Moody's Places Gulf States on Review for Downgrade

Dubai: Moody's has lowered the credit ratings of Oman and Bahrain and placed the remaining Gulf oil exporters on review for downgrade, saying low crude prices have weakened their economies.

The cut was made to "reflect the impact of the continued large fall in oil prices," the rating agency said in a statement late on Friday.

Moody's review covers OPEC (Organization of Petroleum Exporting Countries) kingpin Saudi Arabia, whose rating Standard and Poor's (S&P) cut two notches to 'A-' last month, the United Arab Emirates, Kuwait and Qatar.

Moody's has forecast oil prices to average $33 a barrel in 2016, $38 a barrel next year and $48 a barrel by 2019.

Bahrain's rating was lowered one notch to 'Ba1', a grade that has some speculative elements and significant credit risk. Oman's rating was lowered two notches to A1 - still an upper-medium grade with low credit risk.

Although a relatively small exporter, oil and gas accounted for 75 per cent of Bahrain's exports and 86 per cent of public revenues between 2010 and 2014, Moody's said.

As for Oman, oil and gas income made up 90 percent of government revenues. The Gulf sultanate has a comparatively weaker asset cushion, with government financial assets amounting to only about three years of spending, the agency said.

Moody's said the structural shock set off in the oil market is weakening Gulf states' balance sheets, their economies and therefore their credit profile.

For Saudi Arabia, it said oil accounts for 84 per cent of exports, 40 per cent of Gross Domestic Product (GDP) and 62 per cent of consolidated government revenues. Before the fall in oil price, the crude income contribution was around 90 per cent.

Between 2013 and 2015, revenue as a percentage of GDP declined by 23 per cent and the fiscal balance moved from a surplus of 6.5 per cent of GDP in 2013 to a deficit of 15 per cent last year.

During the same period, the kingdom's current account balance relative to GDP slid from a surplus of 18.2 per cent to a deficit of 5.7 per cent, Moody's said.

All Gulf Cooperation Council (GCC) states have undertaken austerity measures including cutting energy subsidies to counter the drop in oil revenues.

Moody's said last month that fuel subsidy reforms will help reduce pressure on budgets but are not enough to offset deficits resulting from low oil prices.