By JAMAL HALABY, TAREK EL-TABLAWY
The Associated Press
updated 2 hours 41 minutes ago 2011-02-08T15:06:15
AMMAN, Jordan — Ratings agencies Moody's and Standard & Poor's on Tuesday downgraded a host of ratings for Jordan, a move that underscored how massive anti-government protests in Egypt have fueled worries about the economies of other Arab countries.
Moody's said it revised Jordan's Ba2 foreign currency government bond outlook to negative from stable, and warned that the sovereign rating may be lowered if "there were disruptive political turmoil that threatened a structural weakening of Jordan's credit fundamentals relative to rating peers."
It also knocked the government's local currency bond rating out of investment-grade status, lowering it to Ba2 with a negative outlook from Baa3.
Both moves were triggered by concerns that fiscal and economic risks have mounted following protests in Tunisia that toppled the country's leader and broader ones in Egypt seeking to oust President Hosni Mubarak.
The Egypt protests have been particularly worrisome for investors as they roiled the Arab world's most populous nation and one considered for much of Mubarak's nearly 30-year tenure to be the most stable in a volatile region.
An official at the Central Bank of Jordan said he was "surprised" by Moody's negative outlook. The official, who spoke on condition of anonymity because he was not authorized to comment to the media, declined to provide other details aside from saying that the government is reviewing Moody's report and will respond later.
Moody's was not alone in raising concerns about a potential spillover from the unrest that has roiled the region for more than two weeks. Jordan has seen smaller-scale demonstrations that led King Abdullah II to fire his Cabinet in a bid to defuse the tension.
Fellow ratings agency Standard & Poor's lowered its long- and short-term local currency ratings on Jordan to BB+/B from BBB-/A-3, and revised the outlook on long-term foreign currency and local currency ratings to negative from stable.
"We believe ongoing turmoil will lower Jordan's medium-term growth prospects and damage its public finances," S&P credit analyst Luc Marchand said, adding that the continuing turmoil in the region is likely to result in lower economic growth and fiscal revenue expectations.
The agency affirmed its BB/B long-term and short-term foreign currency ratings for Jordan.
The kingdom, which along with Egypt is one of Washington's staunchest allies in the region, struggled during the global financial meltdown.
The desert kingdom relies heavily on foreign investment, tourism and worker remittances to fuel economic growth and generate revenue for the government. But it also plays host to hundreds of thousands of Palestinian and Iraqi refugees, burdening a system that is already struggling to cope with a record $2 billion budget deficit this fiscal year.
The unrest in Egypt has left investors uneasy — with the biggest worries focusing on potential, albeit unlikely, protests of similar size and scope in the oil rich Gulf region. But other Arab countries may be the ones to feel the pinch most noticeably, as the protests scare tourists away in Egypt and Jordan.
Jordan's Tourism Board acknowledged that the Egypt protests have prompted cancellations mainly by Westerners to their country, but declined to quantify the drop.
"Jordan's tourism sector is keeping a close eye on regional political developments while assuring its international partners that the Kingdom remains to be a very safe destination," the board said in a written statement to the AP.
A steep drop in tourism revenues could hit the government hard, just as the country is rebounding from the effects of the global meltdown. In turn, that could exacerbate unease in the country where many are complaining about limited job opportunities and a high cost of living — the same ingredients that helped stir the unrest in Egypt and Tunisia.
Moody's noted those challenges in its decision to lower the sovereign outlook and, in an increasingly common theme, said the new government may relax its fiscal stance to ease tensions and raise the standard of living. This, in turn, would make deficit reduction measures increasingly unlikely for the time being.
"While perfectly understandable from a social policy perspective, Moody's believes that this would likely have an adverse effect on the overall state of Jordan's public finances, which in some respects are weaker than those of Ba rating peers," the agency said.
It cut Jordan's local currency ceilings to Baa1 from A3.
The Associated Press
updated 2 hours 41 minutes ago 2011-02-08T15:06:15
AMMAN, Jordan — Ratings agencies Moody's and Standard & Poor's on Tuesday downgraded a host of ratings for Jordan, a move that underscored how massive anti-government protests in Egypt have fueled worries about the economies of other Arab countries.
Moody's said it revised Jordan's Ba2 foreign currency government bond outlook to negative from stable, and warned that the sovereign rating may be lowered if "there were disruptive political turmoil that threatened a structural weakening of Jordan's credit fundamentals relative to rating peers."
It also knocked the government's local currency bond rating out of investment-grade status, lowering it to Ba2 with a negative outlook from Baa3.
Both moves were triggered by concerns that fiscal and economic risks have mounted following protests in Tunisia that toppled the country's leader and broader ones in Egypt seeking to oust President Hosni Mubarak.
The Egypt protests have been particularly worrisome for investors as they roiled the Arab world's most populous nation and one considered for much of Mubarak's nearly 30-year tenure to be the most stable in a volatile region.
An official at the Central Bank of Jordan said he was "surprised" by Moody's negative outlook. The official, who spoke on condition of anonymity because he was not authorized to comment to the media, declined to provide other details aside from saying that the government is reviewing Moody's report and will respond later.
Moody's was not alone in raising concerns about a potential spillover from the unrest that has roiled the region for more than two weeks. Jordan has seen smaller-scale demonstrations that led King Abdullah II to fire his Cabinet in a bid to defuse the tension.
Fellow ratings agency Standard & Poor's lowered its long- and short-term local currency ratings on Jordan to BB+/B from BBB-/A-3, and revised the outlook on long-term foreign currency and local currency ratings to negative from stable.
"We believe ongoing turmoil will lower Jordan's medium-term growth prospects and damage its public finances," S&P credit analyst Luc Marchand said, adding that the continuing turmoil in the region is likely to result in lower economic growth and fiscal revenue expectations.
The agency affirmed its BB/B long-term and short-term foreign currency ratings for Jordan.
The kingdom, which along with Egypt is one of Washington's staunchest allies in the region, struggled during the global financial meltdown.
The desert kingdom relies heavily on foreign investment, tourism and worker remittances to fuel economic growth and generate revenue for the government. But it also plays host to hundreds of thousands of Palestinian and Iraqi refugees, burdening a system that is already struggling to cope with a record $2 billion budget deficit this fiscal year.
The unrest in Egypt has left investors uneasy — with the biggest worries focusing on potential, albeit unlikely, protests of similar size and scope in the oil rich Gulf region. But other Arab countries may be the ones to feel the pinch most noticeably, as the protests scare tourists away in Egypt and Jordan.
Jordan's Tourism Board acknowledged that the Egypt protests have prompted cancellations mainly by Westerners to their country, but declined to quantify the drop.
"Jordan's tourism sector is keeping a close eye on regional political developments while assuring its international partners that the Kingdom remains to be a very safe destination," the board said in a written statement to the AP.
A steep drop in tourism revenues could hit the government hard, just as the country is rebounding from the effects of the global meltdown. In turn, that could exacerbate unease in the country where many are complaining about limited job opportunities and a high cost of living — the same ingredients that helped stir the unrest in Egypt and Tunisia.
Moody's noted those challenges in its decision to lower the sovereign outlook and, in an increasingly common theme, said the new government may relax its fiscal stance to ease tensions and raise the standard of living. This, in turn, would make deficit reduction measures increasingly unlikely for the time being.
"While perfectly understandable from a social policy perspective, Moody's believes that this would likely have an adverse effect on the overall state of Jordan's public finances, which in some respects are weaker than those of Ba rating peers," the agency said.
It cut Jordan's local currency ceilings to Baa1 from A3.