th. Just five years ago Qatar ranked 60th, but its stellar economic performance, underpinned by the boom in its liquefied natural gas industry, has sent it soaring up the ranks.
All of the country’s economic assessment indicators score more than 7.0 out of 10; its government finances a substantial 8.7. While growth in the hydrocarbons sector is now slowing down as oil and gas fields mature, the government is investing heavily in other areas – transport, healthcare, education, tourism and sport – to diversify the economy without inflicting any serious fiscal damage.
The Qatari budget for fiscal year 2013/14 (to end-March) estimates $58 billion of government spending, a rise of 18% in nominal terms, as the authorities implement a massive infrastructure spending programme partly in preparation for hosting the 2022 Fifa World Cup.
The increased spending will lower the budget surplus to $7.4 billion from more than $27 billion during the previous fiscal year. However, it is typically based on a conservative oil price projection of just $65/barrel, compared with a current market price of around $100.
In reality the budget will narrow, but only from 9% of GDP in 2012/13 to a still considerable 7% of GDP, according to experts.
Other Gulf states Kuwait, Oman, the UAE and Saudi Arabia are also tier-two sovereigns, with the gap between high-flying Qatar and the UAE having narrowed to 5.4 points in Q1 2013 after widening to 13.4 during Q3 2012.
However, Bahrain, the only member of the six-nation Gulf Cooperation Council without an A-class credit rating, is languishing below in tier three. Its economic prospects are far less assured, as the IMF’s latest World Economic Outlook, April 2013 demonstrates.
The IMF’s forecasts highlight the diversity of economic prospects across the region, from fast-growing Iraq to contracting Iran. However, as the Euromoney survey indicates, it is not just economic fortunes shaping MENA’s country risk. A whole host of other political and structural factors are influencing the region’s risk profile.
This article was originally published in Euromoney Country Risk.