June 7 (UPI) — Kuwait faces credit risks because national policies are behind the curve when it comes to supporting non-hydrocarbon growth, Moody’s Investors Service found.
Early this year, Fitch Ratings found Kuwait’s credit strengths were supported by a low-price policy peg for Brent crude oil at $56 per barrel, about $20 per barrel less than current levels. That report, however, found that strength is balanced by an economy that depends heavily on oil, is exposed to geopolitical risks and has a weak business environment behind it.
A report Thursday from Moody’s found Kuwait faces significant credit challenges because of its dependency on oil moving in a volatile commodities market.
“The country has been slower than its regional peers in developing its non-oil and private sectors,” the report read.
The International Monetary Fund reported that non-oil growth picked up somewhat over the last two years, though that wasn’t enough to dampen the impact of voluntary production cuts from members of the Organization of Petroleum Exporting Countries. Kuwait is the fifth-largest producer in OPEC, churning out about 2.7 million barrels per day.
The IMF said the voluntary cuts in production from OPEC members would be a negative growth factor for Kuwait. Growth in GDP is estimated at 1.3 percent this year.
The Arab Petroleum Investments Corp., a regional development bank, reported expectations of mixed success for renewable energy. Morocco led the pack by setting a target for 52 percent of its energy mix coming from renewables by 2030.
Moody’s estimated public and private investments should support non-hydrocarbon growth rate of about 4 percent through 2021. Kuwait’s economy, meanwhile, is at risk because of the wide swings in oil prices at a time when broader markets are exposed to global trade tensions.
“Kuwait’s credit profile would be supported by a steady diversification of government revenues and economic activity away from the oil sector,” Thaddeus Best, a Moody’s analyst who co-authored the report, said in a statement.