RIYADH: Corporate and infrastructure firms in the Gulf Cooperation Council region are expected to maintain a resilient performance in 2023 despite the looming threat of inflation, higher interest rates, less-accommodating debt capital markets and the possibility of an economic slowdown, according to a recent report by S&P Global.
The US-based credit rating firm noted that the corporates and infrastructure issuers in the GCC will comfortably navigate through 2023, driven by stable earnings profiles, strong balance sheets, and healthy funding and maturity profiles.
“Most companies exhibit a balanced debt composition with about half of their funding exposed to floating interest rates, and the rest based on fixed rates. However, a handful of companies have higher floating rate exposure, making them more vulnerable to further interest hikes, especially for those operating in cyclical industries that may suffer from economic headwinds,” said Tatjana Lescova, a credit analyst at S&P Global.
FASTFACTS
The operating performance of GCC companies accelerated in 2022 accompanied by positive rating actions, thanks to improvements in the regional oil and gas-based economies.
The corporates and infrastructure issuers in the GCC will comfortably navigate through 2023, driven by stable earnings profiles, strong balance sheets, and healthy funding and maturity profiles.
S&P Global went on to note the operating performance of GCC companies accelerated in 2022 accompanied by positive rating actions, thanks to improvements in the regional oil and gas-based economies.
“Seventy-five percent of our rating outlooks are stable, while over 20 percent are on a positive outlook, which reflects our expectations of resilience for the rated corporate and infrastructure issuers in 2023,” said the firm’s credit analyst Sapna Jagtiani.
The agency further noted that the growth of gross domestic product in GCC countries is expected to slow down due to the oil product cut decision by the Organization of Petroleum Exporting Countries and its allies, known as OPEC+.
In October 2022, OPEC+ had agreed to cut output by 2 million barrels per day, the equivalent of about 2 percent of world demand, from November until the end of 2023.
According to S&P Global, Brent crude could average $90 per barrel in 2023, while it will slightly go down to $80 in 2024.
“Hydrocarbon prices in 2023 and 2024 should support intrinsic credit quality for the oil and gas sector in the region,” said S&P Global Ratings credit analyst Rawan Oueidat.
The report further pointed out that there will not be any significant negative impact on non-oil GDP and corporate sector performance in the GCC region, while inflation could affect profitability margins for some of the regional operators.
