RATING SENSITIVITIES
The main factors that could, individually or collectively, lead to a downgrade are:
- Evidence of stress in financing fiscal shortfalls.
- Further deterioration in the country's security, particularly if insecurity spreads to new geographical areas or hinders oil production or exports.
The main factors that could, individually or collectively, lead to positive rating action are:
- A sustained period of oil prices higher than our current forecasts, particularly if combined with higher oil production and exports and leading to an improvement in Iraq's public and external finances.
- A fundamental improvement in the country's security that allows for stronger non-oil economic development.
KEY ASSUMPTIONS
Fitch forecasts Brent crude to average USD42/b in 2016, USD45/b in 2017 and USD55/b in 2018. We assume that Iraqi oil sells at a consistent discount to Brent. Fitch forecasts Iraqi oil exports (excluding exports from the Kurdish region) to average 3.3m b/d in 2016-17.
Fitch does not incorporate into its fiscal numbers an oil-sharing agreement between the central government and the Kurdish Regional Government, given the patchy track record for implementing this agreement.
(Source: Fitch)
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