(MENAFN- Khaleej Times) Major investment projects that are part of GCC strategic initiatives, such Dubai Expo 2020 and the 2022 Fifa World Cup in Qatar, are likely to remain insulated from the mounting pressure on government budgets in the wake of oil price crash, Standard & Poor's said.
The ratings agency said fiscal buffers of the GCC countries accumulated over the past years will also withstand the adverse impact of the oil prices plunge.
Standard & Poor's, in an analysis on how lower oil prices affect banks in 10 oil-exporting countries, said that a drop in banking systems' loan growth and an increase in problem loans are likely to emerge.
"However, ratings agency said it did not expect any of these 10 countries [the six GCC countries plus Brunei, Kazakhstan, Malaysia and Nigeria] to experience losses beyond its normalised loss estimates. "We believe their earnings buffers will remain sufficient to absorb these losses."
"While we do not expect oil's price drop to have any major negative implications on these countries' banking systems, we think banks in Bahrain and Oman are vulnerable indirectly through the potential drop in investments and economic growth, and Nigeria is vulnerable directly through its banking system's significant overall exposure to the oil sector," the report said.
S&P said it believes low oil prices would result in decreased government revenues and exports, and will hamper banking systems' liquidity. Government deposits account for 28 per cent on average of total bank deposits for these 10 countries and range from three-quarters of total deposits for Brunei to around seven per cent for Malaysia.
"In our view, the low loan-to-deposit ratio and strong net external creditor position of the Brunei banking system mitigates such risks. Banks in Qatar, Oman, and the UAE display significant concentration in their funding profiles, with around 30 per cent-40 per cent of deposits coming from government and its related entities. Nigerian banks' funding profile is moderately concentrated, with around 15 per cent of deposits coming from the oil sector and 20 per cent from government," said the report.
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