Saudi Arabia, UAE, Kuwait, Bahrain, Qatar outlook changed to negative: Moody’s

A picture taken on March 23, 2020, shows the empty King Fahd road in the Saudi capital Riyadh amid the coronavirus pandemic. (File photo: AFP)

The outlook for the banking systems of Saudi Arabia, UAE, Kuwait, Bahrain, Qatar has been changed to negative from stable, said credit ratings agency Moody’s Investors Service in a report on Thursday.

All the countries have had their banking system outlooks cut due to the dramatic fall in oil prices over the last month after Russia failed to agree to a new output cut agreement with the Organization of Petroleum Exporting Countries (OPEC), triggering an oil price war for market share. Meanwhile, the coronavirus pandemic, officially known as COVID-19, has slashed oil demand across the world, causing prices to collapse further.

The Gulf Cooperation Council (GCC) states that Moody’s reviewed are all dependent on oil to balance their budgets. Oil is currently below that threshold for all of the countries.

“Moody’s expects defaults on bank loans to increase and loan-loss provisioning for doubtful loans to rise. A combination of higher loan loss provisions and slower lending growth will erode the banks' normally solid profitability,” the rating agency said in the report.

The firm expects economic growth in Saudi Arabia, UAE, Bahrain, and Oman to be the hardest hit, while Kuwait and Qatar will maintain flat growth.

Read more:

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Last Update: 11:54 KSA 14:54 - GMT 11:54
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