Kuwait: risk assessment
Sovereign risk Currency risk Banking sector risk Political risk Economic structure risk Country risk
August 2011 A BBB BB BB BBB BBB
Stable. Levels of public debt are low and Kuwait is expected to continue to report massive fiscal surpluses. As a result, its modest debt-servicing obligations will be easily manageable throughout the forecast period.
Stable. Kuwait’s large fiscal and current-account surpluses, coupled with a huge stock of foreign assets, will support the Kuwaiti dinar. The dinar is likely to appreciate slightly against the US dollar in 2011 as part of the Central Bank of Kuwait’s efforts to contain imported inflation.
Banking sector risk
Stable. The banking sector looks vulnerable given its exposure to high levels of real estate sector and personal loans. However, the Central Bank has ample resources to ensure that the sector has adequate liquidity.
The political feuding between the executive and the legislature is expected to continue but is unlikely to threaten underlying political stability.
Economic structure risk
Kuwait’s economy is heavily dependent on the oil sector. However, its large foreign assets and fiscal and external surpluses would provide support for its economic position even in the event of a sustained slump in oil prices.
SOURCE: Country Risk Service