Bangkok--25 Apr--Standard & Poor's
Middle Eastern, North African, and Central Asian sovereigns continued to benefit from strong real economic growth, averaging more than 6%, and improved creditworthiness. Their ratings, however, remain constrained by low fiscal flexibility and geopolitical risks, according to a report published today by Standard & Poor's Ratings Services.
The report, titled "Sector Review: Sovereign Ratings In The Middle East, North Africa, And Central Asia," is available in the "Sovereign Ratings In The Middle East And Central Asia" brochure released today. In addition, a commentary titled "Gulf States Tackle Diversification, But Tough Decisions Lie Ahead," is included in the brochure; for further details about this commentary see media release titled "Further Reforms Needed To Capitalize On Diversification Efforts In Gulf States, Says Report." The brochure also contains summary analyses for all fourteen of these sovereigns.
"Sustained high commodity prices have spurred economic growth in the Gulf countries and Kazakhstan, as both public and private investment increased," said Standard & Poor's analyst Farouk Soussa. "Although the majority of this investment has been in the oil sector, significant public and private expenditure in other sectors has also been witnessed in countries such as Oman, Saudi Arabia, and Qatar, where efforts to diversify the economy have been redoubled."
Elsewhere, a continued favorable global conjuncture and ample liquidity has helped keep real interest rates low, stimulating domestic investment and demand, and improving the inward flow of capital. Turkey, Morocco, Jordan, Egypt, and Israel all enjoyed strong real investment growth in 2006--a trend that has been boosted by increased intra-regional investment by oil-exporting Arab countries. Lebanon was a notable exception to the strong growth story as the mid-year month-long conflict between Hizbollah and Israel reversed a promising economic recovery in the first half of the year.
Moreover, ratings in many countries in the region are constrained by a lack of fiscal flexibility and/or underperformance on the budget. In the Gulf states and Kazakhstan, fiscal performance in 2006 continued to be very strong, with almost all countries increasing the size of the already large surpluses registered in 2005 as revenues accruing from a further rise in oil prices far exceeded those assumed in budgets. Encouragingly, these unforeseen oil revenues were not matched by excessive spending, but mainly once more used to augment stabilization funds for future use, or used to retire domestic debt (as was the case in Saudi Arabia). Nevertheless, ratings in the Gulf countries remain constrained by the dependence of government finances on oil revenues. Other countries in the region generally exhibit similar structural inflexibilities on the expenditure side of the budget, while not enjoying the kinds of revenues generated in oil-rich states.
The latest individual sovereign analyses can be found on the "Related Research" page for each sovereign. Alternatively, for pdf or print copies of the "Sovereign Ratings In The Middle East And Central Asia" brochure, call one of the following Standard & Poor's numbers: Client Support Europe (44) 20-7176-7176; London Press Office Hotline (44) 20-7176-3605; Paris (33) 1-4420-6708; Frankfurt (49) 69-33-999-225; Stockholm (46) 8-440-5916; or Moscow (7) 095-783-4017. Members of the media may also contact the European Press Office via e-mail on: [email protected] .
Media Contact:
David Wargin, New York (212) 438-1579
[email protected]
Analyst Contacts:
Farouk Soussa, PhD., London (44) 20-7176-7104
Ben Faulks, London (44) 20-7176-7108
Luc Marchand, London (44) 20-7176-7111