Following the recent parliamentary elections in Kuwait, marked frictions between an elected Parliament and the appointed government will continue to weigh on the reform agenda and hamper political effectiveness, according to Fitch Ratings.
“As we have previously highlighted, Kuwait’s government effectiveness is low relative to rating peers, and the friction between the executive and legislature can frustrate economic development. This is a key rating weakness,” it added.
“Parliamentary elections were held in Kuwait on 2 February. They followed several weeks of protests against the government’s handling of a corruption affair that led to the dissolution of the National Assembly last December, and the resignation of the government.
“Although political parties are not allowed in Kuwait, it is widely considered that about two-thirds of newly elected MPs form part of the opposition to the former government. The pre-election campaign helped unite political opposition around common themes such as the fight against corruption and the need for political reforms.
As a result, Fitch believes that difficulties in reaching agreement at the political level will continue to affect economic reforms, including the implementation of the four-year Development Plan (worth 80% of GDP over 2010/11-2013/14), which aims at boosting the country’s infrastructure and diversifying the economy away from oil.
Fitch rates Kuwait ‘AA’ with a Stable Outlook. High oil prices (we forecast oil prices $100/barrel in 2012) should continue to ensure double digit current account and fiscal surpluses, which are the main support of the rating.