Mubasher: Overall sovereign creditworthiness in the Middle East and North Africa (MENA) region has continued to weaken in 2016, according to S&P Global Ratings’ report published on 13 July under the title “Middle East And North Africa Sovereign Rating Trends Mid-Year 2016”.
“The report covers the 13 sovereigns we rate in the region: Abu Dhabi, Bahrain, Egypt, Iraq, Jordan, Kuwait, Lebanon, Morocco, Oman, Qatar, Ras Al Khaimah, Saudi Arabia, and Sharjah”.
"We rate eight MENA sovereigns in the 'BBB' rating category or above," S&P Global Ratings sovereign credit analyst Benjamin Young said.
The report pinpointed that "The average MENA sovereign rating is now close to 'BBB', one notch lower than in mid-2015. When weighted by GDP, the average moves closer to 'BBB+'."
Weighted by nominal GDP, this average has fallen more sharply than the unweighted average over the past 12 months as S&P Global Ratings lowered the rating on Saudi Arabia which is MENA's largest economy.
“In Bahrain, Oman, and Saudi Arabia we expect fiscal deficits to average 12% of GDP per year in 2016 and 2017. Although much lower, fiscal deficits for Abu Dhabi and Qatar are nonetheless above 5% of their GDPs,” the report said.
On the international market volatility level, weaker demand from China was reflected as well as uncertainty stemming from Brexit, and the potential for a change in stance from key monetary authorities on global liquidity.
Deposit growth in GCC domestic banking systems has slowed from double-digit growth over 2012-2014.
Balance sheet strength remains a characteristic of the region, however. Only Bahrain is in a fiscal net debt position. “That said, funding deficits with assets alone would have a marked impact on this strength.”
S&P expects Bahrain's net debt position to grow almost six-fold between 2014 and 2019, while . net asset position for both Oman and KSA is forecasted to fall by 90% and 35% respectively over the same period.
