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- Dubai 04:50 06:04 12:14 15:39 18:19 19:33
Divergence between the ratings of energy exporters and importers in the Middle East and North Africa (Mena) is narrowing due to lower oil prices, Fitch Ratings said in a new report.
Fitch expects Brent crude to average $70 a barrel in 2015 and $80 in 2016.
Lower oil prices have changed the economic environment for the region's exporters, says the ratings agency. It maintains lower crude prices will reduce fiscal and external outturns.
Nevertheless, 'AA'-rated Abu Dhabi and Kuwait are expected to post fiscal and external surpluses in 2015 and net sovereign foreign assets in excess of 150 per cent of GDP provide vast buffers in the event of prolonged low oil prices, it states.
The extent of the impact on the fiscal position depends on the policy response, although in a region where growth is dependent on government spending, fiscal consolidation is likely to have negative impacts on growth.
Capacity to absorb lower oil prices varies in line with ratings. Bahrain seems the most strained, with a 2014 fiscal breakeven oil price of $130 per barrel and debt/GDP already above the peer median, and was placed on a Negative Outlook in December.
Oman also requires more than $100 per barrel to balance its budget, but has sovereign wealth fund assets and a low debt burden.
In Saudi Arabia (AA), the impact on the fiscal position has been aggravated by a spending package worth 3.9 per cent of 2014 GDP. However, the Kingdom has exceptionally large buffers and virtually no debt, although it is examining debt financing options, the Fitch report maintains.
Oil importers are benefiting from lower prices through reduced import bills and lower fuel subsidy costs. Jordan stands to gain the most, with net fuel imports of 16 per cent of GDP and fuel subsidies (transfers to the state electricity generating company) of around 8 per cent of GDP.
Net fuel imports for Lebanon and Morocco both exceed 10 per cent of GDP. Egypt is a small net importer, but spent around 6 per cent of GDP on fuel subsidies in 2014 fiscal year (to end June).
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