Guest views are now limited to 12 pages. If you get an "Error" message, just sign in! If you need to create an account, click here.

Jump to content
  • CRYPTO REWARDS!

    Full endorsement on this opportunity - but it's limited, so get in while you can!

Moody's warns: escalating geopolitical tensions will lead to economic shock


yota691
 Share

Recommended Posts

Moody's: Iraq's fiscal deficit is expected to reach 4% in 2019

Moody's: Iraq's fiscal deficit is expected to reach 4% in 2019
Moody's Credit Rating Agency
 03 Oct 2019 02:18 PM

A report issued by the credit rating agency "Moody's" that the credit file of the Government of Iraq is stable, noting that it will remain dependent on oil revenues, which is expected to decline in the medium term.

The Moody's report published on Thursday, that oil production and exports are two of the main factors of economic growth in Iraq and the main source of financial and current account revenue.

Moody's expects Iraq's fiscal deficit to be around 4 percent of GDP in 2019-20 after a surplus of 7.9 percent in 2018.

Oil accounts for 99 percent of merchandise exports, more than 90 percent of government revenues and more than 60 percent of economic output.

The agency said it did not expect Iraq to reduce its dependence on oil production and the sensitivity of oil price fluctuations significantly in the next five years.

It also suggested that the current account balance would gradually deteriorate to 2 percent of the GDP deficit by 2020, after a surplus of 5.8 percent and 0.8 percent of GDP in 2018 and 2019, respectively.

  • Thanks 3
  • Upvote 2
Link to comment
Share on other sites

  • yota691 changed the title to A report issued a new classification of the economy of Iraq and lists the challenges
 
 
 2019/10/17 11:33:15
 

Moody's credit ratings agency said Thursday that weak institutions and slow reforms constrain Iraq's credit rating at (Caa1) with a stable outlook, according to a report issued today.

What does Caa1 mean?
Means that the country or institution has a very high credit risk to repay the debt.

The agency said that these factors in addition to the challenges of governance reduce the government's ability to deal with internal and external economic shocks and reduce the competitiveness of the Iraqi economy.
The agency warned that the decline in oil prices will lead to a budget deficit this year, and that the pace of structural reforms will remain slow as major domestic and foreign political challenges continue.

What is the budget deficit?
When expenditures are greater than resources in a given economy. It is measured in relation to GDP - the sum of goods and services - to measure a country's ability to meet its obligations without problems.

The agency's
deputy co-author, Alexander Bergese, said in a statement that Iraq "has made slow progress on the agenda of structural reforms, which include improving laws and legislation and developing institutions to improve public financial management."
“Attempts to diversify the economy remain a challenge,” he said.
The Iraqi economy depends mainly on oil, where Iraq's oil exports constitute about 95 percent of the revenues of the state budget, and therefore Iraq is greatly affected by fluctuations in world oil prices.
In addition to fluctuating oil prices, Iraq faces an internal challenge of political conflicts, the fragile security situation in some areas and the huge task of rebuilding cities devastated by fighting with the Islamic State for three and a half years.
Protests broke out in some central and southern cities earlier this month against corruption, unemployment and political elites. The demonstrations saw clashes with security forces that killed dozens and forced the government to impose a total curfew and cut off the Internet for several days.

  • Upvote 1
Link to comment
Share on other sites

Iraq’s credit profile constrained by poor governance, Moody’s says

Iraq’s nominal GDP was almost $226 billion in 2018, making it one of the largest economies in MENA region. AP
 

Country is facing political risk and its attempts to diversify the economy are not enough, says report

Iraq’s nominal GDP was almost $226 billion in 2018, making it one of the largest economies in MENA region. AP Iraq’s nominal GDP was almost $226 billion in 2018, making it one of the largest economies in MENA region. AP

The Iraq government’s ability to repay debts is constrained by a number of challenges, such as weak institutions and poor governance, according to a new report by Moody's Investors Service.

These challenges affect the government’s abilities “to respond to external and domestic shocks” and also “weigh on the competitiveness of the economy”, it added in a report issued on Thursday.

“Iraq has made slow progress on its structural reform agenda, which includes enacting laws and developing institutions to support public financial management,” said Alexander Perjessy, Moody’s vice president and senior analyst.

Moody’s has a credit rating of Caa1 on Iraq’s sovereign debt, and a stable outlook. Typically, a rating below Baa3 is considered to be sub-investment grade, or junk. A Caa rating means debt obligations “are judged to be of poor standing and are subject to very high credit risk”, according to the New York-based agency’s definition.

The agency said Iraq witnessed an improvement in its fiscal health last year but that was “almost entirely due to higher oil prices”.

However, Iraq is currently facing very high levels of political risk and its attempts to diversify the economy have not been bold enough.

“Obstacles to the growth of private non-oil industries include poor infrastructure, an inefficient banking system, an unstable electricity supply, skilled labour shortages and weak control on corruption,” said Mr Perjessy.

Iraq’s nominal gross domestic product was almost $226 billion in 2018, making it one of the largest economies in the Middle East and North Africa. This jump was mainly driven by income derived from Iraq's oil industry, which accounts for about 45 per cent of nominal GDP and almost all of the country’s exports.

Despite a relatively large economy, substantial natural resources and high growth potential, things are moving slowly in Iraq, said Moody’s.

“Potential is limited by the slow pace of rebuilding infrastructure and productive capacity following years of conflict,” it added.

Iraq possesses extensive oil reserves, accounting for around 12 per cent of Opec's proved oil reserves and more than 8 per cent of global proved reserves, which at current levels of production would last approximately 87 years.

It’s proved oil reserves are the fifth-largest in the world behind Venezuela, Saudi Arabia, Canada and Iran. But the country's hydrocarbon wealth remains under-exploited in view of the many years of armed conflicts and international sanctions, said Moody’s.

Geopolitical tensions in the Middle East, which have concerned the transit of oil along heavily congested pathways such as the Strait of Hormuz, also pose "a significant risk to Iraq's credit profile," said Moody's.

In the past few weeks, the country has also been rocked by protests over widespread unemployment, failing public services and state corruption, leading to the deaths of dozens of people.

Despite this, the agency said that a much-needed rebuilding of its infrastructure should lead to stronger growth in Iraq’s non-oil growth.

“As more reconstruction projects get underway in 2020… it will support a gradual recovery in overall real GDP growth to 2.8 per cent in 2019 and 4.6 per cent in 2020 from an estimated contraction of 0.6 per cent in 2018 and 2.5 per cent in 2017.”

Edited by Butifldrm
  • Like 2
  • Upvote 1
Link to comment
Share on other sites

4a70a2ad-7ced-4996-9882-c65cb40cc6ed.GIF
 
     
 
 
 
 
 
 

Research Announcement:

 

Moody's - Iraq’s credit profile constrained by weak institutions, governance challenges and slow pace of reforms

17 October 2019
 
 

 

 

New York, October 17, 2019 --

 

  • Fiscal balance to revert to deficit in 2019 due to lower oil prices
  • Pace of structural reforms will remain slow; significant domestic and geopolitical challenges persist

Iraq's (Caa1 stable) credit challenges include very weak institutions and governance that limit policy effectiveness, constrain the government's capacity to respond to external and domestic shocks and weigh on economic competitiveness, Moody's Investors Service said in a report today.

Last year's improvement in the fiscal and external balances was almost entirely due to higher oil prices without any structural improvement that would reduce the impact of future possible falls in oil prices. Iraq also faces very high levels of political event risk.

"Iraq has made slow progress on its structural reform agenda, which includes enacting laws and developing institutions to support public financial management," said Alexander Perjessy, a Moody's Vice President – Senior Analyst and the report's co-author. "Attempts to diversify the economy remain a challenge. Obstacles to the growth of private non-oil industries include poor infrastructure, an inefficient banking system, an unstable electricity supply, skilled labor shortages and weak control of corruption."

The relatively large size of Iraq's economy, its substantial natural resources wealth and its high growth potential support the sovereign credit profile. Nevertheless, this potential is limited by the slow pace of rebuilding infrastructure and productive capacity following years of conflict.

Upward pressure on the rating could emerge if - over the medium-term - there were signs that Iraq's institutions are strengthening, with material improvement in governance, control of corruption and management of public finances.

 
  • Thanks 4
  • Upvote 1
Link to comment
Share on other sites

  • yota691 changed the title to Moody's warns: escalating geopolitical tensions will lead to economic shock

Moody's warns: escalating geopolitical tensions will lead to economic shock

Moody's warns: escalating geopolitical tensions will lead to economic shock

 January 06, 2020 09:46 PM
Mubasher: A Moody's analyst warned that the escalation of geopolitical tensions between the United States and Iran will lead to a major economic and financial shock.

The killing of the Iranian, "Qassem Soleimani" in a US raid last Friday, has fueled tensions between the United States and Iran, as threats between the two sides continue.

"The permanent conflict between Washington and Tehran will have wide-ranging impacts through a broad economic and financial shock that negatively affects operating and financing conditions," Alexander Bergessi, chief credit officer of the credit rating agency, said in a note to clients on Monday. American C.

"The conflict, if prolonged, is likely to have global repercussions, particularly through its impact on oil prices," Bergessi added.

The analyst said that the effects of the ongoing tensions will affect the wider economy - not just the oil and banking sectors - as other sectors such as tourism in the Middle East, for example, will be affected.

He also indicated that the dimension on risk would be negative for issuers of debt securities, especially those with large external financing needs and relatively smaller or insufficient reserves.

Bergessi stated that higher oil prices for Middle East crude producers "could mitigate some of the negative effects on credit, as long as demand remains high and countries can continue to export."

Oil prices rose to their highest levels since last April, and Brent traded above $ 70 after the escalation of geopolitical tensions, but benchmark crude resumed its gains to reach $ 68.83 a barrel by 6:15 pm GMT.

 
  • Thanks 2
Link to comment
Share on other sites

Join the conversation

You can post now and register later. If you have an account, sign in now to post with your account.
Note: Your post will require moderator approval before it will be visible.

Guest
Reply to this topic...

×   Pasted as rich text.   Paste as plain text instead

  Only 75 emoji are allowed.

×   Your link has been automatically embedded.   Display as a link instead

×   Your previous content has been restored.   Clear editor

×   You cannot paste images directly. Upload or insert images from URL.

Loading...
 Share

  • Recently Browsing   0 members

    • No registered users viewing this page.
×
×
  • Create New...

Important Information

By using this site, you agree to our Terms of Use.