DUBAI, United Arab Emirates – Two oil-rich Persian Gulf states suffered serious economic shocks wednesday when a primary credit company first lowered Kuwait’s rating and the United Arab Emirates declared that its economy would contract to a point last observed in 2009.
The agency, Moody’s Investors Service, lowered Kuwait’s debt rating and sounded that “its liquid resources are running low. “Since the government did not pass a public debt law, Kuwait turned to its reserve fund to continue spending, at a rate that may prove unsustainable. Moody’s warned that government “stagnation” and inefficient debt control would erode Kuwait’s monetary strength in the coming years.
Even if Kuwait passed an unlimited debt law, Moody’s predicts it would still take $90 billion to close the investment hole until 2024. Despite expanding “liquidity risks,” Kuwait’s government has not sought its sovereign wealth fund. one of the largest in the world, destined to make a fortune for generations after oil depletion.
Meanwhile, the Central Bank of the United Arab Emirates reported that the country had experienced a “significant decline in economic activity” due to its blockade of COVID-19, one of the strictest in the world. Virus-induced restrictions have closed borders, floor flights, closed businesses and disrupted global chains, laying the economic foundations for the region’s “commercial, tourist and transportation center,” according to the bank’s quarterly review.
The gross domestic product of the United Arab Emirates for the year is expected to decline by 5. 2%, the bank said, worse even than the 3. 5% drop predicted by the International Monetary Fund. This is the biggest drop since 2009, when the global currency crisis plunged the country. economy in a persistent recession.
Even as the oil-rich federation of seven sheikhs seeks to diversify its economy, its non-oil GDP by 9. 3% in the last quarter of the year, compared to 2. 7% in the previous quarter.
In large part, the United Arab Emirates has reopened its doors to business, seeking to get rid of the effects of closure, but with an oil-dependent economy, the country continues to face the risk of falling oil prices.