Saudi Arabia’s ratings improve while Kuwait’s political crisis deepens

GULF COUNTRIES - Report 20 Mar 2023 by Justin Alexander

There were some significant and potentially market-moving developments in the Gulf over the weekend and so we are putting out a quick note, rather than waiting to roll up our analysis into our weekly briefing on Friday.

* Saudi Arabia received a rating upgrade from S&P and a positive outlook from Moody’s.
In terms of the more qualitative reasons for the rating actions, both agencies agree that, mid-way through the Vision 2030 implementation period, Saudi Arabia’s economic, fiscal, administrative and social reforms are trending in the right direction.

* Iran’s president has been invited to visit Saudi Arabia.
Another factor in the rating improvements is geopolitical de-escalation, particularly the restoration of relations with Iran – which are moving quickly, with reports that, even before foreign ministers have met, King Salman has already issued an invitation for President Raisi to visit.

* Kuwait’s constitutional court annulled the September election and reinstated the previous parliament.
The ruling is highly controversial and, whatever the technical legal merits of the court’s ruling, it is being seen as an attempt by the state to stifle the opposition. This seems likely to undermine the efforts over the last two years to gradually build trust between the opposition and government through amnesties and other initiatives and may signal a tougher approach from Crown Prince Meshaal, who last summer hinted darkly of consequences if the Assembly and electorate didn’t get in line.

* Saudi National Bank (9.9% of equity) and Qatar Investment Authority (6.8%) will take major hits on Credit Suisse. There may be further Gulf exposure to AT1 debt.

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