In its latest report, global rating agency Standard & Poor’s (S&P) has affirmed Kuwait’s ‘A+’ sovereign rating with a stable outlook. This strong assessment is primarily attributed to Kuwait’s sizeable government financial assets, which are projected to reach around 418 percent of the country’s gross domestic product (GDP) in 2024.
The agency highlighted the ongoing structural and financial reforms in Kuwait. However, S&P also noted that Kuwait’s economy remains heavily reliant on the oil sector, leaving it vulnerable to volatility in global oil prices. S&P anticipates a contraction of 2.3 percent in Kuwait’s real GDP in 2024, followed by an average growth of 2.4 percent during 2025-2027, assuming a slight easing of OPEC’s oil production restrictions.
New vision to transform Kuwait into financial hub
The report highlights Kuwait’s plans to accelerate large government investment projects, with a focus on public-private partnerships and high-impact initiatives driven by the New Kuwait 2035 vision. This national strategy aims to transform Kuwait into a regional and international financial and trade hub, making it more attractive to investors.
Substantial financial assets to provide stability
S&P’s stable outlook reflects the assumption that Kuwait’s substantial financial and external balances will remain robust during the forecast period, supported by the projected growth in government financial assets to reach 447 percent of GDP between 2024 and 2027. These significant assets are expected to mitigate the economic risks associated with the country’s heavy reliance on the oil sector and potential fluctuations in oil prices.
Potential ratings upgrade contingent on structural reforms
The rating agency noted that a potential upgrade in Kuwait’s sovereign credit rating could be contingent on the successful implementation of a comprehensive structural reform package, such as diversifying the economy away from the hydrocarbon sector and increasing its productive capacity, leading to stronger real GDP growth prospects.
Moreover, S&P emphasized that a downgrade in Kuwait’s rating could be triggered by a significant rise in fiscal imbalances, potentially due to weaker oil prices or the absence of fiscal reforms, if the government remains without comprehensive fiscal financing arrangements.
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