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Research Announcement:

Moody's - Lower oil prices to weaken credit profiles of oil-exporting sovereigns

24 March 2020

DIFC - Dubai, March 24, 2020 --

  • Losses in fiscal revenue by more than 10% of GDP for most exposed sovereigns
  • Large sovereign assets will provide a degree of resilience for some

The severity of the credit impact of lower oil prices on oil- and gas-producing sovereigns will vary from country to country, driving divergence in their creditworthiness, Moody's Investors Service said in a report today.

The coronavirus outbreak's squeeze on global oil demand and the breakdown of the OPEC+ agreement earlier this month have created a deep, albeit temporary, shock to oil prices.

"We don't currently see the oil price decline as the outcome of a structural shift in the oil market, and fundamentals support our medium-term oil price assumption of $50-$70 per barrel," said Alexander Perjessy, a Moody's Vice President – Senior Analyst. "However, in light of recent shocks, we have revised our assumptions for 2020 and 2021.

"The sovereigns most vulnerable to lower oil prices in 2020-21 are those with the highest reliance on hydrocarbons as a source of fiscal revenue and exports, and limited capacity to adjust."

Moody's estimates that fiscal revenue and exports would decline by more than 10% of 2019 GDP in 2020 in Iraq and Kuwait compared with the rating agency's previous projections, in the absence of any adjustment, such as an increase in oil output.

In Oman, Qatar, Azerbaijan, Saudi Arabia, Republic of the Congo and Bahrain, the fall would be 4%-8% of GDP. The decline would be smaller, at less than 3% of GDP, in Russia, Kazakhstan, Trinidad and Tobago, Nigeria and Gabon.

The most vulnerable sovereigns are Oman, Bahrain, Iraq and Angola, where external vulnerability is high and capacity to adjust to the shock is limited. By contrast, stronger fiscal positions ahead of the shock buffer the credit implications for Qatar, Russia, Azerbaijan, Kazakhstan and Saudi Arabia. And robust sovereign balance sheets will support Qatar and the United Arab Emirates, and, to a lesser extent, Kuwait, Azerbaijan, Kazakhstan and Saudi Arabia.

NOTE TO JOURNALISTS ONLY: For more information, please call one of our global press information hotlines: New York +1-212-553-0376, London +44-20-7772-5456, Tokyo +813-5408-4110, Hong Kong +852-3758-1350, Sydney +61-2-9270-8141, Mexico City 001-888-779-5833, São Paulo 0800-891-2518, or Buenos Aires 0800-666-3506. You can also email us at mediarelations@moodys.com or visit our web site at www.moodys.com.

This publication does not announce a credit rating action. For any credit ratings referenced in this publication, please see the ratings tab on the issuer/entity page on www.moodys.com for the most updated credit rating action information and rating history.

Alexander Perjessy
VP-Senior Analyst
Sovereign Risk Group
Moody's Investors Service Middle East Limited
JOURNALISTS : 44 20 7772 5456
Client Service : 44 20 7772 5454

Matt Robinson
Associate Managing Director
Sovereign Risk Group
Moody's Investors Service Ltd.
JOURNALISTS : 44 20 7772 5456
Client Service : 44 20 7772 5454

Releasing Office :
Moody's Investors Service Middle East Limited
Regulated by the DFSA
Gate Precinct 3, Level 3
P.O. Box 506845
DIFC - Dubai
UAE
JOURNALISTS : 44 20 7772 5456
Client Service : 44 20 7772 5454

© 2020 Moody’s Corporation, Moody’s Investors Service, Inc., Moody’s Analytics, Inc. and/or their licensors and affiliates (collectively, “MOODY’S”). All rights reserved.

CREDIT RATINGS ISSUED BY MOODY'S INVESTORS SERVICE, INC. AND/OR ITS CREDIT RATINGS AFFILIATES ARE MOODY’S CURRENT OPINIONS OF THE RELATIVE FUTURE CREDIT RISK OF ENTITIES, CREDIT COMMITMENTS, OR DEBT OR DEBT-LIKE SECURITIES, AND MATERIALS, PRODUCTS, SERVICES AND INFORMATION PUBLISHED BY MOODY’S (COLLECTIVELY, “PUBLICATIONS”) MAY INCLUDE SUCH CURRENT OPINIONS. MOODY’S INVESTORS SERVICE DEFINES CREDIT RISK AS THE RISK THAT AN ENTITY MAY NOT MEET ITS CONTRACTUAL FINANCIAL OBLIGATIONS AS THEY COME DUE AND ANY ESTIMATED FINANCIAL LOSS IN THE EVENT OF DEFAULT OR IMPAIRMENT. SEE MOODY’S RATING SYMBOLS AND DEFINITIONS PUBLICATION FOR INFORMATION ON THE TYPES OF CONTRACTUAL FINANCIAL OBLIGATIONS ADDRESSED BY MOODY’S INVESTORS SERVICE CREDIT RATINGS. CREDIT RATINGS DO NOT ADDRESS ANY OTHER RISK, INCLUDING BUT NOT LIMITED TO: LIQUIDITY RISK, MARKET VALUE RISK, OR PRICE VOLATILITY. CREDIT RATINGS, NON-CREDIT ASSESSMENTS (“ASSESSMENTS”), AND OTHER OPINIONS INCLUDED IN MOODY’S PUBLICATIONS ARE NOT STATEMENTS OF CURRENT OR HISTORICAL FACT. MOODY’S PUBLICATIONS MAY ALSO INCLUDE QUANTITATIVE MODEL-BASED ESTIMATES OF CREDIT RISK AND RELATED OPINIONS OR COMMENTARY PUBLISHED BY MOODY’S ANALYTICS, INC. AND/OR ITS AFFILIATES. MOODY’S CREDIT RATINGS, ASSESSMENTS, OTHER OPINIONS AND PUBLICATIONS DO NOT CONSTITUTE OR PROVIDE INVESTMENT OR FINANCIAL ADVICE, AND MOODY’S CREDIT RATINGS, ASSESSMENTS, OTHER OPINIONS AND PUBLICATIONS ARE NOT AND DO NOT PROVIDE RECOMMENDATIONS TO PURCHASE, SELL, OR HOLD PARTICULAR SECURITIES. MOODY’S CREDIT RATINGS, ASSESSMENTS, OTHER OPINIONS AND PUBLICATIONS DO NOT COMMENT ON THE SUITABILITY OF AN INVESTMENT FOR ANY PARTICULAR INVESTOR. MOODY’S ISSUES ITS CREDIT RATINGS, ASSESSMENTS AND OTHER OPINIONS AND PUBLISHES ITS PUBLICATIONS WITH THE EXPECTATION AND UNDERSTANDING THAT EACH INVESTOR WILL, WITH DUE CARE, MAKE ITS OWN STUDY AND EVALUATION OF EACH SECURITY THAT IS UNDER CONSIDERATION FOR PURCHASE, HOLDING, OR SALE.

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MJKK and MSFJ also maintain policies and procedures to address Japanese regulatory requirements.

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