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Euromoney Country Risk

Gulf disparities warrant careful inspection – MENA Q2 results

Although the Gulf remains the safest bloc within the MENA region, its six constituent countries still display diverse prospects in terms of the three main categories of risk in Euromoney’s survey (see chart).

Qatar, a comfortable tier-two sovereign, nestled between Taiwan and the UK on ECR’s global risk data table – in 18th place out of 186 countries – has seen its score deteriorate since December, partly in response to a slower economic outlook than it has been accustomed to in previous years.

Having grown by 6.6% in real terms last year, and a double-digit pace during 2006-11 – due to investment in the productive capacity of its liquefied natural gas sector – a more sedate pace of expansion of around 5% is predicted for 2013-14 by the IMF.

Still, Qatar has far safer economic dynamics than most other countries in the region, with one of the largest current-account surpluses, amounting to almost 30% of GDP. Its economic outlook has deteriorated a little in light of global energy demand and capacity, yet all of the six economic assessment indicators still score more than 7.5 out of 10.

The economy is also diversifying, with the share of non-hydrocarbon economic activity increasing to 42% of GDP in 2012. Massive infrastructure projects are continuing, too, partly in preparation for the 2022 Fifa World Cup, and easily financed by strong government finances, which score a whopping 8.7 in the survey.

Kuwait, too, 20th on ECR’s global scoreboard, has strong economic fundamentals – with a current account even larger than Qatar’s, at 40% of GDP – but the sovereign’s very strong fiscal position (highlighted by a score of 9.0 out of 10 for its government finances) is not matched by confidence in the economy, with its GDP growth predicted to slow from 5.1% in 2012 to just 1.1% this year, subduing the economic-GNP outlook score.

Moreover, as in other Gulf countries, Kuwait’s political and structural development is still failing to keep pace. Government stability has improved a touch but it scores lowly on a range of political indicators, not least for information access/transparency (4.8) and the regulatory and policy environment (4.9).

This article was originally published by ECR. To find out more, register for a free trial at Euromoney Country Risk.

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