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Unrest could hit wealthy Mid East credit

Thursday 3 March 2011 - by Will Henley

Oil-rich Middle Eastern countries are not "immune" to the political unrest which has forced a series of sovereign credit downgrades, according to a leading rating agency.

In two reports issued on Thursday, Standard & Poor's raises fears that the crisis affecting Libya, Tunisia, Egypt and Jordan could spread to more wealthy Arab nations.

In a statement, credit analyst Kai Stukenbrock suggests that economic concessions, although they could dampen the chances of further pressures, may be unable to fully contain the threat of contagion.

Stukenbrock said: "We still consider that, all other factors being equal, high income levels and fiscal reserves, which allow some governments to engage in additional wealth redistribution and social spending, can reduce the likelihood of political unrest emerging.

"However, the fact that oil-exporting countries, which are considerably wealthier and boast many more fiscal reserves than Tunisia, Egypt, and Jordan, have now also been experiencing political upheaval, puts into perspective the extent to which wealth and fiscal spending can contain such pressure."


Examining economic prospects and public finances for 14 states in the Middle East and North Africa, the agency says that "none of the sovereigns" in the region are immune to contagion.

The agency, which has already lowered the ratings of Tunisia, Eqypt, Jordan and Libya, cites economic insecurity, restricted civil liberties and lack of representation as drivers of further strife.


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