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Gulf firms under pressure from low oil price: S&P

Gulf firms under pressure from low oil price: S&P

DUBAI: Companies in the six Gulf Arab states are under pressure as governments reduce spending in response to a slump in oil revenues, Standard and Poor’s ratings services said on Monday.

“Corporate and infrastructure companies in the GCC face a weaker operating environment at present on the back of lower oil prices,” S&P said in a report.

Low oil income has slowed government expenditures on which these companies largely depend, it said.

World oil prices have dropped by more than 50 per cent since June 2014.

The IMF forecasts that that will result in a $300 billion drop in revenues this year for the six GCC states — Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the UAE.

Some infrastructure projects have been scrapped as a result, S&P said.

“We observe, however, that GCC governments continue to invest in large public sector infrastructure projects,” said S&P credit analyst Karim Nassif.

“Still, the longer the oil price remains near current low levels, the higher the likelihood of seeing more infrastructure projects postponed or dropped,” he said.

S&P said the Dubai real estate market is also suffering with residential prices projected to fall by between 10pc and 20pc this year.

Published in Dawn, September 22nd , 2015

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