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Bahrain, Saudi, most vulnerable to oil shock

Bahrain, Saudi, most vulnerable to oil shock

Bahrain and Saudi Arabia topped the list of rated oil-exporting countries most vulnerable to plummeting crude prices, a leading international ratings agency said Tuesday in a report spotlighting the challenges confronting a region where crude is king.
Along with OPEC powerhouse Saudi Arabia and its tiny neighbor, Bahrain, Azerbaijan was also part of the top three in the vulnerability index list created by Standard & Poor's. Norway, Cameroon and Mexico were the least vulnerable to falling oil prices, according to the report.
"The sharp fall in oil prices since mid-2008 has come as a welcome boom to oil-importing countries, but for oil-exporting countries the drop has been less welcome," Farouk Soussa, a Dubai-based S&P credit analyst, said in a statement. "Some are facing dramatic declines in their fiscal and external balances in 2009, along with much less exuberant growth or even declines in their net asset positions compared with 2008."
The report did not include several OPEC members, including Iran, which S&P said is not rated by the company.
Iran is among the hardest hit of the oil producers, with crude accounting for about 80 percent of its foreign revenues. Critics have accused the country's hardline President Mahmoud Ahmadinejad of squandering the profits from last year's boom on populist projects aimed at shoring up support for his government.
The index _ which did not factor in other elements that help determine S&P's credit ratings of these countries _ offered another reminder of the dangers key members of the Organization of the Petroleum Exporting Countries face in not having a diversified economy during the worst recession to hit the world in about six decades.
Countries like Saudi Arabia, the United Arab Emirates and Kuwait were riding high during the oil price spike that peaked in mid July at about $147 per barrel. But the subsequent collapse to around $50 per barrel on plummeting global demand has cut sharply into sales of a commodity that accounts for between 60 and 90 percent of foreign revenue sources for many OPEC nations.
All but one of the top five spots in the index were held by Arab nations in the Persian Gulf, with Nigeria the odd-man-out.
But Saudi, in particular, has weathered the crisis well despite projections of falling economic growth rates there, and elsewhere in the region.
The kingdom's Central Bank has cut interest rates, worked to spur lending and liquidity and has even pushed through an expansionary budget focused on boosting infrastructure spending. But this plan, funded by the massive cash surpluses accrued from the earlier oil boom, have come at a price, with the country projecting its first budget deficit in years.
The International Monetary Fund last month said the global meltdown has forced oil producers in the Middle East to dig deep into their pockets to offset slumping oil revenues. While the IMF said the region was faring well relative to other parts of the world, the days of sharp spikes in economic growth rates were, at least temporarily, over.
Saudi's gross domestic product growth rate was projected to plummet from 4.6 percent in 2008 to -0.9 percent this year before rebounding to 2.9 percent. In the UAE _ home to debt-saddled Dubai _ growth is projected to fall to -0.6 percent in 2009 from 7.4 percent last year, according to the IMF.
Even so, few have sounded the alarm bells, with the expectation that prudent fiscal policies, coupled with a rebound in crude prices once demand picks up, will again help fill these nations' treasuries.
S&P said the index, while useful in gauging overall vulnerability, should be taken in context of the various countries' overall political and economic position and do not reflect the credit worthiness of the individual countries. Saudi Arabia and the UAE, for example, enjoy investment grade sovereign credit ratings.
"The relative rankings in this score of Saudi Arabia (AA-/Stable/A-1+_ and Cameroon (B/Stable/B) are an indication of the importance of other factors in determining sovereign credit quality, such as political stability, a country's overall level of wealth and the overall state of a government's finance," said Soussa.
Among the other countries listed in the rankings, Nigeria came in fourth, followed by Oman, Kuwait, Gabon, Qatar, Trinidad & Tobago, Venezuela, Ecuador, Russia, Abu Dhabi, Kazakhstan, Vietnam, Malaysia, Norway, Cameroon and Mexico.


Updated : 2021-05-18 18:12 GMT+08:00