Ratings agency Fitch warns of threat from Kuwaiti unrest

The ratings agency Fitch warned on Monday that a surge in public unrest in Kuwait could threaten the Gulf state's solid sovereign rating. "Recent popular protests suggest a radicalisation of the political scene in Kuwait," Fitch analyst Paul Gamble wrote, while noting that the oil-rich country's external balance "is the strongest of all Fitch-rated countries." That meant the country's "AA" sovereign rating, the second-highest rating by Fitch, would withstand additional instability, Gamble said. "However, a serious escalation of public unrest could threaten the rating. Much will depend on how the authorities respond, and whether large-scale violence is avoided," he added. Over the weekend, 100 protesters were hurt in weekend clashes with police in Kuwait as the demonstrators defended the "universal right" to freedom of assembly. Riot police used rubber bullets, tear gas and stun grenades and beat hundreds of demonstrators to break up the protest, which the opposition described as the largest demonstration in the Gulf state's history. The Kuwaiti opposition said on Monday that it would push ahead with protests until the government meets its demands for reform. The political crisis was sparked by a decision by the country's ruler to amend the electoral constituency law ahead of December elections. The opposition says the amendments are aimed at electing a rubber-stamp parliament. Fitch estimated that "longstanding political grievances are unlikely to be resolved by the December elections, which opposition MPs and supporters are threatening to boycott." It noted that a political stalemate could damage the Kuwaiti economy, with potential disruptions to the extensive public sector threatening execution of government projects and a 2010-2014 Development Plan. If, however, Kuwait "manages to resolve the current stalemate it would confirm one of its ratings strengths compared with its regional peers," Fitch concluded.