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Moody’s affirms ‘stable outlook for GCC sovereigns’ in 2019

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Ratings agency Moody’s said on Wednesday that its outlook for sovereign credit worthiness in 2019 in the GCC is stable overall, reflecting its expectations for the fundamental credit conditions that will drive sovereign credit over the next 12-18 months.

It said that higher oil prices during most of 2018 have reduced fiscal and external pressures in the short term, but weakened the impetus for fiscal reform, leaving government credit profiles exposed to future phases of lower oil prices.

Moody’s also warned that geopolitical tensions will remain a key source of risk as well as a catalyst for rising military-related fiscal spending in the region. Under Moody’s current assumptions of oil prices averaging $75 per barrel in 2019, fiscal balances will strengthen modestly compared to 2018.

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It said the GDP growth in GCC will be broadly unchanged this year, as the cuts in oil production agreed to by OPEC+ nations lead to stable or slightly decelerating oil GDP growth, while non-oil GDP growth picks up only modestly.

Moody’s said that: ‘Against that backdrop, we expect unemployment to be broadly unchanged or rise slightly further across the region.

Over the longer term, demographic trends will cause joblessness to climb, unless the participation of nationals in the private sector increases significantly, Moody’s projected.