GCC need innovative solutions to keep up capital spending: S&P
Low oil prices will constrain the amount of funding available to Gulf sovereigns and banks to support the region's substantial infrastructure bill in coming years, according to rating agency Standard & Poor's. To pay for its infrastructure spending, the Gulf countries may have to look at innovative forms of finance in the context that sovereigns as well as the region's banks will have fewer resources at hand to support the infrastructure roll-out plan over the next years - especially if oil prices decline further or remain low for longer.
S&P estimates that Gulf sovereigns' capital spending over the next four years will be $480 billion (Dh1.76 billion), of which about 60 to 70 per cent will go to infrastructure projects. Gulf govt spending on projects alone including infrastructure contracts awarded over the period 2016-2019 could be about $330b. About $50b out of this is expected to be spent on projects will be allocated specifically for infrastructure.
The difference between estimates of capital spending on projects and project contracts is awarded huge. "We project a gap as large as $270 billion through 2019 between capital spending for projects by Gulf sovereigns and project contracts awarded, and a difference of $50 billion for project contracts awarded in the infrastructure sector," said Standard & Poor's credit analyst Karim Nassif.