Kuwait, Abu Dhabi have liquid assets over 100% of GDP: S&P

The Gulf Cooperation Council (GCC) countries are among the 22 sovereigns with liquid assets exceeding 25 percent of gross domestic product (GDP), with Kuwait and Abu Dhabi having liquid assets of more than 100 percent of GDP, S&P Global Ratings said in its recent report.

Combined, the seven sovereigns, with liquid assets of more than 100 percent of GDP, have accumulated $3 trillion in assets (200 percent of GDP on average) to date.

The assets, which are typically managed by sovereign wealth funds, represent the largest component and majority of these assets have been invested externally, the report added.

“In our opinion, when a stock of government assets is that large, a sufficient portion will very likely be available for use in combatting the effects of pronounced economic cycles, without materially impairing the sovereign's balance sheet."

S&P said it estimates all of a sovereign's external general government assets to be liquid if the amount exceeds 100 percent of GDP when calculating net general government debt and narrow net external debt ratios.

“We believe that the sovereign will be able to utilize a significant portion of its assets in the event of financial distress to support its creditworthiness,” it noted.

Meanwhile, S&P said the average rating on the seven sovereigns was "AA", compared with an average of "BBB-" on all sovereigns rated by it.

“Our ratings on Kuwait and Abu Dhabi remained stable at 'AA' throughout the recent slump in oil prices, underlining the rating stability provided by having large liquid assets,” it said, adding its rating on Qatar moved to 'AA-' from 'AA' in August 2017.

Bahrain, Oman, and Saudi Arabia felt the drop in prices more keenly, and their stock of liquid assets are below 100 percent of GDP, the ratings agency added.