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After Arab Spring, MENA region faces varied political and monetary flexibility risks, says S&P report
Source: Standard & Poor's Ratings Services , Author: Posted by BI-ME staff
Posted: Mon May 7, 2012 12:05 pm

UAE. Standard & Poor's Ratings Services rates 13 sovereigns in the Middle East and North Africa (MENA) region, all with high political risks and limited monetary policy flexibility that constrain the sovereign credit ratings.

This is according to a recent survey, titled "Political Risk And Monetary Inflexibility Continue To Weigh On MENA Sovereign Ratings," on the Global Credit Portal.
 
The nature of political risk differs across the region, and includes domestic political turmoil and succession and geopolitical risk. Institutional transparency and accountability are a further consideration in our assessment of political risk.

The limits to monetary policy flexibility in the region stem from fixed or heavily managed exchange rates, compounded by small and underdeveloped capital markets.
 
Bahrain, Egypt, Jordan, Oman, and Tunisia have negative outlooks, indicating at least a one-in-three chance that we could lower the sovereign ratings in the next one to two years.

For all five, the negative outlook reflects our view that we could lower the ratings if political tensions were to escalate and further weaken economic prospects economic prospects or external and fiscal performance.
 
The ratings on Abu Dhabi, Israel, Kuwait, Lebanon, Morocco, Qatar, Ras Al Khaimah, and Saudi Arabia have stable outlooks, indicating that we currently do not expect to raise or lower the ratings over the 2012-2013 ratings horizon.
 
The report includes individual sections on the rated sovereigns, and looks at the considerable divergence between the creditworthiness of those MENA sovereigns with a substantial hydrocarbon endowment and those without.

 

MIDDLE EAST BUSINESS COMMENT & ANALYSIS

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INTERNATIONAL. "I believe that in the wake of the Gaza war and the basis on which the ceasefire was established, a new momentum for peace negotiations might have been created."
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QATAR. Price increases may suggest a potential overheating of the real estate sector. Closer analysis, however, indicates that the increase is still within the fundamentals of Qatar's fast growing economy and rapid population growth.
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KUEAIT. There is plenty of potential in the Kuwaiti market, should investor interest remain and the government carries out its proposed spending plans. The government's 2014/15 budget is expansionary, with expenditure growth of 3.2% to US$77.3 billion.
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