Kuwait slower than peers in diversifying economy: Moody's

Kuwait MoodysMoody's said that Kuwait's credit profile reflects its "substantial" oil and gas reserves, balance of payments surpluses and low government debt

The rating agency said that the country's main credit challenge is its "very high" dependence on oil and an economy which is not diverse.

"The country has been slower than its regional peers in developing its non-oil and private sectors," the report from Moody's said.

Countries in the Middle East, which have enjoyed high oil prices, saw their economies come under strain after 2014 due to falling oil prices in an oversupplied market.

Since then, governments have made efforts to diversify their economies, reign in spending, cut debt and introduce new taxes.

The UAE and Saudi Arabia have made focused efforts in growing their downstream portfolio to cash in on the demand for petrochemicals.

Governments have also looked towards alternate sources of energy such as nuclear and solar to satisfy domestic demand.

They have turned to industries such as construction, tourism and infrastructure to attract investments and are looking to ease regulations to encourage private sector jobs growth.

Kuwait, for instance, has rolled out a five-year national development plan, which includes a host of projects targeted at diversifying the economy, building infrastructure and bettering delivery of public services.

"Kuwait's credit profile would be supported by a steady diversification of government revenues and economic activity away from the oil sector," said Thaddeus Best, a Moody's analyst and co-author of the report.

"Sustained improvements to the institutional framework, in particular, government transparency and reporting standards, would also be positive," Best added.

Moody's, however, estimates that Kuwait's budget will return to a surplus of about 7 per cent of its GDP in 2018-19 on the back of oil prices, which have been driven higher by output cuts.

Moody's has a "Aa2" rating on Kuwait's sovereign debt and a "stable" outlook on the country.

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