“Improving oil prices, which are narrowing fiscal deficits, as well as an ongoing commitment to public spending and a supportive stance towards government-related issuers will underpin the stable outlook on GCC companies over the next 12 months,” said Rehan Akbar, vice president - senior analyst at Moody’s.
Rated GCC corporates are mainly government-related issuers (GRIs), which will continue to benefit from strong competitive positions and government support. Oil prices above US$50 per barrel will allow countries with large fiscal buffers and small populations, such as the UAE, Kuwait and Qatar, to implement fiscal reforms at a slower pace than their regional peers, which will in turn support the operating environment in these countries.
Fewer growth opportunities will drive GCC companies toward consolidations and acquisitions outside the region, as well as investments in increasing vertical integration, and corporate focus on costs. Mature state-owned corporates are increasingly looking to diversify funding sources, which could lead to an uptick in capital market activity.