GCC Company and Infrastructure Outlook 2021: Act with warning – S&P World


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After a really tough 2020 amid the COVID-19 pandemic and the oil value shock, we count on reasonable progress in GCC economies this yr. Pressures are anticipated to proceed within the company sectors, significantly for firms working in tourism, aviation, actual property and non-food retail. The identical is true for the main oil, gasoline, and commodities sectors – together with petroleum companies – as we count on income era to stay below stress from 2019. At the moment, almost 38% of non-companies Monetary and infrastructure entities fee us within the GCC have a unfavourable outlook (together with one on CreditWatch with unfavourable implications). If we exclude government-related entities (GREs), which make up simply over half of our rated enterprise and infrastructure portfolio, this ratio reaches nearly three-quarters.

Given the unfavourable working outlook, we might count on most firms to take care of cautious methods. Within the absence of a considerable restoration in income era, they may doubtless concentrate on optimizing prices, proactively managing their money move, and preserving their money move, whereas new investments will proceed to take a again seat in most sectors.

Warning will characterize 2021

Whereas the worst could also be behind us, we count on financial pressures to proceed and the restoration to be gradual and gradual. After experiencing a significant contraction in 2020, we forecast general actual GDP progress of simply 2.5% in GCC economies between 2021 and 2023 (see Charts 1 and a couple of). (For extra particulars, see "GCC Economic Exercise Slowed by Its Heavy Hydrocarbon Economic Construction and OPEC-Associated Manufacturing Reductions," posted December 7, 2020 on RatingsDirect).

We count on Brent oil costs to common $ 50 in 2021 and 2022 and $ 55 in 2023 and past. As vaccine deployments proceed in a number of nations, S&P World Rankings believes that there stays a excessive diploma of uncertainty in regards to the course of the coronavirus pandemic and its financial results. Widespread vaccination, which some nations may obtain by the center of the yr, will assist pave the way in which for a return to extra regular ranges of social and financial exercise. We use this vaccine timing assumption to evaluate the financial and credit score implications related to the pandemic (see our analysis right here: www.spglobal.com/rankings). Because the state of affairs evolves, we are going to replace our assumptions and estimates accordingly.

As we forecast a gradual restoration in financial progress, we consider that the scale of the economies of most sovereign states within the area will stay beneath their 2019 ranges by 2022. Because of this, GCC firms will proceed. more likely to be below widespread stress.

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Many of the GCC firms have skilled seen stress on their income and EBITDA era in 2020. Their precedence this yr will probably be to recoup the losses of 2020, whereas working in a gradual progress setting.

We predict that the majority companies will face income progress challenges in 2021, because of an absence of visibility on the timing of the restoration and the uncertainties surrounding COVID-19. A big variety of rated firms have minimize or postponed their capital spending in 2020. Some, like actual property, have minimize and / or eradicated dividends to preserve money. Some firms additionally monetize their property to cut back their debt. We count on these traits to proceed by way of 2021.

The vulnerabilities on the sector and nation stage, which we now have already highlighted in our July 2020 report “Twin shocks of low oil and COVID-19 imply double hassle for GCC firms” (July 21, 2020 ) will stay largely unchanged till 2021. Whereas we anticipate the current decision of the Qatar dispute being constructive for Qatar's actual property and tourism sectors, we consider it’s too early to count on a major enchancment in demand for these two sectors.

We nonetheless anticipate that a full restoration of the worldwide aviation and tourism industries will take time; this is the reason these sectors stay essentially the most uncovered. Whereas there’s appreciable uncertainty in regards to the outlook for world air transport, we nonetheless forecast a weak restoration in 2021, with visitors and revenues nonetheless 40% to 60% decrease than in 2019 and 20% to 30% decrease. % in 2022 (cf. Improve in COVID-19 circumstances, slowdown in restoration of worldwide air visitors ", 13 November 2020). Regardless of our baseline state of affairs, efficient immunization in opposition to the coronavirus will probably be broadly accessible by this time. Mid-2021. Subsequently, we count on the pressures on the area's aviation and tourism sectors to stay in place. The United Arab Emirates (UAE) could be main the vaccination effort. within the area, with a vaccination fee exceeding 25% of the inhabitants, the second highest on the planet. Excessive vaccination charges may assist the UAE's tourism sector recuperate prior to others within the area. world.

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Most nationwide oil firms (NOCs) and oil majors proceed to concentrate on optimizing prices, renegotiating their contracts and value agreements, and customarily limiting capital spending, which signifies that the oilfield service firms proceed to place stress on the highest strains.


Two key sectors within the GCC area, actual property and petroleum companies, accounted for about half of our unfavourable score actions that we took in 2020. Confronted with a nonetheless unfavourable funding local weather, we count on actual property demand to stay subdued. Though we now have seen a major drop in new launches in Dubai, we nonetheless count on the provision overhang will restrict any restoration within the quick to medium time period.

Whereas we consider present circumstances could name into query asset disposals and valuations in troubled sectors reminiscent of actual property, oil companies and retail, we’re additionally seeing offers. selective opportunists between regional telecom operators. For instance, the Indonesian subsidiary of Ooredoo has resumed tower gross sales, and in Saudi Arabia we’re in search of alternatives to monetize property – Saudi Telecom Co. (STC) has introduced plans to publicly record its subsidiary STC Options in 2021, and it bought a 15% stake in its fee options subsidiary STC Pay to Western Union.

Firms within the GCC infrastructure sector have tapped into the monetary markets for the previous 12 months and proceed to look to them for long-term debt at aggressive costs. Given the declining long-term liquidity of the banking sector mixed with comparatively low rates of interest, we now have seen firms within the power and oil and gasoline sectors prepared to refinance their bonds by accessing a big pool of institutional buyers in search of ahead yields. As well as, we now have observed a rising variety of securitization schemes of huge infrastructure property, each in the private and non-private sector, to draw low value capital. We count on this pattern to proceed in 2021 given persistently low rates of interest.

Mitigate geopolitical dangers and reforms ought to assist restoration

The Abraham Accord signed by the United Arab Emirates, Bahrain and Israel final September paved the way in which for the normalization of relations between these nations (see "Israel's Agreements with Bahrain and Alliances UAE to Center East Sign Switch Report ”printed on September 17, 2020). We consider that there are necessary alternatives for cooperation in areas reminiscent of tourism, security and monetary companies amongst others, significantly benefiting Dubai, the middle of tourism, aviation and the area's worldwide commerce and logistics.

One other favorable growth has been noticed in Qatar (see “Resolving Qatar's dispute to enhance political and financial cooperation within the GCC area”, January 7, 2021). Saudi Arabia and the United Arab Emirates have now reopened their borders with Qatar and we count on different events to the Abraham Accord to observe. Over time, this can doubtless result in a major easing of the pressures on the aviation, tourism and actual property sectors in Qatar for the reason that summer season of 2017 as a result of boycott.

The UAE, which is dwelling to essentially the most numerous and internationally open financial system within the area, has additionally undertaken main reforms. These embody permitting 100% possession of onshore companies by international nationals to stimulate international direct funding. Likewise, the UAE has adopted some social guidelines as properly, together with permitting expats to observe their dwelling nation's legal guidelines on inheritance and divorce. Throughout the yr the UAE additionally applied sure guidelines to offer long run residency choices to extremely certified expats in chosen fields. We consider that each one of those modifications will additional enhance the attractiveness of the emirates as a worldwide vacationer and expatriation vacation spot.

Nonetheless, not all reforms instantly assist the enterprise cycle. In Saudi Arabia, the worth added tax was raised to 15% from 5% on July 1, 2020, alongside larger import costs on a variety of merchandise to assist the federal government price range. These measures got here at a time when the financial system, disposable revenue and shopper demand have been already below stress, and we count on the impact to reverberate in 2021. At the moment, we don't count on that to occur. One other GCC nation follows up on such excessive VAT will increase. Oman will begin making use of a 5% VAT fee from April 2021.

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Steady outlook for ERMs, largely unfavourable for the non-public sector

We at the moment fee 32 company and infrastructure issuers within the GCC area. Reflecting the necessary position that governments play within the area's general financial exercise, 17 of the 32 issuers we fee are Authorities Associated Entities (GRE). The sturdy credit score profiles of sovereigns, reminiscent of Abu Dhabi, Kuwait, Qatar and Saudi Arabia translate to excessive credit score rankings for these GREs as we see potential backing from their sovereigns associates.

After a number of downgrades in 2020, round 60% of our company and infrastructure rankings at the moment have a secure outlook. Nonetheless, after we exclude ERGs, solely 27% of personal sector firms have a secure outlook, together with one on CreditWatch with constructive implications. Reflecting our issues about topline era, actual property and oil and gasoline firms (primarily oil companies) collectively account for 75% of our unfavourable outlook and our unfavourable CreditWatch, whereas entities in Dubai account for extra 65% unfavourable and unfavourable outlook. CreditWatches. Though the UAE has applied a number of structural measures in 2020 that assist their long-term enterprise prospects, we nonetheless anticipate that the restoration in key sectors that energy Dubai's financial system will take time.

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GCC rated enterprise and infrastructure entities




Abu Dhabi Pipeline

Sofia Bensaid, Dubai

AA / Steady / –

ADES Worldwide Holdings PLC

Rawan Oueidat, CFA, Dubai

B + / Adverse /

Almarai Co.

Sapna Jagtiani, Dubai

BBB- / Steady / A-Three

Bahrain Mumtalakat Holding Co.

Max McGraw, Dubai

B + / Steady / B


Sapna Jagtiani, Dubai

B / Adverse /

Bahrain Telecommunications Co.

Rawan Oueidat, CFA, Dubai

B + / Steady / B

Borets Worldwide Ltd.

Rawan Oueidat, CFA, Dubai

BB- / Adverse / –

Damac Actual Property Growth Ltd.

Bida Blume, Dubai

B / Adverse / –

Dubai Aerospace Enterprise Ltd

Betsy R Snyder, CFA, New York,

BB + / Steady / –

Emaar Malls PJSC

Timucin Engin, Dubai

BB + / Adverse / –

Emaar PJSC Properties

Timucin Engin, Dubai

BB + / Adverse / –


Sofia Bensaid, Dubai

A- / Steady / –

Emirates Telecommunications Group Co. PJSC

Rawan Oueidat, CFA, Dubai

AA- / Steady / A-1 +

EQUATE Petrochemical Co Okay.S.C.C.

Rawan Oueidat, CFA, Dubai

BBB / Adverse / A-2

Ooredoo Q.P.S.C.

Rawan Oueidat, CFA, Dubai

A- / Steady / A-2

Ezdan Holding Group Q.S.C.

Bida Blume, Dubai

B- / WatchNeg / –

Kuwait Tasks Co. (Holding) Okay.S.C.

Timucin Engin, Dubai

BB / Adverse / B

Majid Al Futtaim Holding LLC

Sapna Jagtiani, Dubai

BBB / Steady / A-2

Mamoura Diversified World Holding PJSC

Zahabia Gupta, Dubai

AA / Steady / A-1 +

Qatar QSC Industries

Rawan Oueidat, CFA, Dubai

A + / Steady / –

Nakilat Inc.

Bida Blume, Dubai

A + / Steady / –

Petrofac Ltd.

Ozana Breaban, London

BB + / Adverse / B

Qatar Petroleum

Shokhrukh Temurov, CFA, Dubai

AA- / Steady / –

Ras Laffan Liquefied Pure Fuel Co. Ltd. (II)

Sofia Bensaid, Dubai

A / Steady / –

Ras Laffan Liquefied Pure Fuel Co. Ltd. (Three)

Sofia Bensaid, Dubai

A / CreditWatchPos / –

Ruwais Energy Co. PJSC (Shuweihat 2)

Sofia Bensaid, Dubai

A- / Steady / –

Saudi Primary Industries Corp.

Rawan Oueidat, CFA, Dubai

A- / Steady / A-2

Saudi Electrical Co.

Sapna Jagtiani, Dubai

A- / Steady / –

Saudi Telecom Co.

Rawan Oueidat, CFA, Dubai

A- / Steady / A-2

Kiwi VFS SUB I S.ar.l

Divyata Ved, London

B- / Adverse /

Shelf Drilling Holdings Ltd.

Rawan Oueidat, CFA, Dubai

CCC + / Adverse / –

Taghleef Industries Holdco Ltd.

Bida Blume, Dubai

BB- / Steady / –

Associated analysis

As COVID-19 circumstances enhance, restoration in world air visitors slows, November 13, 2020
Dispute decision in Qatar to enhance political and financial cooperation in GCC area, January 7, 2021
Two low-oil and COVID-19 shocks imply double hassle for GCC companies, July 21, 2020
The financial exercise of the CCG slowed down by its heavy financial construction in hydrocarbons and the discount in manufacturing linked to OPEC December 7, 2020
S&P World Rankings Revises Oil and Pure Fuel Value Assumptions, September 16, 2020

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