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Divergence in MENA sovereign energy importer-exporter ratings widens: Fitch

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Reuters – Fitch Ratings says in a new report that the average sovereign ratings of energy exporters and importers in the Middle East and North Africa (MENA) have further diverged in 2014, following the upgrade of Saudi Arabia (to AA).

Credit fundamentals across the energy exporters are expected to remain strong, driven by triple digit oil prices. Fitch forecasts that Brent crude will average $105/b in 2014 and $100/b in 2015. As a result, all energy exporters are expected to record external surpluses and all except Bahrain (‘BBB’) are forecast to post fiscal surpluses in both years. Non-oil economic growth is forecast to pick up across the region, with the gains most pronounced in Qatar and UAE.

Fitch assumes that economic performance should improve in most energy importers in 2014 due to greater external financial support, a recovering euro zone and, in some cases, improved political stability. Nonetheless, the energy importers face significant challenges, from raising growth to levels that will lower unemployment through to implementing fiscal consolidation in a volatile political environment. These pressures are reflected in the Negative Outlooks for both Lebanon (B) and Tunisia (BB-) and in Egypt’s rating being the lowest in the region at ‘B-’/Stable.

Israel (A) is the only sovereign in the region with a positive outlook. Fiscal consolidation during 2013 kept the debt/GDP ratio on a downward trend and further measures are set to narrow the budget deficit in 2014. Despite the fiscal consolidation, and exchange rate strength toughening the environment for exporters, economic growth is forecast to remain over 3%.

The ratings of MENA energy importers range from ‘BBB-’ (Morocco) to ‘B-’ (Egypt). Energy exporters’ ratings range from ‘BBB’ in Bahrain to ‘AA’ in Abu Dhabi, Kuwait and Saudi Arabia.


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