S&P forecasts favorable credit conditions for Gulf companies
Non-oil sectors to drive economic expansion in Gulf countries
KUWAIT CITY, March 5: Standard & Poor’s, the credit ratings agency, anticipates that companies in the Gulf countries, especially infrastructure firms, will experience favorable credit conditions in their respective local markets in 2024, reports Al-Seyassah daily.
Despite challenges such as weak global economic growth, elevated interest rates, and geopolitical tensions in the Middle East, the agency foresees resilient asset performance and the ability of these companies to manage their financing requirements.
The majority (over 95%) of companies and infrastructure firms in the Gulf Cooperation Council (GCC) countries are expected to maintain a stable outlook, suggesting flexibility in their classifications throughout 2024, with a possibility of slight upgrades.
The ability of classified infrastructure companies in the Gulf to manage refinancing needs and high interest costs in 2024 is considered feasible.
Refinancing risks are deemed manageable, with a significant portion of debts due in 2024 held by highly rated entities associated with the government.
This optimism is underpinned by improved operational performance, particularly in sectors like oil, gas, and chemicals, as well as sustained growth in non-oil sectors. Additionally, both government and non-government issuers in the region have reported a relatively stable level of debt.
Standard & Poor’s projects minimal changes in total reported debt for 2024 and 2025, despite substantial spending requirements. They anticipate a 5% to 10% increase in earnings before interest, taxes, depreciation, and amortization for rated Gulf companies over the next two years.
The agency will closely monitor interest coverage ratios, especially for highly leveraged companies or those needing significant refinancing in 2024.
The growth of real GDP, particularly in oilrelated sectors, is expected to be bolstered by reduced OPEC+ cuts, supporting the overall economic environment in Gulf countries. Nonoil sectors are also anticipated to contribute to economic growth.
Gulf economies are forecasted to grow by 2% to 3% on average in 2024, supported by relatively moderate oil prices. Non-oil economic expansion, particularly in Saudi Arabia and the UAE, will be driven by substantial investments in diversification efforts and population growth across the region.