16 February 2013
JEDDAH - The Gulf economies remain insulated from economic and political turbulence in the broader MENA region, and globally, Standard & Poor's Ratings Services said in its report titled "The Gulf Economies Are Going Strong, But Structural Issues Still Weigh On The Sovereign Ratings".
"We rate seven sovereigns in the Gulf Cooperation Council (GCC): Abu Dhabi, Bahrain, Kuwait, Oman, Qatar, Ras Al Khaimah, and Saudi Arabia. All have a stable ratings outlook," the report noted.
However, structural challenges continue to constrain sovereign ratings, despite the GCC's relative wealth, it added, forecasting a 4.6 percent GDP growth in 2013. "There are still particular shortcomings in the effectiveness and predictability of policymaking in the GCC," Standard & Poor's credit analyst Dima Jardaneh said. "Weaknesses include the quality of policy debate; the strength and depth of institutions; transparency of decision-making; data monitoring and reliability of information; legal frameworks and the rule of law; and succession risks."
"Under our criteria, the lack of monetary policy flexibility is also a ratings constraint for the GCC, particularly in terms of exchange rate regimes, the credibility of monetary policy, and the effectiveness of the transmission mechanism via the financial system and capital markets," S&P report said. It also noted the possibility that oil reserves could peter out in some GCC countries much earlier than in others.
"The oil endowment varies significantly across the GCC," Jardaneh said. "Reserves at the current production levels will last about 90 years in Abu Dhabi and Kuwait, and 70 years in Saudi Arabia, but are considerably lower in Oman and Bahrain where, at current production levels, supplies could run out in the next two decades."
Last year, S&P said Gulf banks were likely to continue their steady recovery from the 2008 crisis and remain isolated from eurozone turmoil for the rest of 2012 and 2013.
The rating agency said that despite slower balance sheet growth, most GCC banks have maintained healthy earnings generation before provisioning.
JEDDAH - The Gulf economies remain insulated from economic and political turbulence in the broader MENA region, and globally, Standard & Poor's Ratings Services said in its report titled "The Gulf Economies Are Going Strong, But Structural Issues Still Weigh On The Sovereign Ratings".
"We rate seven sovereigns in the Gulf Cooperation Council (GCC): Abu Dhabi, Bahrain, Kuwait, Oman, Qatar, Ras Al Khaimah, and Saudi Arabia. All have a stable ratings outlook," the report noted.
However, structural challenges continue to constrain sovereign ratings, despite the GCC's relative wealth, it added, forecasting a 4.6 percent GDP growth in 2013. "There are still particular shortcomings in the effectiveness and predictability of policymaking in the GCC," Standard & Poor's credit analyst Dima Jardaneh said. "Weaknesses include the quality of policy debate; the strength and depth of institutions; transparency of decision-making; data monitoring and reliability of information; legal frameworks and the rule of law; and succession risks."
"Under our criteria, the lack of monetary policy flexibility is also a ratings constraint for the GCC, particularly in terms of exchange rate regimes, the credibility of monetary policy, and the effectiveness of the transmission mechanism via the financial system and capital markets," S&P report said. It also noted the possibility that oil reserves could peter out in some GCC countries much earlier than in others.
"The oil endowment varies significantly across the GCC," Jardaneh said. "Reserves at the current production levels will last about 90 years in Abu Dhabi and Kuwait, and 70 years in Saudi Arabia, but are considerably lower in Oman and Bahrain where, at current production levels, supplies could run out in the next two decades."
Last year, S&P said Gulf banks were likely to continue their steady recovery from the 2008 crisis and remain isolated from eurozone turmoil for the rest of 2012 and 2013.
The rating agency said that despite slower balance sheet growth, most GCC banks have maintained healthy earnings generation before provisioning.
© The Saudi Gazette 2013
