Moody’s: Economic Rebound in GCC Induces Stable Outlook for Banks

An economic recovery and stronger oil prices prompted Moody’s to set a stable outlook for banks in the GCC states region for the upcoming 12 to 18 months, the ratings agency said in a report. “Economic growth in 2022 will reflect a gradual increase in hydrocarbon production and a strong recovery in other segments of the economy,” said Ashraf Madani, a vice president and senior analyst at Moody’s. He added that quality of assets is set to stay healthy despite a marginal rise in non-performing loans. As for next year, the firm indicated that regulatory measures and large projects, including stadiums for the World Cup and Saudi Arabia’s giga projects, will boost credit growth in the region and raise credit demand.

The US-based company added that liquid assets account for about 25%-30% of total GCC banking assets and are predicted to stay this way to safeguard against any unforeseen crises. Loan performance will likely deteriorate when payment holidays end, Moody’s pointed out. The UAE and Bahrain are two countries that will be most affected. GCC governments still maintain a strong disposition to protect the banking sector due to their large sovereign wealth funds, the report added.