(The following statement was released by the rating agency)
June 28 – Fitch Ratings says in its latest bi-annual global Sovereign Review and Outlook
that the economic and rating outlook in the Middle East and Africa (MEA) remains dominated by
the differential impact of recent high oil prices on oil exporters and oil importers, the
soundness of policy regimes and reform ambitions, and political risks.
Oil Producers Still Benefitting from High Prices
Although the oil price has fallen from its peak in March, Fitch’s latest forecast is for the
Brent oil price to average USD107/bl this year, well above estimated budget breakeven prices for
the major GCC producers. Geopolitical tensions surrounding Iran’s nuclear ambitions subsided in
Q212 but are likely to re-surface in H2 with renewed talks between Iran and the P5+1 making
little progress.
Saudi Arabia’s budget breakeven price has eased to just over USD70/bl as production has
risen substantially to make up for sanctions constrained production in Iran and in an attempt to
achieve what it regards as a fair price of USD100/bl. Its balance sheet is benefiting strongly
from higher oil production and prices. Strong fiscal and current account surpluses – a feature
also shared with Kuwait and Abu Dhabi – will allow Saudi Arabia to continue with its ambitious
infrastructure programme. More active labour market policies are also beginning to have an
impact on employment of Saudis in the workforce.
A number of African oil producers have attracted positive rating actions this year due to
the combination of improved public finances and stronger policy regimes. Gabon and Angola were
placed on Positive Outlook in April and May, respectively. In both cases, oil revenues are
improving and being deployed more effectively, especially on critical infrastructure which will
benefit medium term growth and employment prospects.
In Nigeria, the scrapping of the expensive gasoline subsidy in January, although partly
rolled back after popular protests, nevertheless marks important progress and has contributed to
this year’s steady increase in international reserves. A tighter budget has also played a part,
based on a conservative oil price of USD72/bl and only a modest spending rise. However, all
these countries still have limited room for manoeuvre in the event of sustained low oil prices
and their response to further price weakness will provide important evidence of whether lessons
have been learned from 2009, when weak oil prices brought severe macroeconomic stress.
Continued…
