The Gulf Co-operation Council (GCC) countries are in sound financial standing and that the region's equities have "greatly outperformed" those in the developed and emerging markets (EM), according to the Institute of International Finance (IIF), an US economic think-tank.
Reasoning for the Gulf region's financial soundness, IIF said “increases in the price of oil have led to large fiscal surpluses, filling government coffers and reducing debt."
Consequently, sovereign default risk in the GCC region is low when compared to the EM peers, it said, adding sovereign credit ratings, apart from Bahrain and Oman, remain "strong".
The IIF also said the Gulf region's debt needs is expected to decline in view of the robust fiscal surpluses.
"We expect hard currency bond issuances from the GCC to fall from $110bn in 2021 to $40bn in 2022, consistent with the outcome for the first nine months of this year. This is due mainly to a decline in sovereign borrowing by oil exporters in the region as governments are expected to register significant fiscal surpluses," it said.
Corporate issuance, including from government-related-entities (GREs), to finance existing loans and bonds that mature in 2023 will remain sizeable, according to the IIF.
Equities in the GCC area, largely led by Saudi Arabia, have greatly outperformed those in developed and emerging markets, it said.
While the MSCI emerging market index and the MSCI ACWI index (which tracks stocks in both developed and emerging markets) have lost 33% and 13% respectively since the beginning of 2021, the MSCI GCC index has gained nearly 40%, the report highlighted.
"The over-performance can be largely attributed to the increase in oil price (Brent crude oil increased roughly 75% during the same period), and its positive effects on GCC economies," it said, adding year-to-date, the GCC equities have also outpaced peers, growing 2% in 2022 while emerging markets and ACWI fell over 25%.
Highlighting that FDI or foreign direct investment in the MENAP (Middle East, North Africa and Pakistan) region is improving; the report said in Qatar, a new FDI law allows full foreign ownership in manufacturing and non-financial services.
Moreover, the North Field expansion is attracting additional investment that would help raise the country’s LNG or liquefied natural gas production capacity.
Qatar’s LNG production capacity is expected to increase from 110mn tonnes per year to 126mtpy by 2026 or 2027. The North Field Expansion Project, comprising North Field South and the North Field East expansion projects, is the industry’s largest ever LNG project.
Reasoning for the Gulf region's financial soundness, IIF said “increases in the price of oil have led to large fiscal surpluses, filling government coffers and reducing debt."
Consequently, sovereign default risk in the GCC region is low when compared to the EM peers, it said, adding sovereign credit ratings, apart from Bahrain and Oman, remain "strong".
The IIF also said the Gulf region's debt needs is expected to decline in view of the robust fiscal surpluses.
"We expect hard currency bond issuances from the GCC to fall from $110bn in 2021 to $40bn in 2022, consistent with the outcome for the first nine months of this year. This is due mainly to a decline in sovereign borrowing by oil exporters in the region as governments are expected to register significant fiscal surpluses," it said.
Corporate issuance, including from government-related-entities (GREs), to finance existing loans and bonds that mature in 2023 will remain sizeable, according to the IIF.
Equities in the GCC area, largely led by Saudi Arabia, have greatly outperformed those in developed and emerging markets, it said.
While the MSCI emerging market index and the MSCI ACWI index (which tracks stocks in both developed and emerging markets) have lost 33% and 13% respectively since the beginning of 2021, the MSCI GCC index has gained nearly 40%, the report highlighted.
"The over-performance can be largely attributed to the increase in oil price (Brent crude oil increased roughly 75% during the same period), and its positive effects on GCC economies," it said, adding year-to-date, the GCC equities have also outpaced peers, growing 2% in 2022 while emerging markets and ACWI fell over 25%.
Highlighting that FDI or foreign direct investment in the MENAP (Middle East, North Africa and Pakistan) region is improving; the report said in Qatar, a new FDI law allows full foreign ownership in manufacturing and non-financial services.
Moreover, the North Field expansion is attracting additional investment that would help raise the country’s LNG or liquefied natural gas production capacity.
Qatar’s LNG production capacity is expected to increase from 110mn tonnes per year to 126mtpy by 2026 or 2027. The North Field Expansion Project, comprising North Field South and the North Field East expansion projects, is the industry’s largest ever LNG project.
